TOULOUSE, FRANCE (REUTERS) — Airbus is delaying the development of its A321XLR jet by several months, pushing its arrival to 2024, as regulators tighten the rules to prevent fire risks, some industry sources said.

The latest upgrade to the best-selling A321 had been due to enter service in late 2023, but the delay stems from discussions with regulators about the certification of a novel fuel tank needed to boost its range in a battle for sales with Boeing

The European Union Aviation Safety Agency (EASA) is looking at significant rule changes that would force Airbus to redesign areas of the lower fuselage known as "underbelly fairings", two of the sources said.

These composite external structures would have to be lengthened and redesigned in heavier metal to help contain fire in the event of a belly-landing.

Such work could add 6-9 months to the timetable depending on the scope of the final rule, one of the sources said.

A second source said this and other work could add up to a year, though Airbus - which reports results later on Wednesday - is unlikely to adopt such a worst-case scenario immediately.

Airbus and EASA confirmed they were in talks on how to certify the new long-range narrowbody jet.

"The certification of the A321XLR is an ongoing project," an EASA spokesperson said.

"The complete set of conditions in relation (to) the installation of the rear-centre tanks is still under definition, and, when ready, will be published for comments."

An Airbus spokesperson said, "As the discussions with the airworthiness authorities are still ongoing, we are not in a position to comment".

Airbus is pitching the A321XLR as a game-changing addition to its narrowbody fleet, making it possible for airlines to serve thinly flown long-distance routes profitably, rather than forcing passengers to fly indirectly via wide-body hubs. To meet the demand for longer routes, Airbus had already added optional extra fuel tanks inside the cargo bay of some A321s. For the A321XLR, Airbus plans to eke out more space for fuel by molding one tank directly into the fuselage.

The concept caught the attention of EASA which last year said it would impose special conditions to keep passengers safe.

In a rare intervention, Boeing last year expressed concerns about fire risks from its rival's design. An industry source told Reuters last March that the design debate could push the entry to service to 2024. Bloomberg News reported earlier on Wednesday that the resulting design changes could shorten the XLR’s range, a key battleground in the busiest part of the jet market.

The Airbus spokesperson said it expects "no significant impact" on range.

The development delay comes as Airbus is struggling to keep production of existing A321 models on track, while also fine-tuning plans to increase overall narrowbody output.

Air Lease Corp said last week A321 output was being delayed and an industry source told Reuters on Wednesday that deliveries were now 3-5 months late across the board.

Engine makers said last week they had agreed goals for 2024, paving the way for Airbus to keep raising output beyond its current target of 65 a month in mid-2023, up from about 50 now.

The pace of the increase towards rates of 70 or 75 a month has worried some supply chain experts, but Airbus stresses it involves recapturing levels partially tested before the pandemic when its narrowbody output peaked at 60 a month.

"Recovering the (A321 output) arrears while also carrying out the fastest rate increase ever looks very ambitious," one of the industry sources said.

Airbus declined to comment on output ahead of earnings.