Boeing is scrapping its proposed Sonic Cruiser, which would have flown at the speed of sound, after admitting it is not wanted by airlines.
It has also warned that a protracted war in Iraq could have a "tremendous" impact on the aerospace industry.
Rather than building the Sonic Cruiser, Boeing will use the technology it has developed for the project to manufacture a new mid-sized aircraft that will burn up to 20 per cent less fuel but fly at the same speed as the larger 747.
British Airways has expressed interest in the new concept, but says it is too early to say whether it will buy any of the planes. Boeing says it will be ready to start marketing in 2004, but the first deliveries will be in 2008.
The change is a big climb- down for the US company, which has consistently said it was supporting the Sonic Cruiser. BA had surveyed its corporate passengers, who had said they would prefer a cheaper flight to a quick flight.
Boeing will soon lose its status as the manufacturer of the largest passenger aircraft; Airbus, its European rival, is developing a new "Superjumbo" that will hold 550 people. Boeing thinks its new "super-efficient" craft will have a market of 2,000 to 3,000 planes.
Both manufacturers have been competing hard, as 11 September brought what Boeing calls an "unprecedented" crisis in the industry.
Alan Mulally, vice-president, said that Boeing would not see growth in its commercial aircraft division until 2004.
He said on Iraq: "The best thing that can happen is either the situation is resolved peacefully, or there is decisive and quick military action."Reuse content