It said EADS directors were unanimous in the decision "in light of a substantial effort" to make the price more attractive.

Press reports here earlier in the day said that EADS, which owns 80 percent of Airbus, had decided to award the engine contract to EuroProp International (EPI) after the group cut its price to compete with Pratt and Whitney Canada.

EuroProp groups the French state-owned engine maker Snecma, Rolls Royce of Britain, MTU of Germany and ITP of Spain.

Both EuroProp and Pratt and Whitney had submitted "excellent proposals," EADS chairman Manfred Bischoff said in the statement.

"However, we have decided to opt in favor of the engine supplied by the European consortium as presenting overall the best solution and in light of a substantial effort on the agreed upon price."

The statement said the EADS board of directors had approved a recommendation from Airbus in favor of the TP400-D6 engine of the European consortium "as the best solution to the needs of the clients of the military transport plane A400M."

EADS directors convened in Amsterdam on Tuesday afternoon following a shareholders' meeting there to study the two proposals.

With 180 orders already on the Airbus books, the A400M is due to meet Europe's military airlift needs from its scheduled launch in 2009. The contract to supply its engines was seen as strategically important to the European aerospace industry.

As the original contract deadline passed last week, Airbus chief executive Noel Forgeard said that unless the European engine makers lowered their price, his first choice would be Pratt and Whitney, whose initial bid was almost 20 percent lower than EPI's

"As of today Pratt and Whitney is the winner without doubt," Forgeard had told reporters.

But he added: "A much lower offer could make us change our minds."

Forgeard also made clear that that a decision to give EPI more time to revise its bid had been taken because of the strong "political dimension" of the contract award.

EADS and Airbus are reported to have come under strong pressure from European governments led by France -- which owns Snecma as well as a 0.06-percent share in EADS -- to choose EPI over its North American rival.

But the French defense ministry insisted there had been no political interference in the contract decision and stressed that Airbus should be the "main judge" of the merits of the rival bids

The French daily Le Monde said earlier Tuesday that EPI had submitted a revised bid, reducing its price by 20 percent and effectively closing the gap with Pratt and Whitney.

But Le Figaro said that EPI had cut its price by just 10 percent.

WAR.WIRE