June 15 (Bloomberg) -- Boeing Co. may build a new wing for its 15-year-old 777 plane to compete with the Airbus SAS A350 as the U.S. company’s Dreamliner model loses out on contracts where a bigger aircraft is needed.

Airbus’s A350-1000 will seat 350 people when it enters service in 2013, 60 more than the largest 787 Dreamliner. The 777 can carry almost 370 passengers in three classes but needs a new wing to boost its efficiency, Boeing commercial planes chief Scott Carson said today in a briefing at the Paris Air Show.

The evolution of the A350, which has been redesigned five times, has produced a more competitive plane, Carson said, adding that Boeing could also respond with a bigger 787 or even with an all-new model. The Chicago-based company would be taking a risk in developing the 777, said Richard Aboulafia, vice president Fairfax, Virginia-based consulting company Teal Group.

“The history of re-winging is one of mixed blessings,” Aboulafia said. “It’s possible you wind up spending more than you expected with less commercial impact than envisaged. An all- new plane might offer better value from a cost standpoint.”

Airbus devised the A350 in response to the Dreamliner after the Toulouse, France-based company had concentrated on building the double-decker A380 superjumbo, allowing its U.S. rival to steal a march in the market for long-haul, twin-aisle planes.

Getting Bigger

Two years of delays to the 787 have since allowed Airbus to close the gap, with input from airlines prompting the European company to shift toward a plane bigger than the largest 787-9 and competing more directly with the 777.

Boeing has won 865 orders for the Dreamliner, which will have its first flight in the next two weeks, according to Carson. A second plane also joined the flight-test program today, the company said. The A350 has attracted 483 orders.

“As that airplane has been maturing and as it continues to mature, it will create some market expectations,” Carson said of the Airbus model.

Airbus Chief Operating Officer John Leahy said today in an interview at the Paris show that Boeing is being forced to consider an upgrade of the 777 because the A350 will be 25 percent cheaper to operate than the older plane.

“I’m not surprised he’s talking about that,” Leahy said. “He’s going to lose the market if he doesn’t do something.”

Boeing spokesman John Dern said a re-winged 777 would be a response not to lost sales but to the challenge of future versions of the A350.

More Efficient

“A new wing could possibly extend performance by offering enhanced aerodynamic efficiency, weight savings and, perhaps, greater fuel savings,” Dern said at the show.

Jim Proulx, another Boeing spokesman, said that a revamped wing might be roughly of the same size, span and fuel capacity as the current design, but would offer an increased operating range thanks to the efficiency improvements.

Boeing may alternatively go ahead with developing a bigger version of the Dreamliner known as the 787-10 and seating 310 people, Carson said. That would bring the advantage of the 787’s light-weight composite construction compared with the metal 777, though it’s not clear that the engine offered by General Electric Co. would be sufficient to power an A350-size plane.

Dubai-based airline Emirates said as long ago as October 2007 that a GE-equipped 787-10 would lack thrust. Rolls-Royce Group Plc offers a larger engine suitable for the aircraft, but the Arab carrier mainly uses powerplants from the U.S. company.

New Plane

An all-new plane may be a better investment than lower-cost options in the longer term, said Doug Runte, an analyst at Piper Jaffray who spoke in Paris. Proulx said that’s a possibility.

“We’re studying all the options we can to address the product mix by the end of the next decade,” he said.

Carson said earlier that Boeing anticipates an upturn in jetliner demand in 2010, with the market “bouncing off the bottom of the cycle” and growth likely to return from the middle of the year.

The tightening of credit for airlines seeking purchases should also be a relatively short-lived phenomenon and financing options will improve by the second half of next year, he said.

Carson also said that Boeing currently has no plans to cut aircraft production beyond levels already announced.

Boeing was trading down 3.5 percent at $49.64 as of 2:02 p.m. in New York, paring gains this year to 16 percent. Airbus parent European Aeronautic, Defence & Space Co. fell 2.9 percent to 11.05 euros in Paris and has lost 8.2 percent for the year.

To contact the reporters on this story: Andrea Rothman in Paris at aerothman@bloomberg.net; Susanna Ray in Paris at Sray7@bloomberg.net

Last Updated: June 15, 2009 14:05 EDT