Northrop Grumman Corp beat rival Boeing Co to win a major $3.8 billion contract to maintain and service the U.S. Air Force's fleet of KC-10 refueling tankers, the Pentagon said on Thursday.

Boeing holds the current contract for servicing the aircraft, which expires in January, and has provided support for the KC-10s for more than a decade.

Boeing said it was disappointed by the Pentagon's decision.

We presented a competitive proposal that leveraged Boeing's tremendous experience from over 80 years of building and maintaining tankers as well as inventing boom technology, Boeing spokesman Forrest Gossett said.

We now need to review the Air Force's selection decision and process before deciding on our next course of action.

Large Pentagon contracts are often appealed to the U.S. Government Accountability Office, the audit arm of Congress.

The Air Force had planned to award the contract in June 2008, but a decision was delayed because bidders submitted insufficient cost and pricing data.

This is a stunning upset, said defense analyst Loren Thompson with the Virginia-based Lexington Institute. Boeing has been servicing this plane since it was first introduced, Thompson said, adding so for Boeing to lose to Northrop is truly amazing.

Northrop, with its European partner, Airbus-maker EADS , is also in a battle with Boeing to win a contract to supply at least 179 new tankers to the Air Force, work that could be worth up to $50 billion.

The Air Force's oldest tankers are the KC-135s, some of which are 50 years old.

The Air Force's refueling fleet includes nearly 60 KC-10s, which were purchased in the 1970s and are modified DC-10 aircraft made by McDonnell Douglas, which was bought by Boeing in 1997.

(Reporting by Julie Vorman and Andrea Shalal-Esa; editing by Andre Grenon and Tim Dobbyn)