SEOUL (AFP) – Korean Air and European aerospace giant Airbus have signed an agreement to jointly bid for an $8-billion jet fighter project, an airline spokesman said Sunday, pitting them against a team comprised of Lockheed Martin and Korea Aerospace Industries.

The project is designed to develop and produce 120 fighter jets of a new "indigenous" type to replace the country's ageing fleet of F-4s and F-5s.

"We've signed a memorandum of understanding with Airbus," a Korean Air spokesman told AFP.

One of the conditions of the bid is that local enterprises tie up with foreign companies to secure technological assistance, according to Seoul's Yonhap news agency.

The pair will compete with Korea Aerospace Industries, which has teamed up with America's Lockheed Martin.

South Korea's Defence Acquisition Programme Administration plans to announce the final winner in July.

The Korean Air/Airbus alliance would have to present a totally new design as the Eurofighter Typhoon's delta wings do not fit South Korea's specifications, an analyst said.

"Eurofighter does not fit the swept-wing concept favored by South Korea", Lee Il-Woo of Korea Defence Network told AFP.

Korean Air currently operates aircraft maintenance workshops for both the South Korean and US airforce and has many years of experience in manufacturing wings for Boeing.

“Korean Air would play a role as a manufacturer with technological assistance from Airbus", Lee said.

The rival bidder, KAI, had the experience of developing South Korea's first supersonic aircraft along with Lockheed Martin in 2002.

But both Korean Air and KAI need assistance from their foreign partners in designing a new jet fighter, Lee said.

The Korean Air/Airbus couple is likely to enjoy more room to maneuver in terms of technology transfer over the rivals.

"The US government does not want to see aircraft know-how changing hands" in a project where the Indonesian government would have a 20-percent stake, Lee said.

The South Korean government would have a 60 percent stake and the winning consortium would have the remaining 20 percent stake.

But analysts have expressed concern over the viability of the project, citing the short development period and the budget which is too small for developing a new jet fighter.

"It is to be seen whether the project will proceed as scheduled as it would require somewhere between 10 to 30 billion dollars and up to 20 years to develop a new jet fighter", Lee added.

The country's military has overwhelmingly chosen US suppliers in the past, especially where the airforce is concerned, reflecting their close military alliance.

But Airbus has also made a number of bids for the South's military contracts in recent years, including a $1.38 billion deal to provide air refueling tankers. The final bidder for the deal has not been chosen yet.