UPDATE 2-Airbus leads Boeing in 9 mth orders, output

(Adds Kingfisher cancellations and conversions, background)

By Tim Hepher

PARIS, Oct 7 (Reuters) - Airbus (EAD.PA) sold 31 planes in September, bringing gross orders for the first nine months of the year to 785 as the European planemaker held a lead over strike-hit Boeing (BA.N) in new orders and deliveries.

Stripping out cancellations, Airbus reported a net total of 737 aircraft orders in the first nine months.

While some airlines are having second thoughts over purchases as the economy weakens, the Airbus tally does not yet include a 55-plane purchase from Abu Dhabi-based Etihad.

Although the $11 billion order dominated headlines at the Farnborough air show in July, getting it into the order book has proved a headache as Airbus and the Gulf emirate negotiate an industrial offset deal, according to industry executives.

The deal for a net 51 planes would bring Airbus within reach of its 2008 goal of 850 orders if it enters the backlog before end-year, though other new business has slumped since July.

Airbus sold no planes in August.

The Etihad order now being finalised includes 10 Airbus A380 superjumbos, but this will be partially offset by cancellation of an earlier order for four A380s from the same airline.

At first Etihad had settled for four A380s originally used for flight testing but now it wants all brand-new jets, highlighting a growing rift in fortunes between fast-expanding carriers in the oil-rich Gulf and many floundering Western airlines.

BOEING STRIKE

With a waiting list of up to seven years for new planes, orders are seen as a gauge of the industry's confidence but analysts focus on deliveries since these generate short-term revenue.

Airbus delivered 34 planes in September and 104 in the third quarter, bringing deliveries for the year so far to 349 jets.

Deliveries at rival Boeing (BA.N) have been paralysed by a production workers' strike, now one month old.

The U.S. jetmaker said last week it had delivered 84 planes in the third quarter, down from 109 in the same quarter of 2007.