The Canadian government has named Lockheed Martin Corp. as winner of a C$5 billion contract ($4.4 billion) to replace the military's aging Hercules transport planes, the National Post newspaper said on Wednesday.

The newspaper, citing sources, said the U.S. defense contractor had been informed on Monday of the Canadian government's decision to use Lockheed's C-130J aircraft. There has been no public announcement of the contract.

The newspaper quoted the president of EADS Canada as saying his company had received notice Canada had chosen Lockheed rather than opting for the rival Airbus A400M plane.

The newspaper said a contract for the planes is expected to be signed by the summer of 2007, with the first aircraft to be delivered three years after that.

It said Canada will spend C$3.2 billion to buy the 17 planes and another C$1.7 billion for a 20-year service contract.

Canada's Conservative government, which won power in January, says it will spend C$17 billion ($15 billion) on new helicopters, planes, ships and trucks.

The Conservatives promise to boost the annual defense budget by a total of C$5.3 billion over the next five years to reach C$20.3 billion by 2011.

The planes will be built in the United States, but the newspaper said there is potential for at least two Canadian companies to take part in the program. Heroux-Devtek Inc. builds landing gear for the planes, while CAE Inc. provides flight simulators.

Canada has a total of 84,000 full-time and reserve soldiers. Last year the Liberals vowed expand the regular armed forces by 5,000 soldiers to 67,000 over five years. The Conservatives plan to increase that total to 75,000.