Boeing captures UK's Monarch after jet contest -sources

Reuters

* UK airline to order 30 Boeing 737 jets, sources say

* China seen ordering A320 jets during Merkel visit

* Airbus wins backing from Virgin Atlantic for A330neo (Adds banking quote, background, wraps separate items)

By Tim Hepher and Sarah Young

LONDON, July 1 (Reuters) - Boeing is poised to win a $3 billion jet order from UK carrier Monarch Airlines, ousting its European rival Airbus for a key victory two weeks before the Farnborough Airshow, industry sources said on Tuesday.

The expected order for some 30 revamped 737 aircraft follows a contest lasting several months as the Luton-based carrier became the latest hotspot in a global battle for market share between two popular types of narrowbody jets.

Most industry sources had expected Airbus to win the contest, which had been watched as a gauge of competition.

Emerging less than two weeks before the world's largest aerospace event, it will be seen as a blow to Airbus, which had displaced its U.S. rival Boeing in an earlier fleet overhaul at one of Europe's oldest leisure airlines.

But it could also rekindle concerns about a potential price war between the largest planemakers to try to win the advantage on models that have already sold many times more than their designers originally hoped.

"Both Airbus and Boeing have huge pricing power, which could drive up aircraft values if it weren't for their ongoing battle for market share," said Bert van Leeuwen, a managing director of Germany's DVB Bank, on the sidelines of an industry conference.

Boeing said it does not comment on negotiations with customers. Monarch said a final decision had not been taken.

"Monarch Airlines is at an advanced stage in evaluating a range of options for re-equipping its fleet to enhance the economics of the airline and the standards of service it provides to its millions of customers," a spokesman said.

"A further announcement will be made in due course when this process is complete," he said in an email.

Sales and stock prices for both companies have soared ever since Airbus, and then Boeing, decided in 2010-11 to upgrade their cash-generating, narrowbody models with new engines.

The first such jet, the Airbus A320neo, is due to enter service in 2015 and has won over 2,600 orders.

It competes with the upgraded Boeing 737 MAX, which as of last week had 2,089 orders.

SUPPORT FOR A330NEO

Boeing Commercial Airplanes Chief Executive Ray Conner urged employees in a recent internal campaign to fight for every sale and pay attention to winning back market share.

So far this year, Boeing is well ahead on total airplane orders, prompting speculation that Airbus will respond with several hundred new orders at the July 14-20 Farnborough Airshow, including its 3,000th order for the A320neo.

It is also expected to unveil sales of several dozen A320 jets to China during a visit next week by German Chancellor Angela Merkel, industry sources said. Airbus declined comment.

Boeing is meanwhile seen as very close to finalising an order for 150 large twin-engined 777X from Dubai's Emirates.

Speakers at the Ascend Flightglobal Aviation Forum in London said demand for new fuel-saving aircraft was being driven by high oil prices and low interest rate rates, but that demand was also fundamentally supported by economic growth projections.

On a positive note for Airbus, Virgin Atlantic threw its weight behind a possible revamp of its A330, saying it might buy some while urging Airbus not to delay..

Airbus is nearing a decision on whether to adapt the same formula it used on the A320 by upgrading the wide-body jet.

It has already selected Rolls-Royce as sole engine supplier, probably with its Trent 1000-TEN powerplant, according to industry sources, but Les Echos newspaper reported that the Airbus Group board was not yet ready to sign off on the move.

"On paper it looks a fantastic offering. It will come with an increase in ownership costs, but as long as this is kept under control ... it will be appealing to a good number of airlines," Alan Leeks, Virgin Atlantic's head of strategic fleet planning, told the Ascend Flightglobal Finance Forum.

Virgin Atlantic may, however, further delay taking delivery of six Airbus A380s that it has long had on order, he added.

(Additional reporting by Alwyn Scott; Editing by James Regan and Tom Heneghan)

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