UPDATE 2-Airbus nears deal to sell A330neo jets to VietJet -sources

(Adds fleet, separate jetliner dispute and airline statement paragraphs 1-2, 7-20)

By Tim Hepher and Lisa Barrington

Feb 21 (Reuters) - Europe's Airbus is close to a provisional deal to sell around 20 A330neo wide-body airliners to Vietnamese budget carrier VietJet, industry sources said on Wednesday.

The multi-billion-dollar commitment could be announced as early as Thursday at the Singapore Airshow, they said, pointing to what would be the largest airplane order so far at Asia's biggest aerospace event.

Airbus declined to comment on any commercial talks and VietJet did not immediately respond to a request for comment.

Demand for wide-body jets is surging as air travel rebounds after the pandemic, though the air show has been overshadowed by a warning from home carrier Singapore Airlines that fares are now coming under pressure from overcapacity.

VietJet, one of Asia's largest low-cost carriers, already operates an earlier version of the A330, which is designed for long-haul routes. It took delivery of its first wide-body aircraft, an A330, in December 2021.

Earlier at the Singapore Airshow on Wednesday, VietJet said it had selected RTX unit Pratt & Whitney to power 19 Airbus A321neo narrow-body aircraft.

Industry sources said those are part of the dozens of similar jets the budget airline already has on order.

Airbus is anxious to prolong sales of its A330neo as it amortises upgrade costs and preserves its longstanding A330 line, which the newer A350 is gradually superseding.

The latest deal highlights the growth of VietJet, which said on Wednesday it is expanding in destinations such as Australia, India, China, Japan, South Korea, Indonesia and Thailand.

The carrier has some 108 Airbus jets and 200 Boeing jets on order, according to the two planemakers' websites.

JET DISPUTE

The deal coincides with a separate jet repossession dispute involving four smaller Airbus jets.

A UK judge last week ordered VietJet to refrain from interfering with the export of four A321neo jets reclaimed by FW Aviation (FWA), which says the airline has failed to pay rent since 2021.

The lessor, part of London-based FitzWalter Capital, has accused VietJet of thwarting an internationally agreed repossession process by interfering behind the scenes with efforts to physically export the grounded jets from Vietnam.

VietJet denied this week it had hindered repossession of the four jets and blamed delays on procedural errors by the lessor.

The airline said in a statement it remained committed to continued compliance with its legal obligations.

"At a time when significant demand for such aircraft exists, the attempt to attribute blame to Vietjet is refuted absolutely," the statement said.

The dispute has been playing out in courts in London, Singapore and Hanoi and is seen as a test case for lessors' rights in Vietnam, which has hundreds of jets on order, as well as for wider leasing rules known as the Cape Town Convention.

The Aviation Working Group, a UK-based entity that monitors financing laws on behalf of planemakers and lessors, last year placed Vietnam on a watchlist over its adherence to the Cape Town treaty. It reaffirmed the move in October, when it said the procedure the lessor followed had been valid.

VietJet said that "contrary to reports (the FWA case) saw the Cape Town Convention operate effectively in Vietnam". (Reporting by Tim Hepher in Paris and Lisa Barrington in Singapore; Editing by Kirsten Donovan and Josie Kao)