The US Air Force will next month reopen a difficult chapter in its history when it has to decide whether to award Boeing or the US defence contractor’s European rival, EADS , a lucrative contract to supply refuelling tankers to replace its ageing fleet.

Programme near take-off

When EADS snatched Britain’s largest private finance initiative contract from under the noses of rival Boeing four years ago, it was seen as a coup for the European aerospace and defence group, writes Sylvia Pfeifer.

The £13bn ($25.4bn) programme to provide the Royal Air Force with a fleet of refuelling tankers had been hotly contested.

But things have not gone smoothly over the past four years for the Future Strategic Tanker Aircraft (FSTA) programme. While the EADS-led consortium, AirTanker, was selected by the Ministry of Defence in February 2004, it was not named as the preferred bidder until a year later aftertalks to try to de-risk the programme, in effect a leasing deal.

However, the consortium says that the programme is nearing lift-off. AirTanker is in the process of raising £2.5bn. The credit crunch has increased the cost of the fundraising but the companies said the deal was on track to close in March.

Phill Blundell, AirTanker chief executive, said: “Because of the continuing market conditions we are still maintaining as much flexibility as we can between [issuing] bank and bond debt . . . Timing wise we remain confident of closing the deal by March 31 but probably before” .

The stakes could not be higher for Boeing, EADS or the air force. Victory for EADS, which is partnered with Northrop Grumman, would mark a huge step in its strategy to expand into the US defence market. While the initial contract is worth $40bn, a second tranche is expected to bring the final value to more than $100bn.