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UPDATE 1-Norwegian Air CEO steps down, sees 737 MAX flying in Oct

Victoria Klesty and Gwladys Fouche

* Co-founder Kjos steps down as CEO

* Sees Boeing MAX flying again in Oct

* Company previously expected them back in Aug (Recasts on CEO stepping down)

OSLO, July 11 (Reuters) - Norwegian Air's Bjoern Kjos stepped down on Thursday as chief executive of the budget airline he co-founded.

Kjos, a former fighter pilot, helped to build a tiny Norwegian airline housed in pre-fabricated barracks on the edge of Oslo airport into Europe's third-biggest budget carrier by passenger numbers.

The airline has shaken up the long-haul market with cut-price transatlantic fares, but its rapid expansion has left it with hefty losses and high debts and it had to raise 3 billion crowns ($350 million) from shareholders earlier this year.

"I am confident that the Board of Directors will find the best qualified successor to lead the next chapters of the Norwegian story together with the top management team," Kjos, 72, said in a statement.

The airline also said it expected its 18 grounded Boeing 737 MAX aircraft to return to service in October, compared with its previous view that they would return to service in August.

The jets have been grounded worldwide since March following two fatal crashes and Norwegian Air has said the disruption could scupper its plans to return to profitability this year.

The company also reported second-quarter earnings that beat expectations on Thursday.

Its net profit came in at 82.8 million crowns, down from 300.3 million in the same period last year, but ahead of the average forecast of 76.2 million from five analysts compiled by Refinitiv.

The company cut its target for passenger carrying capacity to 0-5%, compared with the previous guidance for 5-10%.

It said earnings before interest, tax, depreciation and amortisation and restructuring or rent costs (EBITDAR), excluding "other" losses or gains for items such as foreign currency contracts and forward fuel contracts, were expected to reach 67 billion crowns in 2019, up from 3.2 billion in 2018.

($1 = 8.5554 Norwegian crowns) (Editing by Mark Potter)