UPDATE 3-Airbus lifts jet output, dismisses glut concerns

(Corrects 2018 to 2017 in para 7)

* To lift output of A320 family to 60 a month in 2019

* Confident strong demand for jets will continue

* Airbus shares jump 5 pct

* Jetmaker posts 12 pct rise in Q3 core operating profit

By Tim Hepher and Cyril Altmeyer

PARIS, Oct (HKSE: 3366-OL.HK - news) 30 (Reuters) - Europe's Airbus pledged to increase production of its popular A320 and dismissed growing concerns about the jetliner market on Friday, putting pressure on Boeing (NYSE: BA - news) to follow suit as both firms strive to turn record airline orders into profits.

A day after grabbing a $17 billion order for 130 jets from China, the world's second-largest planemaker reassured investors it had already sold enough planes to secure the increase, which will take output of the A320 family up to 60 a month in 2019.

Investors and suppliers are increasingly concerned about a glut of jetliners following a market share war across the Middle East and Asia between the two plane giants, but Airbus said it was confident a strong run in jet demand would continue.

"The healthy commercial aircraft market, robustness of our backlog and supply chain capability allows us to raise the single-aisle production rate," Chief Executive Tom Enders said.

Shares (Berlin: DI6.BE - news) in Airbus Group (Swiss: AIR.SW - news) rose 5 percent to 63.8 euros and looked set for their best day in five months after the output increase, alongside stronger-than-expected quarterly results and another big deal with China for 100 helicopters.

Airbus already produces 42 medium-haul A320-family jets a month or one every seven working hours from plants in France, Germany, China and, soon, Alabama in the United States.

The decision to raise output, first reported by Reuters, lifts its target by a fifth, from a previous goal of 50 a month in 2017, and follows a deal with anxious suppliers.

Engine makers are worried about pushing the supply chain too hard as they switch to new fuel-saving models and had publicly rejected plans by Airbus to raise output to 63 a month.

Airbus Group Finance Director Harald Wilhelm said the company had struck a compromise deal with engine makers that allows it to raise output again to reach that level in 2020 if markets permit.

A380 PRODUCTION DOUBT

The increase is expected to provide around 150 extra jobs in Hamburg, where Airbus plans to add a fourth production line at its facilities employing 13,000 people, union officials said.

That stems from a 15-year-old deal to favour the German city for small jet expansion in return for France assembling the A380 superjumbo: part of the European horsetrading that saw Airbus rise from a 40-year-old consortium to an aviation powerhouse.

Yet as demand for the A320 and Boeing's competing 737 models soars with the growth of low-cost carriers, doubts remain over future production for the industry's largest icons, the double-decker A380 and Boeing's 747-8.

Airbus said it had managed to control A380 costs and was on course to break even at just below 30 deliveries in 2015.

However, it hinted at a looming cut in production of the world's largest airliner by saying it had enough audited orders for 20-30 deliveries in 2017 following slow sales and order deferrals.

Wilhelm declined to say whether it would continue to break even at those levels, but told reporters it aimed to come "as close as possible". In December last year, he told analysts the giant plane would break even through 2018 under any scenario.

Airbus Group posted a 12 percent increase in third-quarter core operating profit to 921 million euros ($1 billion) on revenues that grew 6 percent to 14.072 billion, and confirmed its annual targets including a slight increase in core profit.

The group, whose shares have risen 47 percent this year, said it would immediately start a previously approved 1-billion-euro ($1.1 billion) share buyback, to be completed by mid-2016.

It (Other OTC: ITGL - news) reiterated it would certify and deliver its upgraded A320neo in the fourth quarter despite "several interruptions" to tests due to problems with a new Pratt & Whitney engine. ($1 = 0.9099 euros) ($1 = 0.9081 euros) (Additional reporting by Victoria Bryan and Regis Corblin; Editing by James Regan and Susan Fenton)