KAI received a letter from the Indonesian government confirming that it had been chosen as preferred bidder for the advanced fighter trainer contract, an industry source told media outlets.

The next step is for up to four months of contract and price negotiations with KAI which likely will include some production of the aircraft in Indonesia, the source said.

Other bidders for the deal are the Aero Vodochody L-159 and Yakovlev Yak-130.

The T-50s will replace Indonesia's 38 aging BAE Systems Hawk 53 trainers. More than 900 were made, first by Hawker Siddeley between 1974 and 1977, then British Aerospace from 1977 to 1999 before BAE Systems MAS division bought the business.

However, other reports said Korea's Defense Acquisition Program Administration hadn't received any notification from Indonesia regarding the purchase. "We did not hear from Indonesia," a DAPA official said. "We hope that Indonesia would pick us as a preferred negotiator for the deal."

If the deal goes ahead, it will be an abrupt and welcome reversal of fortune for KAI and the DAPA. In February they suffered a major public relations setback over the bid to Indonesia.

South Korea is investigating possible industrial espionage after a notification by the Indonesian government that intruders were discovered in its delegate's Seoul hotel room.

Indonesia suspected that several officers from South Korea's National Intelligence Service broke into their suite in the Lotte Hotel.

Two men and one woman were accused of looking at a delegate's laptop computer and downloading information to a USB memory stick when they were disturbed by a returning delegate.

Some South Korean media reported that the computer belonged to an aide of Indonesian Economic Minister Hatta Rajasa. The information the three people were attempting to access surrounded the potential sale of the T-50.

The two-seater T-50 is built by KAI from an early 1990s design, based on the Lockheed Martin F-16 Fighting Falcon, the trainer developed for future pilots of the F-16, which is used by South Korea.

The T-50 uses a General Electric F404 turbofan engine producing 17,700 pounds of thrust for a maximum speed of Mach 1.4 to 48,000 feet altitude. The range is around 1,150 miles.

Importantly, its training systems are designed to enable a smooth transition to more advanced fighters including the F-22 Raptor, F-35 Lightning II and the F-16 Fighting Falcon -- of which Indonesia has 10 and also which may be due for upgrades.

KAI also produces the TA-50 light armed fighter and the T-50B, aerobatic performance aircraft.

Lockheed Martin funded 13 percent of the aircraft's development, KAI put in 17 percent and the South Korean government financed the rest.

Lockheed Martin Aeronautical Systems and KAI created the T-50 International Company, known as TFIC, to pursue export markets outside South Korea.

In November Indonesia decided to buy eight Embraer EMB-314 Super Tucano light attack aircraft to replace its Vietnam War-era Rockwell OV-10 Broncos.

In January, the Indonesian air force awarded Arinc Engineering Services a $66.7 million contract to modernize five of its Lockheed Martin C-130B transports.

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