"We intend to bid for the honor to work with our Air Force customer to replace the existing fleet of KC-135 aircraft with a new-generation, multi-role tanker in a fair and transparent acquisition process," said Dennis Muilenberg, president and chief executive of Boeing Defense, Space & Security.

The US aerospace giant said it would submit its proposal by May 10, within the 75-day period set out in the Pentagon's request for proposals for the contract for 179 planes.

They would replace a 1950s-era fleet of Boeing KC-135 Stratotankers.

Boeing is the first to announce it will bid in the troubled competition, which marks the third attempt to replace the aging Boeing fleet after years of controversy and scandal.

It remained unclear whether the European Aeronautic Defence and Space Company (EADS), parent of Airbus, and its US partner Northrop Grumman would bid on the contract after accusing the Pentagon of favoring arch-rival Boeing.

The Defense Department on February 24 issued its final terms for the high-stakes competition, known as a request for proposals (RFP), promising a fair contest for aerospace rivals Boeing and EADS.

"Northrop Grumman continues to work toward a bid/no-bid decision through a thorough analysis of the final RFP and discussions with our tanker teammates," Northrop spokesman Randy Belote told AFP.

"We will announce our decision when the review is completed."

An EADS spokesman, contacted in Paris, said the company was still reviewing the RFP.

"It is still too soon to make a decision," he said, adding that an announcement could come before Tuesday, when EADS publishes its annual financial results. EADS reportedly is pressing Northrop to submit a bid.

Boeing said it would offer the NewGen Tanker, a warfighter based on the company's wide-body 767 commercial airliner and outfitted with cutting-edge systems.

The updated tanker was proposed because it would "deliver the most capability for the lowest cost to own and operate."

The NewGen Tanker will save billions in taxpayer dollars and create significantly more American jobs than Airbus would, the company said.

"More cost-effective to own and operate than the larger, heavier Airbus airplane, the Boeing NewGen Tanker will save American taxpayers more than 10 billion dollars in fuel costs over its 40-year service life because it burns 24 percent less fuel.

"The Boeing NewGen Tanker program also will support substantially more jobs in the United States than an Airbus A330 tanker that is designed and largely manufactured in Europe," it said.

The Chicago-based Boeing plans to build the tanker at its plant near Seattle, in Washington state, equip it with military technology in Witchita, Kansas, and use US suppliers throughout the nation.

Shares in Boeing leaped 1.71 percent to close at 65.55 dollars in New York, while Northrop Grumman gained 1.22 percent at 63.08 dollars.

Analysts say that because the Boeing and Airbus planes would likely meet the Pentagon's performance criteria, the contract would be decided largely on price. The winner was expected to be picked before the end of summer, officials say.

The Pentagon has struggled since 2003 to get a new tanker built.

A contract was awarded in February 2008 to the Northrop-EADS team, but the deal was canceled after Boeing successfully appealed the decision to the Government Accountability Office (GAO), the investigative arm of Congress.

EADS and Northrop had offered a modified version of the commercial Airbus A330, while Boeing proposed a 767-based tanker.

In 2003, the Pentagon awarded a contract to Boeing but later suspended it amid an ethics scandal involving a company executive and an Air Force official. The Air Force official was later convicted of criminal conspiracy.

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