Although sales are soaring, two of Israel’s leading defense companies are undergoing unsettling personnel changes: Israel Aerospace Industries’ (IAI’s) CEO for the last six years, Itzhak Nissan, is being forced to retire, and Aeronautics Defense Systems’ CEO and founder Avi Leumi will also depart his position in the coming weeks.

Just two days after announcing the inking of a $1.6 billion contract with an undisclosed Asian customer, IAI’s largest contract ever, Nissan was forced to announce he will vacate the CEO job when his mandate expires in October, after almost seven years on the job. The deal covers the sale of attack drones, missiles and a Green Pine missile defense radar.

But even with that success, Nissan, who is about to turn 67, was unable to get the mandate extension he was hoping for. His predecessor, Moshe Keret, served until he was 72. IAI’s new chairman, Dov Baharav, did not conceal his dissatisfaction with Nissan, despite the fact that Nissan brought a dramatic increase to the company’s sales and put IAI’s backlog at more than $10 billion.

Baharav had doubts about Nissan’s capability to lead the company through the privatization it is expected to undergo in coming years and to prepare it for the expected decline in global defense expenditures, industry officials say.

As a state-owned company, IAI will issue a public tender for candidates to replace the retiring CEO. Baharav had previously expressed his wish to hire a person with business experience, although Defense Minister Ehud Barak will likely push for a veteran defense official.

Israel’s defense ministry recently dragged the country into a diplomatic embarrassment when it ordered the suspension of a $320 million contract signed by Aeronautics Defense Systems to sell Dominator XP medium-altitude/long-endurance (MALE) unmanned aircraft to the United Arab Emirates. The ministry argued that Aeronautics did not receive the required export license from the defense export regulation authority and ordered it to halt the already inked contract.

Without overt diplomatic relations, Israel and the UAE have had a long-standing relationship of commerce and diplomatic coordination, including defense sales. The ties deteriorated, though, after Israel’s Mossad intelligence service was alleged to have killed a senior Palestinian official in Dubai in 2009.

Since then, several Israeli agencies have been working hard to restore relations with the UAE through the sale of advanced defense technology. Those agencies fear the defense ministry’s refusal to grant the export permit would jeopardize the delicate relationship with the UAE, and they are urging the government to allow the Aeronautics deal to go through.

But from the government’s perspective, the issue looks different. Defense ministry officials feel the deal could undermine their own appeals to the U.S. to block the sale of advanced weapons to Persian Gulf states to preserve Israel’s qualitative military edge in the region. Aeronautics’ Dominator XP is a 4,400-lb. UAV based on the Diamond DA42 Twin Star manned aircraft.

It is uncertain whether the departure of Aeronautics’ CEO Leumi, who has been leading the company since it was established 14 years ago, is directly linked to the flare-up over the UAE deal.

Under Leumi, the small UAV manufacturer grew into a company with 750 employees and estimated annual revenues of $150 million. In the coming days the company will announce the appointment of Shahar Kravitz as its CEO, while Leumi will be appointed president. Industry sources claim that Leumi asked to stop managing the operational side of Aeronautics and focus on business development. Yet those sources admit that Leumi had deepening disagreements with one of the company’s leading shareholders.

Aeronautics has recently acquired 50% of the electro-optic manufacturer Controp, with Rafael Defense Systems acquiring the other half, a move that has drained Aeronautics’ cash reserves. Controp was bought at a market worth of 300 million shekels, a price many observers believe was too high.