The European firm is in detailed talks with airlines over the price and timing of the longer-range design - known as A321XLR - and has penciled in some orders subject to a formal launch later this year, industry sources said.

Airbus is looking for 200-300 draft orders before committing to build the A321XLR, aiming to limit the space available for a mid-market alternative that Boeing hopes to launch in a gap between medium-haul and long-haul jets.

"Every A321XLR that Airbus sells, means one less potential sale for the NMA (Boeing's proposed New Mid-sized Airplane)," an industry source said.

An Airbus spokesman said the planemaker is "always talking to customers" and declined further comment.

The middle of the jet market is at the center of one of the most widely watched airplane battles for years, with potential sales valued at hundreds of billions of dollars over 20 years.

Boeing is aiming its potential new 220 to 260-seat NMA at a niche previously served by two models: its own 757, a long-range single-aisle jet, and its 767, a larger twin-aisle model.

Boeing dominates the upper end of that spectrum but has come under mounting pressure from Airbus at the lower end.

Last month it postponed a decision on whether to launch the NMA to 2020 from 2019, though it said it could still decide whether to offer the plane on a preliminary basis this year. It maintained its goal of seeing any new jet enter service in 2025.

Facing a potential new competitor, Airbus plans a defensive pincer move with derivatives of two existing models: the A321neo and its souped-up sister versions - the A321LR and the proposed A321XLR - at the lower end and an upgraded A330 at the top end.

Unlike the smaller A321neo, the upgraded A330neo has been selling poorly but received a hefty Emirates order last week.

COSTS VS CERTAINTY

The A321XLR would have a higher maximum take-off weight of 101 tonnes and 400-500 nautical miles more range than the 4,000-mile A321LR, Airbus' longest-range single-aisle. Under current plans, it would not carry any extra passengers, sources said.

That's where rival Boeing could decide to hit back.

Experts say Boeing will likely argue that such a plane would have worse economics. That's because its special new fuel tanks would make the jet heavier and costlier to fly, but without the compensation of extra seats. That would drive up operating costs per seat, the airline industry's most important yardstick.

But Airbus is gambling that some airlines will be swayed by earlier availability - with the A321XLR reaching the market 2-3 years before the NMA - and greater certainty as Boeing takes its time to evaluate the business case for its ambitious new jet.

Its strategy is to try to pick off one or two potential NMA customers, especially in the United States, and encourage Boeing to think again about launching a jet that could disrupt the market and dent a record run of sales for the A321 family.

Boeing has said its potential new plane will fly similar ranges or more but with greater comfort and at a lower cost.

"The XLR is not in the same ballpark," a U.S. source said.

(Reporting by Tim Hepher; editing by Richard Lough and Alexandra Hudson)

By Tim Hepher