US defense giant Northrop Grumman, which EADS wants to be its transatlantic vehicle, said Wednesday it had put on the back-burner any formal alliance with the European group as it decides whether to compete for a Pentagon contract to supply aerial refueling tankers to the US Air Force.

In an interview in the Financial Times, Ronald Sugar, chief executive of Northrup Grumman, said his decision to compete in the refueling tanker program had been hampered partly by US Congressional action against its likely partner, Airbus parent EADS.

The announcement of a tie-up with EADS had been expected at the Paris Air Show this week at Le Bourget Airport, near Paris.

But prospects for the partnership appeared to be slipping away amid a mounting trade dispute between the European Union and the United States over state aid to commercial aircraft manufacturers Airbus and Boeing.

In late May, the US House of Representatives called on the Pentagon to deny military contracts to any foreign company receiving a government subsidy in a country that is a mmeber of the World Trade Organization.

This initiative is aimed particularly at EADS, whose unit Airbus is the subject of a US lawsuit filed at the WTO over state aid.

The Boeing Company, which Airbus has overtaken since 2003 in civilian aircraft sales, is also competing for the hefty refueling tanker contract, valued at some 23.5 billion dollars (19.4 billion euros).

The future German chief executive of EADS, Thomas Enders, believes it is the Chicago-based company at the root of its nightmare. "Boeing is trying to stop us from entering the American market, because they know that we are coming with an interesting product," he said Tuesday in the German daily Die Welt.

False, responded Boeing chairman Lew Platt. "What I'm really looking for is a level playing field" with Airbus, he said.

"I think that part of that means they should be able to compete for business in the United States."

"It's anybody's guess how this will play out over the summer," Sugar told the Financial Times.

This latest hitch for EADS in pursuit of its "American dream" on the military market would be less discomforting for the group - and less emblematic of its difficulties in breaking into that market - if it had not been accompanied by other setbacks.

On Tuesday, EADS unit Eurocopter lowered its military ambitions in the United States, where by contrast it is well-established in the civilian market.

The helicopter maker said it would not compete "for strictly technical reasons" for two of three US Army contracts which it had hoped to pursue: the Armed Reconnaissance Helicopter and Search and Rescue Helicopter programs.

Eurocopter chief executive Fabrice Bregier told AFP: "The need, such as it was expressed, does not permit us to give ourselves the chance to win."

An attempt to team up with Northrup Grumman failed, he said.

"But it wasn't because Northrup didn't want to have an agreement with us," he added.

Despite these snags, EADS projects confidence. Ralph Crosby, the head of EADS operations in the United States, has promised to unveil next week the name of the US city selected for the assembly of an Airbus A330 tanker if the European wins the US army contract.

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