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United may upgrade some A350 jet orders: sources

(Reuters) - United Airlines is mulling upgrading some of its Airbus A350 orders to the largest member of the European aircraft family in a possible setback for Boeing Co's 777 mini-jumbo, industry sources said.

The deal would be seen as a breakthrough for the A350-1000, which suffered a four-year gap in orders until Cathay Pacific Airways Ltd <0293.HK> selected the 350-seat aircraft in July.

Airbus is now actively looking for more buyers for the long-range jetliner and weighing an increase in production to keep up momentum for its assault on Boeing's near-monopoly of the market for aircraft of just under 400 seats.

United Continental Holdings Inc has on order 25 of a smaller category of aircraft, the A350-900, worth $7 billion at current list prices.

The airline may upgrade some of these orders to the A350-1000, or consider a new order for the larger aircraft, or both, an industry source said, asking not to be identified. The source added no decision appeared to be imminent.

United declined to detail the status of its talks regarding buying new aircraft or converting existing orders.

"We continuously have discussions with our aircraft manufacturers," United spokeswoman Christen David said on Thursday.

EADS subsidiary Airbus declined to comment.

Bloomberg News reported United was considering an A350-1000 order to replace its Boeing 747 jumbo jets.

The A350 was designed to compete with two categories of Boeing aircraft - the brand-new carbon-composite 787 Dreamliner and the larger 777, the world's best-selling wide-body jet.

Boeing is considering revamping the 777 to prolong the production cycle of its most profitable airliner.

Following a Reuters report, Airbus confirmed last month that it was planning to increase allocated production for the A350-1000, which is due to enter service in 2017, to grab sales from airlines maneuvering for early deliveries that can only be met by the 777.

While Boeing is under pressure from top buyers such as Emirates to firm up its plans for the 777X, as the tentative new version is known, Airbus is under pressure to score quick sales of the A350-1000 to recoup lost momentum. Airbus says the plane, which carries a list price of $321 million, offers significant savings over Boeing's best-selling 777-300ER. Boeing says Airbus performance will suffer because it is trying to compete in two categories with one airplane.

Industry analyst Richard Aboulafia of Virginia-based Teal Group told Reuters last month that any order that indicated a pattern of 777-300ER migration towards the A350-1000 would be "a big wake up call for Boeing."

Singapore Airlines Ltd last week ordered 20 more A350-900s, the variant of the twinjet plane designed mainly to compete with the 787, and is expected to return to the market to weigh up the larger A350-1000 against the 777, industry sources said. The airlines is waiting for clarity on the next design of 777.

Boeing held a closed meeting of potential customers for the 777X on Wednesday.

"We have scheduled a series of meetings with customers to discuss twin-aisle airplanes, including our existing product line and future development options," Boeing spokeswoman Karen Crabtree said.

She added that the company is always talking with customers about their fleet requirements.

Meanwhile, the U.S. planemaker is close to a decision to launch a shorter-range, but larger-capacity stretched version of the 787, to be called the 787-10X, and a move could come in the next few weeks, industry sources said. The launch timing of the roughly 320-passenger jetliner could depend on last-minute negotiations between Boeing and the 787's engine makers, Rolls-Royce Holdings Plc and General Electric Co .

Boeing shares were up 0.2 percent at $70.61 in afternoon trading on Thursday.

(Reporting by Tim Hepher in the UK and Karen Jacobs in Atlanta. Editing by Alwyn Scott and Andre Grenon)

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