RAF FAIRFORD, England, July 20 (Reuters) - The United

States Air Force has reached an "affordable" deal with Boeing ( BA )

for the supply of E-7 Wedgetail airborne warning and

control aircraft, senior officials said on Saturday.

The agreement covers the production of prototypes for U.S.

requirements as the Air Force phases out E-3 Sentry or AWACS

airborne warning and control aircraft and follows reports of

disagreements over the price for the 737-based Wedgetail planes.

"We have reached agreement with (Boeing ( BA ))... We have got a

reasonable price point that we can afford," Secretary of the Air

Force Frank Kendall told reporters at the Royal International

Air Tattoo military air show in western England.

A formal contract will be finalised in August, he added.

The U.S. Air Force is replacing its 707-based Cold War-era

E-3s, whose distinctive rotating radar dome allows crew to track

targets and direct individual aircraft during a battle.

The transition between the two planes has been delayed amid

negotiations over price, raising some concerns in Congress

recently about gaps in capability.

"We are very glad to have an affordable basis for the rapid

prototyping program, which is the basis for the production

programme going forward," Andrew Hunter, assistant Air Force

secretary for acquisition, technology and logistics, told

reporters.

Boeing ( BA ) welcomed the agreement, which provides a boost to its

defence business following a series of cost overruns and delays

on fixed-price programmes.

"We are focused on executing well and meeting the needs of

our customer," a spokesperson said.