Airbus Group (OTC:EADSY) won't deliver its first A350 plane until later this year, but it has already booked more than 800 orders for the type. The A350 has proven popular as a replacement for long-haul Boeing (NYSE:BA) wide-body aircraft, including the 777 and 747.

That said, interest in the smallest variant -- the A350-800 -- has been waning for several years. More recently, Airbus has been encouraging customers to upgrade to the larger (and pricier) A350-900 and A350-1000 variants.

Airbus has been trying to convert A350-800 orders to the larger variants. Source: Airbus.

After another cancellation last month, Airbus is down to just 34 orders for the A350-800 from a few customers. By contrast, Boeing has more than 750 unfilled orders for the two smallest variants of its 787 Dreamliner: the closest substitutes for the A350-800. To regain momentum in the small wide-body market, Airbus may need a new strategy, which could involve killing off the A350-800.

Fuel efficiency vs. simplicity
Originally, the A350-800 was going to have several differences in design from the A350-900 in order to reduce its weight and thereby improve its efficiency. However, Airbus changed course in late 2009, reimagining the A350-800 as a simple shrink of its larger cousin.

This move increased the commonality between the two variants and boosted the A350-800's range and maximum payload. In all likelihood, it also reduced Airbus' development costs. On the other hand, the extra weight led to a reduction in the A350-800's fuel efficiency.

The A350-800 has a longer range than Boeing's Dreamliner. Source: Boeing.

At the time, Airbus claimed that the design change was requested by customers, who wanted an airplane with longer range than Boeing's 787 Dreamliner and more commonality with the A350-900. However, it's hard to avoid noticing that the A350-800 began its downward slide at just this moment.

The decline of the A350-800
At the end of 2009, Airbus had more than 180 orders for the Airbus A350-800, representing more than a third of all A350 orders. Today, there are just 34 orders left, or about 4% of the total A350 backlog.

In its current configuration, the A350-800's extra range is its top selling point. Boeing's 787-9 is only slightly larger, but is likely to offer better fuel consumption as a "stretch" model rather than a "shrink." Meanwhile, the larger A350-900 will have a higher trip cost but significantly lower per-seat costs. This relegates the A350-800 to a small market niche.

Based on the recent trend of airlines converting A350-800 orders to the larger A350-900, it seems unlikely that Airbus will see a revival in demand for the smaller variant. However, it doesn't make sense to put any more money into the A350-800 if Airbus will ultimately sell just a few dozen units.

How about an A330 NEO instead?
As I argued last month, Airbus would probably be better off scrapping the A350-800 and offering a reengined A330 instead. An A330 NEO would be relatively cheap to develop and much cheaper to produce than the A350-800, since Airbus already has two decades of experience producing the A330.

A reengined A330 could replace the A350-800 for most missions. Source: Airbus.

Additionally, it would not be competing for production slots against the more-profitable A350-900 and A350-1000 aircraft. As a result, Airbus could offer an A330 NEO at a low enough price to offset its somewhat higher fuel consumption. An A330 NEO would not offer as much range as the A350-800, but it would be capable of handling the vast majority of typical missions for a 250-300 seat wide-body.

Several airlines have expressed particular interest in the A330 NEO concept -- even more than Airbus itself. For example, Delta Air Lines (NYSE:DAL) recently put out an RFP for new wide-body aircraft, and the carrier made it clear that it would be very interested in an A330 NEO if Airbus decided to go ahead with that project.

Foolish conclusion
A few years ago, Airbus had racked up more than 180 orders for the A350-800. However, airlines have increasingly been migrating their orders to the larger A350 variants -- in some cases, with a little prodding from Airbus.

With the A350-800 order book now down to just 34 planes, Airbus could be on the verge of killing off the smallest A350 model entirely. It's not likely that airlines will suddenly fall back in love with the A350-800, so Airbus would be better off focusing on building the larger (and more profitable) A350 variants. A re-engined "A330 NEO" would be a better solution for the small end of the wide-body market.