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UPDATE 3-Boeing to offer revamped 767 tanker for U.S. bid

* Aircraft to have 787 flight deck, new boom

* Boeing touts more jobs, fuel savings

* Northrop still weighing whether to bid (Recasts first paragraph to include aircraft features; adds Northrop reaction)

WASHINGTON, March 4 (Reuters) - Boeing Co's BA.N entry in the U.S. Air Force's multibillion-dollar competition to build new refueling aircraft is an updated 767 the company says would save fuel and create more jobs than its likely rival.

The 767-based tanker that Boeing offered in the last competition lost to the larger Airbus A330 offered by Northrop Grumman Corp NOC.N and its European partner EADS EAD.PA, but the Pentagon canceled the deal after government auditors upheld a Boeing protest.

Northrop and its supporters in Congress say the Air Force’s final terms for the latest competition favor the 767. Northrop is still weighing whether to submit a bid in the competition worth up to $50 billion.

Boeing unveiled its “NewGen Tanker” on Thursday, saying it would upgrade its older 767 commercial jet with several “state-of-the-art” systems, including a new digital flight deck from its 787 Dreamliner and a new fly-by-wire refueling boom.

It said the 767 NewGen tanker would meet the Air Force’s 372 mandatory requirements and offered a low-risk manufacturing option, given existing Boeing plants in Kansas and Washington state, and long-standing relationships with suppliers around the country.

It said the aircraft would create “substantially more” U.S. jobs than Northrop’s A330-based tanker, and would be more cost-effective to own and operate, since it burned 24 percent less fuel. That would save the military about $10 billion in fuel costs over 40 years, Boeing said in a news release.

Boeing said the tanker’s upgraded flight deck would feature electronic displays on screens that were 75 percent larger than on a commercial Airbus A330 and would use a new boom with an increased fuel offload rate.

The tanker would also offer its air crew unrestricted access to the full flight envelope for threat avoidance, rather than allowing computer software to limit combat maneuverability.

Boeing’s statement included remarks from its defense chief, Dennis Muilenburg, as well as his predecessor, Jim Albaugh, who now runs the company’s commercial operations, underscoring Boeing’s unified approach to the competition.

Analysts said Boeing’s commercial division was not fully committed to the last tanker bid, which resulted in higher pricing than the Pentagon had expected.

“The NewGen Tanker will draw on the experience and talents of an integrated U.S. tanker team, including the best of our Boeing defense and commercial businesses and our nationwide supplier network,” said Albaugh, president and CEO of Boeing Commercial Airplanes.

Loren Thompson, chief operating officer of the Virginia-based Lexington Institute, said the new 767-based tanker would be “considerably simpler” than the one it bid in the last competition, which had included parts of different 767 models and was downgraded as possibly risky by the Air Force.

He said Boeing’s announcement would put pressure on Northrop and EADS to make a decision soon on whether to bid.

“Boeing is straining to prove that it is responsive and motivated,” Thompson said.

Northrop said this week it was still evaluating the final terms for the competition, but was closer to a decision.

Northrop spokesman Randy Belote rejected Boeing’s disparaging comments about the cost and capabilities of the A330-based tanker, noting that plane had beat Boeing’s to win the last five international refueling competitions.

Senator Jeff Sessions, a Republican from Alabama where Northrop had planned to assemble its tankers, told the Senate Armed Services Committee on Thursday that the Air Force’s final rules for the competition still clearly appeared to favor Boeing.

Sessions and Richard Shelby, the other senator from Alabama, are maintaining holds on several nominees for top Air Force and Pentagon jobs over the issue, something committee chairman Carl Levin, a Democrat from Michigan, called “unconscionable.”

Air Force Secretary Michael Donley told the committee that the Pentagon had worked hard to structure a fair competition, and said it would evaluate the costs and benefits of both a smaller and larger airplane.

“We believe this is a fair approach. It’s balanced and it has favored no one,” Donley said. (Reporting by Andrea Shalal-Esa, additional reporting by Karen Jacobs in Atlanta, editing by Dave Zimmerman, Matthew Lewis and Tim Dobbyn)

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