Northrop Grumman gets $40B deal to replace Air Force tankers

WASHINGTON (CNN) -- The U.S. Air Force on Friday announced one of the largest military acquisition programs in U.S. history, saying the service had chosen Northrop Grumman over Boeing to replace its aging air refueling tanker fleet.

"We look forward to partnering with them as we continue to defend our great nation in the future," said Secretary of the Air Force Michael Wynne.

The announcement was a surprise to many in the business industry who expected Boeing to be favored over the company, which will use a European company's airframe, Airbus, for the tanker.

The $40 billion deal to start replacing 179 tankers -- known as the KC-45A program -- will expand to over $100 billion to replace the entire fleet of almost 500 planes, Pentagon officials said.

Boeing proposed a tanker based on its 767 commercial airliner, while Northrop -- working with Boeing arch-rival Airbus and its parent company, European Aeronautic Defense and Space Company (EADS) -- offered a model based on the Airbus A330 airliner, which is larger than the 767.

To sweeten the deal, EADS announced it would put a plane assembly plant in Mobile, Alabama, if the company won the contract.

Boeing, a U.S. company, builds planes in the state of Washington.

"We had two very competitive offers in this competition," said Sue Payton, assistant secretary of the Air Force for acquisition, briefing reporters after Wynne made the announcement. "Northrop Grumman clearly provided the best value to the government."

Payton said "debriefings" were planned for both competitors, and declined to say where Boeing's offer fell short until after that happens, sometime on or after March 12.

"We owe it to Boeing to give them the first debrief on this," she said.

The Air Force has been trying since 2001 to replace the tanker fleet, which has some planes close to 50 years old, according to Air Force statistics.

The average age of the fleet is more than 24 years, while the average age of a U.S. commercial airline fleet is just over nine years, according to Air Force officials.

It will take several years to get the new KC-45 flying, said Gen. Arthur Lichte, commander of Air Mobility Command.

"We hope that we'll get the first aircraft into the test program beginning in 2010. And we're hoping that the first capability operationally will be about 2013," he said.

Lichte went on to explain the benefits of the new planes.

"From my perspective, I can sum it up in one word, 'more'. More passengers, more cargo, more fuel to off-load, more patients that we can carry, more availability, more flexibility and more dependability," he said, comparing the new tankers to the current fleet. Explainer: How planes refuel at high altitudes »

But one lawmaker called the decision to award the contract to Northrop Grumman a blow to the American defense industry and an economic boon for European countries.

"These are the same European governments who are unwilling to support us in the global war on terror and over the last few months refused to provide even an additional 100 soldiers apiece for Afghanistan operations," said Rep. Duncan Hunter, R-California.

"Instead, we have to send 3,200 additional U.S. Marines to Afghanistan while they take $35 billion in American taxpayer contracts."

The contract to replace the aging fleet of air refueling tankers was mired in corruption and political wrangling for years.

In 2004, Congress, led by Sen. John McCain, R-Arizona, banned the Air Force from working out a lease and purchase deal with Boeing after a federal investigation uncovered improprieties at the highest levels of the Air Force procurement process.

Critics also complained that Boeing was awarded the contract without competition and that the deal was a bailout for the 767 program, which was facing slumping sales.

Congress forced the Air Force to start a new contract bidding plan that allowed Airbus to compete for the contract.

Pentagon officials said the losing company could protest and ask the Government Accountability Office to investigate the decision, which would delay the program again.

Although the deal announced Friday is one of the largest U.S. military contracts in history, it falls short of the Army's recent $200 billion Future Combat System program and the Pentagon's future F-35 Joint Strike Fighter program, expected to be over $200 billion. E-mail to a friend

All About U.S. Air Force • Northrop Grumman Corporation • Boeing Company