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US Air Force sees no big changes to tanker terms

* No details on changes to financial terms

* Final competition terms due out next month

WASHINGTON, Jan 21 (Reuters) - The U.S. Air Force is eyeing some changes to “financial arrangements” for a multibillion dollar competition for new aerial refueling tankers, but Pentagon officials declined to say whether that could signal a departure from the fixed price terms they initially sought.

Air Force Chief of Staff General Norton Schwartz said on Thursday he did not expect any substantial changes on the requirements for the tanker, but declined to elaborate on possible changes to what he called the financial arrangements.

Schwartz, speaking to reporters on the sidelines of an aerospace conference, said the Air Force planned to release the final terms for the competition within a month after the release of the Pentagon’s fiscal 2011 budget on Feb. 1.

Industry executives have said they expect the terms to be released around mid-February, possibly around Feb. 12.

Schwartz said possible changes to the financial structure of the tanker competition were sparked by the Air Force’s dialogue with industry about possible financial risks associated with the proposed contract terms.

Deputy Defense Secretary William Lynn also declined on Thursday to discuss any possible changes, saying the Pentagon and Air Force would explain their views when the final request for proposals (RFP) is released next month.

Pentagon budget documents obtained by Reuters include funding for development of a new aerial refueling tanker at an estimated cost of $35 billion, forecasting a contract award this summer and procurement to start in fiscal 2013.

Northrop Grumman Corp NOC.N and Europe's EADS EAD.PA won a projected $35 billion contract for 179 tanker planes in February 2008, but the Pentagon canceled it after government auditors upheld a protest filed by rival Boeing Co BA.N.

Northrop and EADS have told the Pentagon they will not bid for the work this time around unless major changes are made to draft rules for the competition that were released last year.

Asked if he was worried about the prospect of awarding a sole-source contract to Boeing given the long history of the Air Force’s attempts to buy new tankers, Schwartz said the clear preference was to have a competition.

“I’m not going to speculate what others might do, but clearly we hope to have two or more offerers,” he said. “But the bottom line is again that we on the customer side get to decide what we need.”

Congress killed an earlier Air Force plan to buy 100 767-based tankers from Boeing amid a huge procurement scandal that sent a former top Air Force official and Boeing’s former chief financial officer to prison for violating federal conflict of interest rules. (Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)