NORTHROP, AIRBUS MAY TEAM PARTNERSHIP WITH EUROPEAN FIRM WOULD BUILD AIR FORCE TANKERS.

Byline: Brent Hopkins Staff Writer

CENTURY CITY - Seeking a shot at a potential $100 billion Air Force tanker contract, Northrop Grumman announced Wednesday that it intends to partner with the European-based parent of Airbus for a bid against rival Boeing Co.

For a seemingly mundane issue such as airborne refueling, Northrop Grumman has stepped into surprisingly controversial waters. The previous deal, won in 2003 by Boeing Co. for $23.5 billion, led to congressional investigations, prison time for Air Force procurement officials and former Boeing executives and, ultimately, the cancellation of the contract.

By introducing Airbus, a subsidiary of the European giant EADS, into the equation, Northrop Grumman raised the prospect of intense nationalistic competition. Under the partnership, EADS would build planes based on the Airbus A330 airliners at a new plant in Mobile, Ala., then Northrop Grumman would upgrade it for military tanker use.

Depending on how many of its 500 aging KC-135 tankers the Air Force chooses to replace, the deal could bring in from $25 billion to $100 billion.

``They're American aircraft, built by Americans for Americans,'' said Randy Belote, a spokesman for Northrop Grumman.

The project would create up to 1,000 new jobs between the Mobile plant and other domestic production, but still has a major link to an overseas competitor. Though Boeing still has the taint of the 2003 scandal, economist Jack Kyser said it would still likely have stronger political backing than its archrival.

``There's also a lot of hostility toward Airbus in Washington, since there's a perception that they're heavily subsidized by the Europeans and have hurt Boeing,'' said Kyser, chief economist for the Los Angeles County Economic Development Corp. ``But the problem is for a tanker like this, you need a very large airframe. The only other game in the globe is in Russia, which is a complete no-no.''

Airbus has won deals to provide tankers to Canada, Germany, Australia and the United Kingdom, based on its A-310 and A-330 platforms. Under Boeing's ill-fated bid, the company would have used modified versions of its 767 airliner, affecting jobs in St. Louis, Wichita, and a handful in Long Beach.

``The A-330 is at the beginning of its commercial life, the 767 is at the end of its commercial life,'' said Guy Hicks, vice president of corporate communications for EADS North America. ``As a team, we're marrying the strengths of two global companies.''

News of the deal raised eyebrows among industry observers, since Northrop Grumman and Boeing are frequent partners, including work on the next-generation space exploration vehicle. By offering to hand business to Boeing's bitter competitor, Northrop Grumman shook up an increasingly small sector.

``I wonder what implications that has on their deals with Boeing,'' said William Baker, president of GARP Research Corp, an analyst company based in Baltimore that owns shares in Northrop Grumman. ``I'm sure they know what they're doing, but it's a good question to ask. Northrop Grumman has such a strong position in the electronics business, Boeing's not going to dump them. They figure that sometimes in this business, you'll team up with other people.''

The aircraft manufacturer offered only scant comment on its partner's announcement.

``We welcome the opportunity to compete, we're ready to compete and we're looking to compete on a level playing field,'' the company said in a statement.

Northrop Grumman shares advanced 29 cents to close at $57.33 on Wednesday, while Boeing saw shares decline 53 cents to $64.50.

Brent Hopkins, [phone]

brent.hopkins(at)dailynews.com