A $40 Billion Tanker Battle

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Boeing has argued that its offering—a modified version of the company's 767 airliner—is more practical. Boeing says its plane is 24% more fuel-efficient than its rival, a potential savings of $14 billion in fuel over the 40-year life of the aircraft. Boeing has delivered about 1,000 767s in the program's 27-year history. The company has begun supplying the new tankers to the Italian and Japanese military.

With its 156-foot wingspan, Boeing's plane is a good deal smaller than the 197-foot Northrop plane. That means it can land in more airfields, says Paul Nesbit, a defense industry analyst with JSA Research. The Pentagon would thus likely be able to afford more of them. "The A330 is a considerably larger and more expensive aircraft," he notes. "The Air Force would have to revamp its whole system of logistics to fly them."

The Made-in-America Advantage

The Boeing aircraft would be manufactured at the company's massive plant in Everett, Wash., and flown to Wichita, Kan., where customized military parts such as the fueling boom would be added. It will have an overall U.S. parts content of 85%, according to Boeing spokesman Bill Barksdale, compared to about half for the Northrop tanker. "No matter how much our competitor wants to push back on that, it's definitely the American tanker," Barksdale says.

Defense industry analysts pick Boeing as the likely winner. Although the Pentagon has been awarding more contracts to foreign suppliers—the new version of the President's Marine One helicopter, for example, is to be made by an Italian/British supplier—John Pike, director of Pentagon watchdog GlobalSecurity.org, says it would be unusual for a contract of this size to have such a significant overseas component. "I'm just not able to believe American tax dollars are going to flow into Airbus on such large scale," Pike says.

One thing is almost certain, however: Whichever company loses will likely challenge the award. That will further delay an already long-delayed project.

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau .