By Nael Shyoukhi

RIYADH/DUBAI (Reuters) - Saudi Arabian budget carrier flynas is to buy 80 Airbus <AIR.PA> A320neo narrow body jets in a deal worth $8.6 billion that includes upgrading an earlier order, it said on Monday.

The 80 A320neo order is valued at $8.6 billion, flynas Chairman Ayed Al Jeaid said at press conference in Riyadh on Monday.

The order is for 60 A320neos and an upgrade of an existing order for 20 current model A320s to neos, an Airbus spokesman confirmed.

The agreement also includes purchasing options for a further 40 A320neo jets, according to flynas.

Reuters reported last week that Flynas, partly owned by Saudi billionaire Prince al-Waleed bin Talal's investment vehicle, had agreed to buy more than 60 A320neos.

Delivery of the 80 A320s will take eight years from 2018, according to an Airbus statement, likely to give flynas one of the largest Middle East budget airline fleets

The order means Airbus has beat rival Boeing <BA.N> to replace and expand flynas' fleet of 27 leased A320 jets.

Flynas, which launched as Nas Air in 2007 and first turned a profit in 2015, is facing increasing competition in Saudi Arabia, its primary market.

Start-up SaudiGulf Airlines and Saudi-owned, Egypt-based Nesma airline were granted domestic operating licenses in 2016. State-owned Saudi Arabian Airlines has announced plans for its own budget carrier, Flyadeal, to launch in mid-2017 with a target of 50 jets by 2020. Qatar Airways-owned Al Maha is waiting for a domestic Saudi operating license.

(This story corrects number of A320neos in headline)

(Reporting by Nael Shyoukhi in Riyadh, additional reporting by Alexander Cornwell in Dubai. Editing by Jane Merriman)