Defence Minister Robert Hill said under the deal EADS would supply the A330 Multi-Role Tanker Transport aircraft and Qantas would provide maintenance over the planes' lifespan.

The aircraft, due to enter service in 2007, will replace the Royal Australian Air Force's ageing Boeing 707s.

Hill said recent campaigns in Afghanistan and Iraq had shown mid-air refuelling acted as a "force multiplier" during combat operations.

He said the aircraft will be capable of refuelling F/A-18s, F-111s, AWACS surveillance aircraft and the upcoming Joint Strike Fighter (JSF).

They will also be used to for airlift and can carry up to 293 passengers.

The contract includes a hospital bed kit for emergency medical evacuations.

The award of a major defence contract to a European bidder will help ease concerns that Australia was favouring US firms when buying military hardware.

Canberra has committed to spending up to 16 billion dollars on the US-developed JSF, it recently ordered 59 second-hand US Abrams tanks at a cost of 550 million dollars and will spend six billion US dollars on Aegis guided missile systems.

Australia is expected to make an announcement in the next few weeks about replacement of its fleet of troop lift helicoptors, with Sikorsky of the United States and NH Industries/Eurocopter the main contenders.

WAR.WIRE