UPDATE 1-Boeing rival sues Air Force over tanker maintenance

(Adds Boeing statement, final paras)

By Jim Wolf

WASHINGTON, June 26 (Reuters) - Alabama Aircraft Industries Inc AAII.O said on Thursday it was filing a lawsuit challenging the U.S. Air Force's selection of Boeing Co (BA.N) for a $1.1 billion contract to maintain the KC-135 mid-air refueling fleet.

The lawsuit was being filed under protective seal in the U.S. Court of Federal Claims after back-to-back protests to the Government Accountability Office, said the company formerly known as Pemco Aviation.

The GAO, the audit arm of Congress, upheld part of Alabama Aircraft's initial protest in December. The company filed its second challenge after the Air Force decided to stick with Boeing for the contract.

Ten days ago, the Air Force announced it was lifting a stop work order on the Boeing contract that had been in effect since shortly after it was awarded on Sept. 10, 2007.

The KC-135 contract went to Boeing at a time when the Air Force envisioned a smaller number of existing tankers requiring maintenance because of plans for a new tanker fleet. The initial contract to start building the new fleet was awarded on Feb. 29 to Northrop Grumman Corp (NOC.N) and its partner, Airbus parent EADS (EAD.PA), over Boeing.

Boeing itself turned to the GAO and successfully challenged the award to Northrop and EADS -- a program for 179 aircraft valued at $35 billion over 15 years,

"With that contract now being mired in another protest that was upheld by the GAO, the Air Force will be delayed in fielding the new tankers and the existing KC-135 fleet will be in service for a longer time," said Trent Wisecup, a company spokesman.

He said Alabama Aircraft was pursuing litigation because the court of claims provides greater latitude to challenge the contract, including a chance to use discovery to get information from the Air Force that was not available during the GAO protest process.

Alabama Aircraft also plans to press issues of bias, conflicts of interest and procurement integrity that were not covered by the GAO in its previous rulings, Wisecup said in an e-mail interview.

The lawsuit asks the court to order the Air Force to conduct "a full and proper evaluation" and to ensure compliance with acquisition law, the company said in a statement.

Chicago-based Boeing said in response it was time to move on to keep the KC-135 fleet flying and battle-ready.

"This action by our competitor does not benefit the Air Force, then men and women in uniform relying on these aircraft, or the U.S. taxpayer," Forrest Gossett, a Boeing spokesman, said in an emailed statement. (Editing by Andre Grenon and Braden Reddall)