U.S. plane maker Boeing, based in Chicago, builds the KC-10 and currently holds the current service contract for the plane, which is set to expire in January. It has been providing 24-hour service, seven days a week on the aircraft since 1998.
Boeing expressed disappointment over the Air Force's selection, saying it would review the decision before taking any further action. Based on merits, the company can chose to appeal the service's decision.
"Northrop has taken away from Boeing a franchise it's owned for a quarter century," said Loren Thompson, a defense consultant for the Lexington Institute.
The nine-year contract is expected to bring 150 to 300 jobs to the Lake Charles area, the offices of Louisiana's two U.S. senators, Mary Landrieu and David Vitter, said Thursday.
Los Angeles-based Northrop and its partner, Airbus parent European Aeronautic Defense and Space Co. NV, are locked in highly politicized battle with Boeing over a lucrative $35 billion contract to replace the Air Force's 179 aerial refueling tankers.
The Air Force has tried and failed twice to award a contract to replace its Eisenhower-era fleet of tankers that refuel military planes in flight. The last attempt in early 2008 was overturned on appeal and led Pentagon leaders to temporarily revoke the Air Force's authority to award a contract. The 2004 award to Boeing was undone by an ethics scandal that resulted in prison terms for a former company executive and a former high-ranking Air Force official.
Shares of Northrop fell $1.67, or 3.2 percent, to close at $50.08. Shares of Boeing fell 11 cents to $52 in after-hours trading, after sliding $2.04, or 3.8 percent, to close at $52.11.