INTERVIEW-UPDATE 1-EADS eyes Pentagon deal terms in August

* EADS sees Pentagon contract terms in August

* May buy U.S. company in 2009

By Sue Zeidler

LOS ANGELES, July 7 (Reuters) - EADS (EAD.PA) does not expect the Pentagon to announce till August the draft terms for a contract worth potentially $35 billion to replace an aging U.S. airforce tanker fleet, the defense group's North American chief told Reuters on Tuesday.

This year, the European group may buy a U.S. company for about $500 million to beef up its service network and expand its footprint in the domestic market, North American chief executive Ralph Crosby added in an interview.

The Pentagon last year canceled the 179-plane contract it had awarded to Northrop Grumman (NOC.N) and partner EADS in February 2008, after government auditors upheld a challenge from losing bidder Boeing (BA.N).

Defense corporations now await details before submitting bids. Defense Secretary Robert Gates said in June of this year that the Pentagon would decide within days the terms and structure of a new contest. [nN18407429]

That would be the Pentagon's third attempt to buy refueling planes. The Air Force's first bid to replace its fleet of KC-135s centered on a lease/buy deal with Boeing for 767s.

But that collapsed in 2004 amid a procurement scandal that sent two Boeing executives to prison for ethics violations.

Northrop then won a second competition -- carefully monitored by Pentagon officials -- but government auditors still upheld 8 of over 100 protest points raised by Boeing.

Pentagon officials are now pondering structures for a third try, including possibly splitting any contract between Boeing and Northrop. But Crosby said on Tuesday that the details of the long-awaited plan may not be released until August.

(Reporting by Sue Zeidler; Editing by Gary Hill)

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