The initial contract for the newly named KC-45 tanker, which is a modified Airbus A330 airplane, covers four test aircraft worth $1.5bn.

There are reportedly plans to buy 175 more aircraft.

The programme marks the first stage of a multi-decade plan to replace more than 500 KC-135 tankers used to extend the range of fighter jets and other defence aircraft.

The US hopes to start operating the new tankers in 2013.

'Game changer'
 
Northrop Grumman says that the new tanker "will be a game changer".

"Northrop Grumman's vast expertise in aerospace design, development and systems integration will ensure our nation's warfighters receive the most capable and versatile tanker ever built," Ronald Sugar, the company's chairman and chief executive, said.

A Northrop Grumman illustration shows a
KC-30 tanker refuelling a B-2 bomber [AFP]
The competition had been closely watched because of the contract's political implications regarding a choice between an American contractor or a mainly US team headed by a foreign contractor.
 
Parts for the Airbus A330 commercial airliner are built mainly in France, Germany, Britain and Spain, then transported to Toulouse in southwest France for assembly.
 
But the new US tanker will be assembled in Mobile, Alabama, and will employ 25,000 workers at 230 US companies, Northrop said in a statement.
 
Both tanker proposals had strong backers in congress divided along the lines of where jobs would be created.
 
Key members of Alabama's delegation, for instance, wrote that any attempt by a contractor "to wrap itself in the American flag during a competition today is disingenuous and condescending".