Gulf Air said on Monday a new deal with Boeing meant its order for widebody 787s had been cut to 12-16 aircraft from the 24 ordered earlier.

The aircraft are scheduled for delivery towards the end of the decade when they will replace Gulf Air's widebody fleet.

Its Airbus order for 20 A330 widebody jets will now be replaced with eight A320ceo - or current engine option - family aircraft, to be delivered by year-end and up to 16 A320neo - or new engine option - family aircraft.

Gulf Air has a fleet of 38 aircraft.

The fleet restructuring reduces Gulf Air's long-term financial liability of approximately $5 billion by over 50 percent, chief executive Samer Majali said in a statement.

Competition from other Middle East airlines such as Etihad, Qatar Airways and Dubai-based Emirates , as well as recent anti-government protests have resulted in falling passenger numbers for the airline.

Gulf Air said in January that it planned to shrink operations and seek cash from government funds.

The airline laid off 200 employees in May last year with bookings down by a quarter following the Arab Spring uprisings. (Reporting by Praveen Menon; Editing by Helen Massy-Beresford)

• A Permanent Economic Emergency