Boeing to improve 777, studies options for midsized jet

(Adds Airbus response to Boeing (NYSE: BA - news) 's 777 plans)

By Tim Hepher

PHOENIX (LSE: PHNX.L - news) , March 9 (Reuters) - Boeing Co pledged on Monday to improve the efficiency and seating capacity of its 777 to shore up production of its most profitable airliner before it switches to a newer model.

The "mini-jumbo" is getting new engines and wings from 2020, but in the meantime Boeing needs to boost sales of the existing version to avoid having to cut production, which would undermine a key source of cash.

Randy Tinseth, vice president of marketing at the planemaker division, said that from the third quarter of 2016, the 777 would be delivered with a 2 percent gain in fuel efficiency thanks mainly to an aerodynamic facelift.

Additionally, Boeing will make room for 14 extra seats.

"This combination of improvement in fuel efficiency and more seats will yield about a 5 percent improvement in efficiency per seat," he told the International Society of Transport Aircraft Trading (Istat) conference in Arizona.

Participants said the decision to spruce up the existing model is designed to allay speculation that Boeing may have to cut production and aims to underpin the value investors place on 777s in the resale market, which affects prices of new planes.

Boeing Chief Executive Officer Jim McNerney said last month it would have to capture 40 to 60 orders a year to maintain production at a record 8.3 aircraft a month.

Europe's Airbus was forced last month to announce a 40 percent cut in production of the smaller A330, after failing to win enough orders to secure a smooth transition to a newer model that is due to enter service in 2017.

Tinseth said Boeing was confident it could "work through a successful transition" for the 777.

But in an interview, Airbus sales chief John Leahy responded that Boeing would struggle to add 14 seats to the 365-seater and predicted it would have to cut production by half.

Tinseth meanwhile gave a glimpse of Boeing studies for mid-market product between its narrow-body and wide-body jets.

There has been speculation about plans to replace the 757, a jet popular with U.S. carriers that seats up to 240 people on transcontinental routes or across the Atlantic (Shanghai: 600558.SS - news) .

Airbus has been encroaching into a traditional Boeing niche with its fast-selling A321neo.

Tinseth said Boeing was looking beyond a pure replacement for the 757 and that customers had expressed interest in a jet bigger than a 757 and with 20 percent more range. (Reporting by Tim Hepher; Editing by David Evans and Lisa Shumaker)