Boeing had been considered a hands-down favorite to win the huge contract to refurbish aging aircraft into Air Force tankers that refuel fighter jets in flight.

The Air Force, instead, decided on a larger Northrop-European Aeronautic Defense and Space Co. Airbus A330, which will be turned into KC-330s. The refurbished plane could holds 24 percent more fuel and 21 percent more cargo than a refurbished 767, reports said.

Boeing, until now, had a monopoly on Air Force tanker planes, the Seattle Times reported.

The blow to Chicago-based Boeing means it will wind down its 767 assembly in Everett, Wash., in 2012, the paper reported. It will also miss out on adding 9,000 jobs to the Everett area.

Northrop-EAD's proposal included building a new jet factory in Mobile, Ala.