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Boeing plans higher-capacity version of 737 jet

By Tim Hepher

LONDON (Reuters) - Boeing plans to bring out a new minor model of its best-selling 737 passenger jet with extra seats, the head of its planemaking division said, stepping up efforts to woo low-cost carriers in competition with Europe's Airbus .

Announcing the move on the eve of the Farnborough Airshow, the head of the U.S. planemaker's jetliner branch said on Sunday the 200-seat variant would be five percent cheaper to operate.

It will be certified to hold 200 passengers which is 11 more than the maximum allowed in the most popular version of the 737, Boeing Commercial Airplanes Chief Executive Ray Conner said.

Boeing will add an extra door behind each wing to allow an increase in the maximum of seats which, under safety rules, is closely tied to the number and layout of evacuation points.

Airbus last month announced a similar drive to increase capacity on its A320 passenger jet family as airlines seek to drive down costs per seat.

Planemakers compete aggressively for orders of single-aisle, medium-haul jets and are producing at record levels.

More seats also mean lower operating costs per seat - the key driver of aircraft economics.

Airbus has said it will increase the certified maximum number of seats for its A320 model to 189 seats from 180 seats.

Conner said he was not worried about a let-up in demand for such airplanes, despite concerns among some airlines and analysts about overcapacity that have taken the edge off a two-year surge in aerospace industry share prices.

"We feel upward pressure at the rates we have today, and are seeing much more demand than we have (built into) our production rates," he said.

The same upward pressure is also true of the carbon-composite 787 Dreamliner wide-body jet, whose production has stabilized at 10 a month, he said.

Conner said he was confident the "more efficient" 787 would be able to compete effectively against a revamped version of the Airbus A330 that Boeing's rival is expected to launch on Monday.

Analysts say demand for the A330 has held up longer than either company expected due in part to production delays on the 787 Dreamliner and Airbus plans to re-launch the aircraft with new engines in order to prevent sales from falling. Airbus says its revamped jet will be as efficient as the 787.

Conner acknowledged there was a gap in availability of 787 Dreamliners but predicted this would be short lived.

"Availability is a concern but they are not in the marketplace until 2018 and by that time we will be at significantly higher production rates."

Boeing has said it will increase production of Dreamliners to 12 a month in 2016 and 14 a month by the end of the decade.

Boeing continues to assess a gap in the market for aircraft seating just over 200 people, replacing the out-of-production 200-243-seat 757, but has several other "top priorities" including work to upgrade its 737 and 777 models, Conner said.

(Editing by Mark Potter)

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