EADS Chairman Ralph Crosby made the statement adding his disappointment that America's war fighters would be getting an inferior product.

He told a media briefing that Boeing had put forward am "extremely low-ball bid" to win the coveted contest but said EADS wouldn't contest the deal.

"It's time to put the interests of the warfighter first, so we're stepping aside," Crosby said.

The contract concerns a $35 billion deal to replace the U.S. Air Force's aging aerial tankers with a new fleet of at least 179 planes. The contest has pitted Boeing and its European rival EADS for nearly a decade.

The Pentagon was expected to render its decision in November but the announcement slid to February. Military and industry officials long anticipated that the U.S. aerospace giant would clinch the multibillion-dollar deal.

Crosby told reporters that his EADS' bid of $22.6 billion was dramatically undercut by Boeing's $20.6 billion bid.

"In the end the tanker with the greatest capability wasn't selected," Crosby said.

Boeing made no comment, although in a statement issued after its selection it said the company was "proud" to have been picked to build the tanker.

Industry experts speculated that the contract could be delayed even further if EADS moved to challenge the outcome of the contest.

Crosby said the Air Force had "confirmed that the EADS tanker version was superior in capability to the Boeing offering as measured by the service's fleet effectiveness rating."

Northrop Grumman Corp. and EADS, the parent company of Airbus, beat Boeing in a similar race three years ago. Their winning bid, however, was annulled after government auditors found that the Air Force had skewed its judgment rules.

The annulment sparked a diplomatic row, with senior European officials berating the United States for what they billed as an act of protectionism. Since then, EADS was allowed to return to the bidding process, resubmitting an 8,000-page bid to replace the Air Force's fleet of Eisenhower-era airborne refuelers.

Under the Pentagon's procurement rules, EADS had the right to appeal the Air Force decision.

Boeing's selection scrapped designs by EADS to gain a key U.S. manufacturing foothold in the United States. The European defense company was planning to construct the tanker planes in Alabama.

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