By Andrea Shalal-Esa

WASHINGTON (Reuters) - The Pentagon said on Tuesday it remains in active talks on the request of Europe's EADS for a 90-day extension to the May 10 deadline for aerial tanker bids, and it has not yet reached a decision.

Pentagon press secretary Geoff Morrell said EADS had expressed some interest in bidding as a prime contractor against Boeing Co to build 179 refueling planes for the Air Force after Northrop Grumman Corp bowed out.

"We are right now engaged in active discussions with the company to better understand the reasons why they would need an extension," Morrell told reporters.

"I would say those discussions are going very well thus far and we have not come to a conclusion, and therefore have not made a decision yet about whether to extend the bidding period any further."

One source who is closely following the discussions said the Pentagon could announce its decision as soon as Wednesday.

Sean O'Keefe, chief executive of EADS North America, told reporters on Monday that the company expected to hear back from the Pentagon within the next few days.

German Economy Minister Rainer Bruederle on Tuesday said it would be fair if the U.S. government accepted EADS' request for a longer period to ready a bid as a prime contractor.

Northrop and EADS, the parent company of Airbus, won a projected $35 billion contract to build an A330-based tanker for the Air Force in February 2008; but the Pentagon canceled the deal later that year after government auditors faulted the procurement process and upheld a Boeing protest.

Northrop decided earlier this month that it would not compete for the work this time around, saying revamped rules for the competition favored Boeing's smaller 767-based tanker.

EADS has been weighing a possible bid on its own, but has said it would need three months of additional time to prepare the huge amount of paperwork that would be involved.

Morrell told reporters last week that the Pentagon would consider making a "reasonable extension" to the deadline.

Top U.S. defense officials had hoped to have a competition for the big airplane contract, but insist that they have mechanisms to ensure that any sole-source deal with Boeing would be fair. Absent an EADS bid, Boeing is poised to grab a contract that could be worth up to $50 billion.

The Obama administration is also under pressure from its European allies, who reacted angrily after Northrop withdrew from the competition and warned Washington against adopting protectionist measures.

Even if it got the additional time it requested, EADS would face an uphill battle with any solo bid.

The company would also likely need to find another U.S. defense company to take on some of the classified work involved in the program, given that tanker operations are closely linked to the U.S. military's strategic planning for future wars.

Aerial tankers are used to refuel fighter jets and other military planes in mid-air, helping the United States project its power around the world.

Any EADS bid would also run into considerable opposition from Boeing supporters in Congress, who say a World Trade Organization ruling upholding U.S. claims that some European government payments to Airbus were subsidies should be factored into the Pentagon's tanker competition.

Airbus on Tuesday confirmed that a WTO panel had condemned European subsidies in a confidential ruling, but said the panel dismissed 70 percent of U.S. claims. It also said the dispute would likely drag on for years.

Guy Hicks, spokesman for EADS North America, said the U.S. government had decided to exempt the rival WTO cases brought by the United States and Europe from the tanker competition.

"The U.S. government has determined that ongoing WTO cases are irrelevant to U.S. defense acquisition and will not penalize U.S. warfighters by holding their needs hostage to an ongoing commercial trade dispute," Hicks said.

(Additional reporting by Phil Stewart, editing by Gerald E. McCormick)