UPDATE 1-Virgin picks Rolls-Royce for $2.6 bln engine order

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NEW YORK, March 3 (Reuters) - Virgin Atlantic Airways [VA.UL] said on Monday it would buy engines from Britain's Rolls-Royce Group Plc (RR.L: Quote, Profile, Research) worth $2.6 billion to power the fleet of Boeing Co (BA.N: Quote, Profile, Research) 787 Dreamliners it ordered last year.

The deal, announced by Virgin Chairman Richard Branson in New York, includes 15 sets of installed Rolls-Royce Trent 1000 engines, four spares, and engines for another 28 787s which Virgin has not yet committed to buy as well as a long-term maintenance agreement.

Last April, Virgin made public its order for 15 of Boeing's new carbon-composite 787s, worth $2.8 billion at list prices, plus options and purchase rights on another 28 planes.

Deliveries of the planes are due to start in 2011, but may be delayed as Boeing struggles to put the first few 787s together for test flights. The project is now about nine months behind schedule.

Virgin uses Rolls-Royce engines on its 19 Airbus (EAD.PA: Quote, Profile, Research) A340-600 jetliners, but uses CFM International engines for its six smaller A340-300s. CFM International is a joint venture between General Electric Co (GE.N: Quote, Profile, Research) and France's Safran (SAF.PA: Quote, Profile, Research). Virgin uses General Electric engines on its 13 Boeing 747 jumbos.

Rolls-Royce shares rose 1.4 percent in London trading. (Reporting by Bill Rigby; editing by Jeffrey Benkoe)