Kelly said the main reason Dyncorp wanted additional time was due to "equipment shortages".
He also said that the Iraqi government had been informed of the decision and had not registered objections.
One US official told the Associated Press that providing helicopter air support for American diplomats in Iraq - transporting them and overflying their convoys - is a "complex challenge," and "a slower transition to DynCorp taking over… is in the best interest of the government."
"We unilaterally extended the current task order... to ensure the continued security and safety of US personnel in Iraq," the official said.
Iraq license refused
Blackwater has earned more than $1bn in contracts awarded under the Bush administration, although a spokesman for Xe told Al Jazeera says the company has since stopped pursuing security contracts, shifting instead to law enforcement and hostage rescue training.
|Blackwater had been banned from operating from Iraq in January
The state department informed Blackwater in January that it would not renew its contracts in Iraq because of the Iraqi government's refusal to grant it an operating license.
The aerial services contract was the last of those contracts to expire.
Blackwater guards stopped protecting American diplomats in al-Hillah, Najaf and Karbala, all south of the capital Baghdad, in August.
Iraqis had long complained about incidents involving Blackwater's ground operations.
A shooting by Blackwater guards in Baghdad's Nisoor Square in 2007 left 17 civilians dead, straining relations between Baghdad and Washington and led US prosecutors to bring charges against the contractors involved, six of whom have been indicted for mansluaghter.
Blackwater's founder, Erik Prince, is being sued in a US civil court by the families of the Baghdad shooting victims for alleged war crimes and extrajudicial killings.
However Prince's lawyers argue that he and the company are legally immune under laws that bar suits against government employees for any actions committed on behalf of the government.