SEATTLE Boeing on Thursday announced it will offer a modified version of its 767 airliner to the U.S. Air Force as its entry into the latest round of competition to build a new aerial refueling tanker.

There was a possibility that Boeing could offer a tanker version of its larger 777, to more evenly compete against a possible Northrop Grumman bid based on the Airbus 330 airliner.

In 2008, Boeing lost out to the Northrop/Airbus team after the Air Force said it preferred the larger A330. But Boeing successfully protested that decision and forced the new round of competition that's now under way. Analysts believe the new round will more likely favor Boeing's entry.

Northrop has warned that it may not bid on the project, saying the Air Force's guidelines appear to favor Boeing's smaller plane. Randy Belote, a spokesman for Northrop, said the company is still analyzing the Air Force's request for proposals and will announce its decision when that process is finished.

The $35 billion contract would be for a fleet of 179 new planes.

Currently, Boeing is building 767 tankers for the Italian Air Force and the Japanese Self-Defense Force.

Click here to see a Boeing video presenting its proposed tanker.

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