The Pentagon has postponed a contentious battle to supply the military with refuelling tankers and passed it to the next administration after deciding that the "charged environment" prevented a fair competition being completed before President George W. Bush leaves office.
Boeing, which had succesfully protested against the Pentagon's decision this year to award European rival EADS the contract to supply the USAF with new tankers, welcomed the decision. Northrop Grumman, EADS's US partner, said it was "extremely disappointed". Louis Gallois, chief executive of EADS, said he was "disappointed" and reiterated the company and Northrop had "a contract and will seek an appropriate conclusion to that contract".
He added that the decision would nevertheless have no impact on EADS sales or earnings as it had not been included in its plans.
The move means the next president, who takes office in January, will decide which aircraft replaces the ageing fleet of refuelling tankers. "Over the past seven years, the process has become enormously complex and emotional, in no small part because of mistakes and missteps along the way by the department of defence," said Robert Gates, defence secretary.
"We can no longer complete a competition that would be viewed as fair and objective in this highly charged environment."
Mr Gates said the resulting "cooling off" period would allow the next president to determine how to proceed with replacing the ageing fleet of Eisenhower-era refuelling tankers.
The Pentagon decision appears to have taken EADS by surprise. Mr Gallois was in Berlin on Tuesday, assuring government officials that there was still all to play for in the $35bn competition.
The Franco-German aerospace and defence group had expected the Pentagon to issue its final requirements for the hotly fought competition this week.
In a surprise move this year, the Pentagon awarded the tanker deal to Northrop and EADS, replacing Boeing, which had supplied the military with refuelling tankers for decades. But the Pentagon scrapped the deal when a congressional oversight body upheld a Boeing protest after finding errors with the air force competition.
The Pentagon originally planned to reopen the competition this week, and choose a winner this year. But Boeing threatened to not offer a tanker unless more time was provided to consider the requirements for the aircraft.
The Pentagon decision to return to the drawing board is yet another setback for a procurement process that first began more than seven years ago and has been mired in politics.
The tanker saga has already cost the careers of two Boeing executives and several Pentagon officials.
General Arthur Lichte, head of the military command that oversees tankers, last week said he did not care which tanker won the competition, but he stressed that the Pentagon needed to move forward quickly.
