UPDATE 1-Swiss voters narrowly block deal to buy Saab fighter jets - projection
* Projection shows 52 pct of voters against $3.5 bln deal
* A "no" vote dashes plans to modernise air force
* Goes against public support for military in past votes (Adds details, background)
ZURICH, May 18 (Reuters) - Swiss voters on Sunday narrowly blocked a $3.5 billion deal to buy 22 Gripen fighter jets from Saab, a projection showed, scuppering the government's air defence plans and dealing a blow to the Swedish aerospace group.
Around 52 percent voted against a government proposal to free up funds to replace Switzerland's aging fleet of Northrop F-5 Tiger fighters with the Gripen jets, according to a projection by Swiss television.
About 48 percent were in favour in the country which has not fought a war in 200 years.
"Now it's practically clear, the Gripen will not be bought today," Claude Longchamp of the gfs.bern research and polling institute told Swiss television SRF.
A "no" vote dashes the government's plans to modernise its air force and means it will have to rely solely on its Boeing F/A 18 Hornets once the 54 F-5 Tigers are retired from service in 2016.
Switzerland - whose fighter jets police the skies over Davos during the World Economic Forum - could find itself without an air defence by as early as 2025, since the F/A 18 Hornets may need to be taken out of service earlier due to extra use.
A negative result is also a blow for Saab whose stock was boosted by an order from Brazil for 36 planes last December as well as the Swiss selection which had removed some of the uncertainty surrounding the project.
Although both the Swiss upper and lower houses of parliament backed the deal, Swiss interest groups - including the socialists, Greens and the Group for Switzerland without an Army - secured a referendum by collecting the 50,000 signatures needed to force the popular vote.
The government had argued that Switzerland needed a modern fighter jets to support its armed forces and protect the country's stability.
But the deal would have required cuts in other areas, such as education. Opponents also warned the cost of keeping the jets in operation would likely spiral to at least 10 billion Swiss francs ($11.22 billion) over their lifetime.
Sunday's result runs counter to a referendum last September, in which the Swiss public voted overwhelmingly in favour of keeping military conscription and bucks a trend for public support for the military. ($1 = 0.8914 Swiss Francs) (Reporting by Caroline Copley; Editing by Alison Williams)