WASHINGTON - The Boeing Co. suffered a major blow Friday as the U.S. Air Force awarded Northrop Grumman Corp. and a European partner a $35 billion contract to build airborne refueling planes.

Boeing spokesman Jim Condelles said the company is disappointed but has not yet made a decision about whether to appeal the award.

Boeing had planned to use the 767 airframe for the tanker, which is built at Everett. The planes would have been turned into tankers in Wichita, Kan.

The selection of Los Angeles-based Northrop Grumman and European Aeronautic Defence and Space Co., the maker of Airbus planes, surprised industry and elected officials. Chicago-based Boeing, which has been supplying refueling tankers to the Air Force for nearly 50 years, had been widely expected to hang onto that monopoly.

Air Force officials said the larger size of the Northrop-EADS aircraft helped tip the balance in its favor.

The contract to build up to 179 aircraft - the first of three awards worth up to $100 billion over 30 years - opens up a huge new opportunity for Northrop Grumman.

"They don't come along at this scale very often," Northrop Grumman Chairman and CEO Ronald Sugar said. "We do see this as being a very important component of our business for many years to come."

The deal also positions EADS to break into the U.S. military market.

In after-hours trading, shares of Northrop initially surged more than 5 percent before retreating to $78.83, an increase of 22 cents. Boeing's stock price fell $2.64 to $80.15.

The Northrop-EADS refueling tanker, the KC-45A, "will revolutionize our ability to employ tankers and will ensure the Air Force's future ability to provide our nation with truly global vigilance, reach, and power," Air Force Gen. Duncan J. McNabb said in a statement.

Air Force officials offered few details about why they choose the Northrop-EADS team over Boeing since they have yet to debrief the two companies. But Air Force Gen. Arthur Lichte said the larger size was key. "More passengers, more cargo, more fuel to offload," he said.

"It will be very hard for Boeing to overturn this decision because the Northrop plane seemed markedly superior" in the eyes of the Air Force, said Loren Thompson, a defense industry analyst with Lexington Institute, a policy think tank. And as the winners of the first award, EADS and Northrop are in a strong position to win two follow-on deals to build hundreds of more planes.

Boeing spokesman Jim Condelles said the company won't make a decision about appealing the award until it is briefed by Air Force officials. Boeing believes it offered the best value and lowest risk, he said.

Stifel, Nicolaus & Co. analyst Troy Lahr said in a research note it was surprising the Northrop-EADS team won given the estimated $35 million per-plane savings offered by Boeing. Lahr estimated the Boeing aircraft would have cost $125 million apiece. "It appears the (Air Force) chose capabilities over cost," Lahr said.

Military officials say the Air Force is long overdue to replace its air-to-air refueling tankers, which allow fighter jets and other aircraft to refuel without landing. The service currently flies 531 Eisenhower-era tankers and another 59 tankers built in the 1980s by McDonnell Douglas, now part of Boeing.

But the new contract has emerged as a major test for the Air Force, which is trying to rebuild a tattered reputation after a procurement scandal in 2003 sent a top Air Force acquisition official to prison for conflict of interest and led to the collapse of an earlier tanker contract with Boeing.

The tanker deal is also certain to become a flashpoint in a heated debate over the military's use of foreign contractors since Boeing painted the competition as a fight between an American company and its European rival. Lawmakers whose districts stood to gain jobs from a Boeing win were pressing this point on Friday.

"We should have an American tanker built by an American company with American workers," said Rep. Todd Tiahrt, R-Kan., who represents the district in Wichita where Boeing would have done much of the tanker work.

"This is unfortunate news for Boeing and the state of Washington," said Gov. Chris Gregoire. "Boeing and its workers build the best planes in the world. They will continue to enjoy great success with their 787 Dreamliner and other innovative products still to come.

"In the coming days, Boeing executives will be debriefed by the Department of Defense on what happened," she added. "I look forward to hearing from Boeing on the results of that briefing."

"We’re profoundly disappointed by the news," said U.S. Rep. Jim McDermott, D-Seattle. "We’re proud of our hometown Boeing team, proud of the airplanes they build, and the quality and commitment that are beyond equal."

"Some questions have been raised about new criteria being introduced late in the process and so we will withhold judgment until we learn more about the claims and potential impact," he added.

In Everett, Wash., a few dozen Boeing workers protested outside a Machinists Union hall holding up signs saying "American workers equal best tankers," and "Our military deserves the best."

The EADS/Northrop Grumman team plans to perform its final assembly work in Mobile, Ala., although the underlying plane would mostly be built in Europe. And it would use General Electric engines built in North Carolina and Ohio. Northrop Grumman, which is based in Los Angeles, estimates a Northrop/EADS win would produce 2,000 new jobs in Mobile and support 25,000 jobs at suppliers nationwide.

"I've never seen anything excite the people of Mobile like this competition," Sen. Jeff Sessions, R-Ala., said. "We're talking about billions of dollars over many years so this is just a huge announcement."