Sources say the department has agreed to temporarily continue using the subsidiary known as Presidential Airways to provide helicopter transport for embassy employees around Iraq until a new contract with another security company, Dyncorp International, is fully implemented. Presidential Airways is an arm of U.S. Training Center, which is a subsidiary of the company Xe, formerly and still commonly known as Blackwater.
Officials say Dyncorp will not be fully staffed and certified in order to assume the responsibilities immediately. Dyncorp takes over the airlift contract on Sept. 4, but because of the delicate handoff between companies, the contract with Blackwater was extended so that the companies overlap.
"The deployment of an aviation program in Iraq is a complex challenge -- a slower transition to DynCorp taking over the task order is in the best interest of the government," a State Department official said.
The Blackwater contract's extension is for an indefinite period of time, but an official stressed it was "limited." The official said the State Department would like to complete the transition in "weeks or months."
Once this contract expires, it will end Blackwater's controversial presence in Iraq. The company was banned from operating in Iraq by the Iraqi government earlier this year and the State Department did not renew its contracts for personal security details in Iraq. The airlift contract had been allowed to continue until it was set to expire this month.
Blackwater rose to infamy in 2007 when some of its guards, who were escorting an embassy convoy through crowded Baghdad traffic, allegedly fired indiscriminately, killing 17 Iraqis. The incident sparked massive protests among Iraqis and hastened calls for a U.S. withdrawal from the country.
Five of the guards were charged with 35 counts of manslaughter and federal fire arms charges last year and pleaded not guilty in court earlier this year. One of the Blackwater guards involved in the shooting, Jeremy Ridgeway, agreed to testify against the five Blackwater guards last November and pleaded guilty to charges of one count of manslaughter, attempt to commit murder and aiding and abetting.
A U.S. official says the U.S. informed the Iraqi government that the decision was made "because the complexity of transition from one company to the next was going to take a little bit more time."
"They were understanding," the official said of the Iraqis.
The U.S. embassy is dependent on the airlift capacity in order to get around the country, a need that has only increased since the U.S. military has begun to scale back its operations, officials say.
A spokeswoman for Xe did not immediately respond to requests for comment.
ABC News' Jason Ryan contributed to this report.