$40 billion Air Force tanker deal expected

WASHINGTON (CNN) -- The U.S. Air Force is expected to announce this week a $40 billion contract to replace its aging fleet of air refueling tankers, a process which has been mired in corruption and political wrangling for years.

Two groups are competing for the project known as the KC-X program -- Boeing and Northrop Grumman.

Boeing is proposing a tanker based on its 767 commercial airliner. Northrop, working with Boeing arch-rival Airbus and its parent company, European Aeronautic Defense and Space Company, is offering a model based on the Airbus A330 airliner.

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

Boeing, a U.S. company, builds aircraft in Washington state.

The contract would start to replace the almost 500 planes in the tanker fleet with 149 new planes, and options could extend the contract up to $100 billion, Pentagon officials said.

Since 2001, the Air Force has been trying 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, according to Air Force officials, while the average age of a U.S. commercial airline fleet is about nine years.

Led by Republican Sen. John McCain, Congress in 2004 banned the Air Force from working a lease and purchase deal with Boeing after a federal investigation uncovered improprieties in the highest levels of the Air Force procurement process.

Critics also complained 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 bidding plan that would allow Boeing rival Airbus to compete for the contract.

Pentagon officials said the losing company could protest and ask the General Accountability Office to investigate the decision, which would delay the program again. E-mail to a friend

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