* Ups 20-year aircraft demand by more than 7 percent
* Revamps way it forecasts aircraft demand
* Executive says Airbus over worst of delivery delays (Adds details, combines items)
By Tim Hepher
LONDON, July 6 (Reuters) - Airbus on Friday raised its forecast for aircraft demand over the next 20 years as it begins to recover from two years of late deliveries of its A320neo passenger jet.
Aircraft demand has been driven mainly by strong economic growth in emerging markets and the need to replace older planes in mature Western markets.
Airbus also confirmed that it was studying further development of the largest member of the A320 family. Reuters reported last month that it was considering an A320 plane with a greater range to head off a potential Boeing mid-market rival.
The European planemaker said it was raising its 20-year forecast for total aircraft deliveries by more than 7 percent to 37,400 jets, worth $5.8 trillion at list prices.
That compares with 34,900 aircraft worth $5.3 trillion a year ago, partly as the result of a higher starting point as the industry absorbs another year of brisk growth in air travel.
Dominating the outlook is the market for 'Small' jets up to 230 seats, where Airbus has expanded its portfolio by closing a deal to buy Bombardier's 110-130-seat CSeries jet - mirrored on Thursday by a tentative deal by rival Boeing to acquire the commercial unit of Brazil's Embraer.
These will represent 28,550 deliveries worth $3.2 trillion, or 76 percent of all units delivered over the next 20 years, Airbus said in an annual forecast.
Airbus has been hit by delivery delays of single-aisle planes due to engine shortages, but the company's planemaking chief said it was over the worst, with a logjam of 100 undelivered jets dipping to 86 by end-June.
It is looking at increasing already record production plans for the jets to 70 a month from a 2019 goal of 60 due to strong demand, but has not made any decision, Guillaume Faury added.
Its new forecasts redrew the traditional distinction between single-aisle or narrowbody jets and twin-aisle aircraft, and between the various types of long-distance aircraft.
The changes are particularly evident for the largest planes. Instead of singling out jets with 450 or more seats, which effectively means the four-engined Boeing 747 and Airbus A380, Airbus now places all planes with 350 or more seats - including the biggest twinjets - in one box called 'Extra Large'.
It believes 1,590 of these will be delivered over two decades. Other categories include 'Medium' between 230 and 300 seats and 'Large' between 300 and 350 seats.
Airbus has been fighting a statistical battle for years with Boeing over demand for very large jumbos like the 747 and A380, where it has been more bullish than its U.S. rival.
Boeing says large twinjets like its 777X will soak up most of this demand and has abandoned forecasting the largest models.
The new Airbus framework ignores the number of engines and focuses on bands of seating, reflecting a view that the same market can be served in different ways, Chief Commercial Officer Eric Schulz said.
Airbus said the new methodology is based on the way airlines use their planes rather than the type flown, spurred in some cases by shifting business models. But the move is unlikely to temper debate over the future of the slow-selling A380.
Boeing, which is due to update its 20-year forecast this month, last year predicted total deliveries of 41,030 jets worth $6.1 trillion. Both firms say most new deliveries will permit growth in airline fleets rather than simply replacing old jets.
Speaking a week ahead of the Farnborough Airshow, Airbus officials hinted at sales of the A330neo, which has been hard to shift in the face of competition from the Boeing 787 recently, and of the soon-to-be-renamed Bombardier CSeries.
Additional reporting by Andrea Shalal, Victoria Bryan, Sarah Young, Editing by Dominique Vidalon and Emelia Sithole-Matarise