There are fears that more jobs could be lost at the Defence Aviation Repair Agency (Dara) at RAF St Athan in south Wales.
Dara could lose a contract to work on Tornado fighters
In March, 550 jobs were cut when the agency lost out to the RAF in the fight for a lucrative repair contract.
Now Labour MP John Smith says another key contract could go to the RAF, possibly risking hundreds more jobs.
The findings of a review into the future of the site are due to be released later. The Ministry of Defence said that they were not able to comment until then.
Following a meeting with Armed Forces Minister Adam Ingram, Mr Smith, the Vale of Glamorgan MP, said he was "not very optimistic at all" about the expected statement.
He fears work on the Tornado fighter will be lost, threatening jobs at the site.
Mr Smith added: "It is my fear that the government is going to take the wrong decision on this. Wrong in principle and wrong in practice.
"Wrong for the Royal Air Force, wrong for St Athan and wrong for the Welsh economy.
"Even at this eleventh hour I ask them to think very carefully about what they're going to announce tomorrow."
The UK government agency, which is a civilian arm of the Ministry of Defence set up to cut the costs of maintaining and repairing the UK's military aircraft, currently employs 2,000 people at St Athan.
It has four sites in the UK, employing a total of 3,800 highly-skilled aviation engineers. RAF St Athan is the main base and accounts for more than half of Dara's employees.
Most of the job losses announced in March were down to a decision to upgrade Harrier jump-jets "in-house" by the RAF at its base at Cottesmore in Leicestershire, instead of St Athan.
There are more than 2,000 Dara workers at RAF St Athan
But now it is feared the next contract, to conduct extensive maintenance of the RAF's fleet of Tornado fighter jets, could be lost - an even bigger deal than the Harrier upgrade contract.
This could effect Project Red Dragon, the Welsh Development Agency (WDA) plan to create a world-class aviation centre there.
But Mr Smith said he believed "common sense" would "prevail in the end".
"This is the economics of the mad house," he said.
"The front line fighter fleet of the Royal Air Force has been serviced and maintained successfully to the highest standard in the world in south Wales since the Second World War. I think we should be clear about this.
"The effect will be devastating and I choose that word carefully. The military have been such an important component of the aerospace industry in south Wales."
Jack Dromey, deputy general secretary of the Transport and General Workers Union, said he feared the worst.
"And that might put at risk Project Red Dragon, which we fought for very hard indeed," he said.
"I think the government is listening too much to vested interest within the armed forces. For years the government has said it does not want to tie up military personnel serving their own aircraft, but instead to have highly skilled civilians doing that for them.
"Now it would appear that the government is reversing that and giving back work to the RAF.
"We don't think that makes any sense," he added.