Northrop seen keeping U.S. tanker order

By Andrea Shalal-Esa

WASHINGTON (Reuters) - Northrop Grumman (NOC.N) and its European supplier EADS (EAD.PA) will probably hold onto a $35 billion (17.7 billion pounds) order for aerial refuelling tankers, but a Boeing (BA.N) protest and political wrangling could delay the deal somewhat, the Teal Group said in a new report.

The U.S. Air Force shocked lawmakers in February by awarding the contract to the Northrop-EADS team instead of Boeing, which has protested the award with the nonpartisan Government Accountability Office. Supporters of the Chicago-based company vow to block funding for the Northrop deal if the appeal fails.

But the Teal Group, one of the leading research groups that follow the military weapons industry, said there was only a tiny chance those efforts would prevail.

"Despite the controversy and headaches ahead, we think this contract will stick," Teal Group Vice President Richard Aboulafia wrote in the report about the Air Force's KC-45 tanker program.

Northrop proposed a tanker based on the Airbus A330-200, calling it the KC-30, while Boeing offered a new version of its 767 jetliner.

"Our forecast assumes that the KC-45 happens on time," Aboulafia wrote. "But there is a 50 percent chance of a one- to two-year delay, due to politics or to a successful GAO protest and the resulting re-compete."

A BOEING ORDER?

Aboulafia also estimated greater than 1-in-3 odds that Congress would add funding to the defence budget to allow the purchase of Boeing's 767 in addition to the A330. Such a move would not reduce funding for the Northrop plane, he said.