The Federal Aviation Administration has decided to not order as extensive a replacement of aircraft thermal insulation as it first announced, industry sources said.

The FAA also will require that only new aircraft meet a second more stringent burn-through test designed to assure passengers more time to escape a burning plane, sources said.

Nonetheless, the FAA soon will order replacement of thermal insulation on more than 700 airliners, including the type of aircraft involved in the 1998 crash of Swissair Flight 111 because it fails new flammability tests, the sources said.

Hundreds or thousands of other airliners may be included in a later rule-making process, but tests have shown insulation on many aircraft will meet new tests for the possible spread of flame aboard aircraft.

The replacement will cost hundreds of millions of dollars, but will be much less expensive than a fleetwide replacement of all insulation. There are more than 5,000 airliners operating in the United States.

The FAA last August had recommended that all insulation on almost all airliners be replaced, pending completion of new flammability tests. It specified that a new type insulation manufactured by the California-based Orcon Corp. would meet the new tests, and grandfathered in one other type of insulation although it was not likely to fully meet the test.

Those tests are nearly complete, the sources said, and show that some of the material used on some other airliners will meet the new flammability standards. How many is uncertain, but the sources said a fleet-wide replacement will not be necessary.

Canadian investigators still do not know if the metalized Mylar covering used on insulation on the Swissair widebody McDonnell Douglas MD-11 played any role in the fire that spread in the ceiling above the cockpit before the plane plunged into the Atlantic Ocean near Halifax, Nova Scotia, Sept. 2, 1998, with 229 people aboard. However, the crash added new urgency to testing already under way because of several other aircraft fires worldwide.

The FAA has decided to take a two-track approach to insulation, beginning with an order called an airworthiness directive that will give airlines four years to replace metalized mylar insulation on the McDonnell Douglas MD-11, DC-10, MD-80 and MD-90 planes, sources said. About 726 planes would be involved.

In a few months the FAA would issue a proposed rule regarding insulation on other airliners. The rule-making process is slower and more deliberative than the more immediate action called for in an airworthiness directive.

That proposed rule will require other airliner insulation to meet the new flame propagation test. Sources said some current insulation such as metalized Tevlar, Kapton-covered insulation and a product called InsulFab330 will meet the standards.

At the same time, the FAA will propose new burn-through standards for insulation, but will apply it only to new airliners.