The contract, aimed at replacing 179 ageing American military tankers, was secured in 2008 by Europe's defence giant EADS, a Franco-Spanish-German company producing the well-known Airbus planes.

But during the presidential campaign, Barack Obama and his team lashed out against the deal for securing jobs outside the US at the expense of American aircraft constructors such as Boeing.

The Pentagon subsequently re-launched the bid last month and changed the requirements so that Boeing's smaller tanker model could qualify.

EADS and its American partner Northrop Grumman said in a statement they withdrew from the new tender because it was biased towards Boeing's "smaller, less capable" aircraft.

"It is no longer [a case of] the best plane and no longer fair competition," Airbus head Thomas Enders told Financial Times Deutschland.

The EU commission also expressed veiled criticism at the protectionist US move. "It is highly regrettable that a major potential supplier would feel unable to bid for a contract of this type. Open procurement markets guarantee better competition and better value for money for the taxpayer", trade commissioner Karel De Gucht said in a statement.

Ironically, Boeing had won the contract in 2003, only for it to be cancelled after an ethics scandal that saw a US Air Force official convicted of criminal conspiracy.

Northrop Grumman is not planning to sue the US government for changing the tender criteria, because it did not want to be held responsible for delaying the process further. "America's servicemen and women have been forced to wait too long for new tankers," the company said in a press release.

A few lawmakers in the US also regretted the withdrawal, such as Alabama senator Richard Shelby, whose state would have seen 300 new jobs in a promised assembly line for the Airbus tanker.

"The Air Force had a chance to deliver the most capable tanker possible to our warfighters and blew it," Mr Shelby said.

But the decision represents a bigger blow to thousands of workers in Britain, France, Germany and Spain.

Under the trans-European proposal, the wings for the planes would have been made in Britain, fuselages in France and Germany, tails in Spain and the aircraft would have been equipped by Northrop in the US.

It is also bad news for the European company's global ambitions, as it already faces credibility problems due to delays and the soaring costs of its A400M military transporter.

The company on Tuesday announced it lost €1.05 billion in the last three months of 2009, compared to a net profit of €490 million a year earlier.

EADS reached last-minute agreement with customer nations last Friday, who agreed to put in another €3.5 billion into the airlift project, allowing it to survive.