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PARIS (Reuters) - After increasing sales of its A320 jet by revamping it with newer and more efficient engines, Airbus (AIR.PA) is studying whether to repeat the process with a larger jet, the A330, industry sources and analysts said.
Sales of the 20-year-old A330 have enjoyed an unexpected boom in recent years after Boeing's (BA.N) radically new 787 Dreamliner encountered three years of production delays and many airlines turned to the cheaper and proven Airbus model.
But the backlog of sales is dwindling and analysts say Airbus faces questions over whether it can maintain current A330 production rates in the second half of the decade without something else to offer airlines coping with high fuel bills.
Officially, Airbus is happy with the way sales of its most successful wide-body jet are holding up, following years of incremental improvements and increases in range and capability.
But suppliers and industry experts say behind the scenes, Airbus is looking seriously at whether to re-engine the A330.
"It is being discussed. It is one of the options in the mix," said an industry source briefed on the plans.
Airbus said it had nothing to add to recent comments made by a company official who told Air Insight website there was no immediate pressure to produce a revamped version of the aircraft. The firm is due to hold its annual news conference on Monday.
Analysts say such an upgrade would cost around $1 billion.
The decision could affect the wider contest between the world's top planemakers because some analysts say a fresh dose of competition from the A330 could, at least for a while, sap margins for the 787 by forcing Boeing to offer bigger discounts and keep up a lifeline of cash for other Airbus developments.
The A330 and A320 are the two main sources of cash at the European firm, which is the sole major competitor to Boeing.
However the proposal must overcome potential concerns about scarce engineering resources and satisfy Airbus bosses that it can generate an adequate return without drawing away sales from Airbus's own Dreamliner equivalent - the A350.
The industry source said Airbus was not expected to make a decision for at least a year.
That might leave time for Airbus to resolve questions over the future of its A350-800, the least popular variant of its latest aircraft model. Airlines are gradually upgrading to the next-largest model, which is seen as more efficient, and a revamped A330 could accelerate a decision to drop the A350-800.
Some analysts however say Airbus cannot afford to wait that long since the weakness of the A350-800 leaves Airbus with little to offer at the lower end of the lucrative market for wide-body jets carrying more than 200 passengers. The A350 series is mostly designed to carry more than 300 passengers.
"The most likely entry to service date (for a re-engined A330) would be 2018, but for that they would need to make a decision pretty soon," said Leeham Co analyst Scott Hamilton, who recently blogged about the A330 re-engining project.
"A re-engining would give the A330 another 10 years of life but it would accelerate the demise of the A350-800 which is likely to fall away as customers upgrade," he said.
Editing by Pravin Char