updated 2/12/2007 3:30:21 PM ET 2007-02-12T20:30:21

Boeing Co. on Monday announced a newly designed KC-767 as its proposed aircraft for a $40 billion Air Force contract competition to replace 179 refueling planes.

The Chicago-based company said at a press conference held in Washington that it tweaked the design of its long-range 767 freighter plane to improve fuel efficiency, among other factors.

Boeing is competing against Northrop Grumman Corp., which is expected to offer its KC-30, a modified Airbus A330, at a discounted price.

At stake for both competitors is a multiyear contract to replace a portion of the military's older fleet of KC-135 aircraft, a medium-sized refueling plane made by Boeing. The $40 billion contract is the first installment of an expected three-phase deal that calls for more than 500 planes and could be worth an estimated $100 billion.

The Boeing-led team includes Smiths Aerospace, a unit of Smiths Group, Rockwell Collins Inc., Vought Aircraft Industries Inc., Honeywell Inc. and Spirit AeroSystems Inc.

Boeing said it would primarily build the refueling tankers at facilities in Everett, Wash., but that additional work would take place at a plant in Wichita, Kan.

"This KC-767 advanced tanker will support more than 44,000 American jobs and 300 suppliers," Mark McGraw, a vice president of Boeing's tanker division, said.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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