Why is Airbus proceeding with both the A330neo and A350 XWB?
Actually the A330neo is already eating up into the A350-800 orders so much that they have abandoned it.

“Their A350 strategy has failed -- they’re really down to one successful model,” Boeing Marketing Vice President Randy Tinseth told reporters at the Farnborough expo near London. “If they didn’t make this choice, they’d be headed for a 30 to 35 percent share in the 200- to 400-seat market.”
Customer feedback about the A350-800 spurred Airbus’s decision to abandon the plane, said Fabrice Bregier, who leads the airliner unit at the Toulouse, France-based company. Stopping work on that jet will let Airbus focus on the more successful and larger -900 model and respond to some airlines’ concerns for fixes to the biggest version, the -1000.