By Jamie Freed and Kannaki Deka

(Reuters) -The U.S. Air Force plans to buy 26 Boeing Co E-7A airborne early warning and control (AEW&C) planes to replace its ageing fleet of E-3s, the Department of the Air Force said on Tuesday, as it announced a contract worth up to $1.2 billion.

The E-7A, introduced in 2009, can track and provide data for airborne targets in real time, and will be able to control and direct individual aircraft, Boeing said.

It uses the 737-700 narrowbody as the aircraft base and an electronically scanning radar, rather than the much older 707 used for the E-3, which has a less capable mechanically scanning radar.

Boeing said it would develop two new variants of the E-7 for the U.S. Air Force, without providing details of the differences.

The Air Force said the first plane was expected to be in service by fiscal year 2027 and it anticipated purchasing an additional 24 by fiscal 2032.

"The E-7A will be the Department's principal airborne sensor for detecting, identifying, tracking and reporting all airborne activity to Joint Force Commanders," said Andrew Hunter, assistant secretary of the Air Force for Acquisition, Technology and Logistics.

Other E-7 operators include the Royal Australian Air Force (RAAF), Republic of Korea Air Force, Turkish Air Force and the United Kingdom's Royal Air Force.

Australia was the first customer for the plane, and has deployed it in Iraq and Syria alongside the U.S. military.

Boeing Defence Australia Managing Director Scott Carpendale said his team was working on how it could use its local capabilities to support the U.S. programme, as it had done with Britain's.

"What that looks like is to be determined and it is guided by U.S. requirements, U.S. security considerations, export control restrictions or parameters and then where we best utilize our talent," he told reporters on the sidelines of the Australian International Airshow.

RAAF Wing Commander Darren Haynes said Australia had deployed the E-7 for up to 17.3 hours at a stretch in the Middle East, which included two aerial refuellings.

The aircraft typically has 12 to 13 people on board, including the pilots.

U.S. Air Force and U.S. Navy personnel have already embedded with the RAAF on the E-7, said Haynes, who once served on the E-3 and said the E-7 had represented a "fundamental shift" in capability.

(Reporting by Kannaki Deka in Bengaluru and Jamie Freed in Avalon, Australia; Editing by Krishna Chandra Eluri and Gerry Doyle)