The last Boeing 757 will be produced next year

The midsize jet has lost favour to more economical planes, including the smaller 737s and the jumbo 7E7s now being developed.

The plane manufacturer has struggled to cope with a slump in demand from US airlines, the traditional outlet for its 757 jets.

The announcement came just hours after Continental Airlines announced that it was downgrading its existing orders for six 757s to the cheaper 737s.

"This decision reflects the market reality for the 757," said Alan Mulally, Boeing's chief executive.

"The fact that Continental wants to move from 757s into more 737s is a clear indication of what most of the carriers have decided."

Job fears

Workers in Seattle, where the 757 is produced were braced for job cuts.

"it's like the final nail in the coffin," said Matthew Hardy, who works on 757 systems installation.

"Right now, the economy is bleeding, the airlines are bleeding, and there's nothing to look forward to except [building] pieces of the 7E7."

Boeing has already eliminated 35,560 jobs since the September 2001 terrorist attacks, a total that is expected to reach 40,000 by the end of the year.

Signs of hope

The airline industry, already coping with over capacity, has been in financial turmoil since the terrorist attacks decreased passenger numbers.

On Thursday, two US airlines - Continental and Northwest - gave the industry some hope that things are picking up, by both reporting a quarterly profit.

But, despite the turnaround, orders for new planes are still significantly lower and there are still many planes which have been taken out of service and are parked in the desert.

Boeing, which is also struggling to compete with its European rival Airbus, does not expect a pick-up in demand for orders until 2006 at the earliest.

Boeing has produced more than 1,000 of the single-aisle 200-seater 757s since they were first rolled off the production line in 1982.