One of Wales' main military bases, RAF St Athan in the Vale of Glamorgan, is facing closure, the UK government has warned.
Armed Forces Minister Adam Ingram has confirmed that 500 jobs will go at the Defence Aviation Repair Agency (Dara) on the site after losing a key RAF contract for Tornado fighters.
He also announced that the entire base could close if it fails to win other contracts "in the longer term".
Unions said it was a "big mistake" which placed a question mark over the future of the site.
In March, 550 jobs were cut at the base when the agency lost another lucrative contract.
Most of the job losses announced in March were because of a decision to upgrade Harrier jump-jets "in-house" by the RAF at its base at Cottesmore in Leicestershire, instead of St Athan.
But now a second contract, to conduct extensive maintenance of the RAF's fleet of Tornado fighter jets, has also been lost - an even bigger deal than the Harrier upgrade contract. The work is being moved to RAF Marham in Norfolk.
Mr Ingram said that moving the work would give better value for money.
He said: "We will explore with other government departments alternative options for St Athan after 2009, although the migration of work and the withdrawal from service of some platforms means that 500 redundancies would be needed there in 2005.
"In the longer term, failure to win alternative work would result in the closure of St Athan."
Jane Hutt, Welsh assembly member for the Vale of Glamorgan, said she was appalled and dismayed by the treatment of the workers.
Peter Hain said the area could attract more defence-related industries
"The skills are here in St Athan - they always have been and this decision will be regretted by the MoD," she said.
"It is not grounded in rational decision-making, it will not be cost effective and it will be a bitter blow to Wales and the aerospace industry."
Ms Hutt, the Welsh health minister, said she would be working with trade unions, local MP John Smith and the Welsh Assembly Government to fight for the base.
"My concerns are now with the workforce and their families who face an uncertain future," she added.
It is feared that Thursday's announcement could also affect Project Red Dragon, the Welsh Development Agency's (WDA) plan to create a world-class aviation centre there.
Prospect, the union representing 16,000 specialist staff in the Ministry of Defence, has condemned the decision.
Prospect's national secretary Mike Clancy said: "Having invested time and money in developing the facilities at St Athan and across Dara, the MoD now seems intent on dismantling it all. It is a big mistake.
"The union has made it clear to the MoD that if it persists with this bizarre approach it will lose a public sector capability that will leave it vulnerable to private sector contractors and destroy a crucial skills base that cannot be replaced.
"The department must act now to give Dara a strategic direction for the future. If not St Athan faces closure.
"The local community will be devastated," he added.
But, speaking in Parliament on Thursday, Commons leader and Welsh Secretary Peter Hain said he could not accept the move would devastate the south Wales economy.
Mr Hain, MP for Neath, said it would be an opportunity for the town to attract further investment.
"Wales, particularly that part of south east Wales, has a fantastic environment for defence-related industries," he told MPs.