UPDATE 2-Qatar won't take Boeing 787s until engine fault fixed

* CEO says won't take 787s without new modified shaft

* Says Qatar not planning to join oneworld alliance

* Sources said airline would reveal membership next week

(Adds GE comment, paragraphs 7-9)

By Regan Doherty and Rhys Jones

DOHA/LONDON, Oct 2 (Reuters) - Qatar Airways will not take delivery of Boeing C o's 787 Dreamliner until an engine defect is modified, its chief executive said on Tuesday.

Qatar has placed orders for 60 Dreamliners - 30 firm and an option for 30 more - and selected General Electric Co's new-generation GEnx engine for the aircraft.

"The 787 has an engine with new technology. However, there has been a material defect in the engine which now needs replacement and inspection," Akbar Al-Baker said after a speech in the Qatari capital Doha.

"We have informed Boeing that we will not take delivery until the 787s have the new modified shaft," said Baker, who has often been outspoken about planemakers Airbus and Boeing and other industry issues.

GE, the world's largest maker of jet engines, said last month it was investigating a second failure of the GEnx jet engine after a Boeing freighter aircraft aborted a takeoff in China.

It was the second incident involving a GEnx engine since July, when an engine on a jet being tested before delivery in South Carolina failed due to cracking in a fan shaft.

The U.S. National Transportation Safety Board said last week that unlike the engine that failed in South Carolina, the one that failed in Shanghai showed no cracking in the shaft.

A GE spokesman said on Tuesday that the company has inspected GEnx engines it has delivered. The conglomerate has also changed the way it manufacturers the engine.

"GE is working very closely with its customers as the GEnx fleet is being very successfully managed in the field with regards to the fan mid-shaft issue," GE spokesman Rick Kennedy said. "The entire fleet in operation has been inspected with no issues."

Qatar Airways, established in 1993, has a fleet of 111 aircraft, with 214 planes on order, including options.


Baker also said Qatar was not preparing to join the oneworld alliance after sources close to the airline group said that next week it would become the first Gulf carrier to join.

Alliances were formed in the 1990s to help airlines benefit from each other's marketing and routes in the face of tightly controlled bilateral traffic rights. So far the Gulf carriers have refrained from joining as they build up big networks alone.

"Qatar Airways is not considering joining oneworld at this time," Baker said.

Earlier on Tuesday sources close to the alliance said Qatar Airways would be unveiled as the group's latest member at a news conference in New York planned for Monday.

Baker added he was not going to New York this weekend.

Oneworld, which is the smallest of the three global alliances and includes IAG's British Airways and American Airlines , said it would not comment on speculation about a forthcoming event.


Baker said he was in favor of the proposed $45 billion merger of EADS and BAE Systems , arguing a combined entity would make better products.

Airbus parent EADS and BAE Systems are battling to save their tie-up, which would create a European aerospace and defense giant, amid competing government interests.

"It will make them strong," Baker said. "They're coming back together because staying apart was not in their best interest. They can provide better products and customer service together."

Baker said he was content with the Airbus A380 superjumbos after the manufacturer moved to address wing crack problems.

In April, the Gulf carrier deferred delivery of the aircraft, saying it wanted more details on cracks found in a handful of wing components of most aircraft in service.

Qatar, which struck an inter-airline partnership agreement with short-haul Canadian carrier Porter Airlines in August, is still eyeing Bombardier's C-series jets.

(Additional reporting by Scott Malone in Boston; Editing by Helen Massy-Beresford and Maureen Bavdek)

((regan.doherty@thomsonreuters.com)(Reuters Messaging: regan.doherty@thomsonreuters.com))