The transfer of search and rescue services (SAR) from HMS Gannet in Prestwick to Glasgow Airport has been put on hold.
The Treasury has announced a review of the privatisation of SAR operations across the UK which was signed off by the previous Labour government.
The move is part of the new Tory-Lib Dem coalition's first round of budget cuts.
Local Labour MP Brian Donohoe said the suspension was "fantastic news."
A private consortium, Soteria, had been appointed to take over SAR operations from 2012.
The total cost of the project was estimated at more than £7bn, according to the Ministry of Defence.
The new service run by the consortium was to combine the current work of the RAF, navy and coastguard.
The current operation provides a 24-hour military and civilian search and rescue across a large area of Scotland, Northern England and Northern Ireland.
The Chief Secretary to the Treasury, Danny Alexander, announced that the privatisation would be reviewed by the Ministry of Defence and the Department of Transport.
Mr Donohoe, the Labour MP for Central Ayrshire, had led a four-month campaign to halt the transferral.
He said he was "absolutely delighted" and would be making "early representations to the UK government" to ensure the privatisation was cancelled completely.