Les Brownlee, the acting secretary of the army, said that army chiefs had decided to pull the plug on RAH-66 Comanche program following a six-month review of its procurement plans in the light of combat experience in Iraq and Afghanistan.

"We've examined closely our resourcing plans for aviation and concluded that some of the capabilities those funds would provide are no longer consistent with the changed operational environmental," he told reporters.

The stealth helicopter, which was originally envisioned in 1983, was conceived of as the US Army's next-generation scout and combat helicopter.

The army has already poured eight billion dollars into the development of the advanced rotorcraft helicopter, which is being jointly developed by the Boeing Company and Sikorsky Aircraft Corp.

The companies have produced two prototypes, and have five production aircraft on the assembly line in Bridgeport, Connecticut, and were planning to begin production in earnest in 2010, according to a Sikorsky spokesman.

The program has reportedly been dogged by delays and cost overruns, with the per-unit cost soaring from 12 to 58 million dollars over the life of the program.

But in his presentation to reporters Monday, Brownlee stressed the decision was based on a wide ranging review of the army's needs, which concluded that the 14 billion dollars earmarked for the program between now and 2011 would be better spent elsewhere.

The reallocation of the money will allow for the "new purchase, upgrade, recapitalization, or modernization of over 70 percent of the rotary winged fleet," the Army said.

"The study also indicates that we should upgrade, modernize and rebuild our attack, utility and cargo helicopter fleets and replace our light observation and scout attack helicopters as rapidly as possible," Brownlee said.

"In addition, we must replace the older helicopters in our fleet, especially in the National Guard and Army Reserve. We must ensure the National Guard and Army Reserve have the capabilities necessary to accomplish the missions they are performing."

A spokesman for the Boeing Company and Sikorsky Aircraft Corp., the two companies that were jointly developing the advanced rotorcraft helicopter, expressed dissappointment.

"We are surprised and disappointed by the Army's announcement today to terminate the RAH-66 COMANCHE program," said Matt Broder. "Five of these advanced technology aircraft are on the production line today, and we are on plan for the program."

The Pentagon will likely have to write off eight billion dollars in investment costs and pay two billion dollars in cancellation fees to Boeing and Sikorsky, a unit of United Technologies.

On expectations of the cancellation, Boeing stock closed down 72 cents, or 1.6 percent, to 43.62 dollars, while United Technologies lost 2.82 dollars, or 2.9 percent, to 93.80 dollars.

Other defense stocks also fell.

"We believe the potential cancellation has raised the industry concern about weakening defense budgets," wrote Citigroup Smith Barney analyst George Shapiro in a note.

The news delivers another blow to Boeing, which is grappling with the fallout from an ethics scandal.

On Friday, the United States number two defence contractor announced it was slowing work on an air-to-air refueling tanker for the US Air Force amid Pentagon investigations into the award of the contract, a controversy that saw the firing of Boeing's CFO and the subsequent resignation of CEO Phil Condit.

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