United Technologies has dropped plans to buy FLS Aerospace, which employs 1,800 people at Dublin Airport, amid the chaos caused in the aviation industry following the terrorist attacks in the United States.

The news is a major setback for the Dublin operation, which lost a large Virgin Airlines maintenance contract on five Boeing 747-200 aircraft grounded immediately after the attacks.

FLS has also lost business because of Aer Lingus's decision to mothball five Airbus aircraft as part of its post-attack cutbacks. Sources say that the national airline is also considering mothballing two more.

A US-based company spokesman confirmed United was no longer interested in FLS: "It's off right now.

There is a reassessment of all possible deals going on in the business in the wake of what happened." Early last month, it was believed that a deal was just days away.

A United Technologies subsidiary, Sikorsky Helicopters, is bidding to win the contract to supply up to five medium-sized helicopters to the Department of Defence in the State's biggest ever military purchase.

United Technologies will still have a significant influence on the future of FLS because it has offered to send 12 Boeing 767 aircraft to FLS for conversion for cargo use if Sikorsky wins the helicopter deal.

Two senior United TC executives, chairman Mr George David and chief operating officer, Mr Karl Krapek met with the US ambassador, Mr Richard Egan in Dublin ten days ago to bring him up to date during a brief visit to Dublin.

Politicians on Dublin's northside, who are already concerned by the worsening situation in Aer Lingus, are lobbying Government figures to favour Sikorsky over its competitors, EH Industries Ltd, Eurocopter and CHC Scotia.

However, the Minister for Defence, Mr Smith, told Fine Gael TD, Mr Gay Mitchell this week that the offer of business to FLS could not influence the awarding of the helicopter contract.