Boeing and Airbus brace for U.S. tanker decision

The decision, expected after U.S. financial markets close, marks another pivotal point in the Air Force's nearly decade-long struggle to begin replacing its 50-year-old KC-135 Stratotankers, which refuel fighter planes and other aircraft in mid-flight to extend the range of military operations.

But analysts say there is no guarantee an epic industry battle will end there. The losing bidder is likely to file a protest that could delay -- or overturn -- the contract.

The competition to supply 179 air-to-air tankers has sparked sporadic transatlantic tensions and clashes in Congress among lawmakers eager to bring jobs to their states.

Congress is out of session this week, but lawmakers will weigh in from their home districts.

Airbus parent EADS and BOEING (BA.NY)Co, arch rivals in the market for passenger jets, have fought bitterly in public over the contest with expensive advertisements while their respective supporters have battled it out at dueling news conferences.

Now, the Pentagon is close to giving its decision on the third attempt to replace aging Eisenhower-era tanker planes and senior defense officials say the choice between Boeing and EADS could come on Thursday.

Both Boeing and EADS, through its North American subsidiary, are offering specially adapted versions of existing twin-engined wide-body passenger jets: the Boeing 767 and the Airbus A330.

Analysts widely expect the losing side to file a protest against the decision with the Government Accountability Office, the arm of Congress which rules on federal contract disputes.

The Air Force has been trying since 2001 to begin replacing its Boeing-built KC-135 tankers.

An initial $23.5 billion plan to lease and then buy 100 modified Boeing 767s as tankers, fell apart in 2004.

EADS, partnered with Northrop Grumman Corp, won a 179-plane deal in February 2008, only to have it canceled after government auditors upheld parts of a protest by Boeing.

Northrop subsequently pulled out, leaving the European aerospace and defense company to bid alone.

Pentagon acquisition chief Ashton Carter declined to make any comment on the tanker selection at a speech in Washington on Tuesday evening, saying that the contract was "in source selection."

Paving the way for a decision, the Pentagon's inspector general, Gordon Heddell, last week said he saw no need to further investigate the accidental release of sensitive data to the wrong companies, adding it was inadvertent and not illegal.

Pentagon Comptroller Robert Hale told reporters last week that the Air Force was requesting an initial amount of nearly $900 million for the tanker program in fiscal 2012, and expected to award a contract in "a month or so."

(Reporting by Andrea Shalal-Esa and Tim Hepher; Editing by Tim Dobbyn)