* Move part of budget cuts
* More pilotless planes being used in Gaza operations
* U.S.-made Apache still in service
By Dan Williams
TEL AVIV, May 28 (Reuters) - Israel has phased out one of its two types of U.S. attack helicopter in favour of using more drones, military officers have told Reuters, reflecting a need for lighter and cheaper air power to counter Islamist guerrillas on its borders.
They said Israel's last squadron of Cobras, built for tank-hunting and eluding surface-to-air missiles, was pulled from service late last year. The decision was previously kept under wraps but disclosed in an increasingly public feud between the Defence Ministry and Treasury over budget cuts.
Israel began flying Cobras after the 1973 Middle East war, when its forces were battered by Egyptian and Syrian armour and air defence units.
With Egypt now at peace with Israel, and Syria riven by a more than 3-year-old revolt, the main threat the Jewish state faces from their territories, as with neighbouring Lebanon and Gaza, is sneak attacks by guerrilla rocket crews or riflemen.
Israel retains two squadrons of Apache helicopters which are bulkier than Cobras but equipped with wide array of weaponry that lends versatility and range to counter-insurgent operations. It also flies an undisclosed number of pilotless drones.
The Cobras were axed as part of budget cuts, a senior military officer said. "They were sort of stuck in the middle in terms of the role they could fulfil, so we decided to do without them," he told Reuters on condition of anonymity.
Israel had a fleet of approximately 33 AH-1 Cobra attack helicopters, according London-based International Institute for Strategic Studies (IISS).
Locally made Israeli drones increasingly patrol combat zones such as the Gaza Strip. They can circle for long hours on propeller engines, beaming back video to mark ground targets or to guide troops.
Israel competes with the United States as a top global supplier of drones manufactured by Elbit Systems, Israel Aerospace Industries, and Aeronautics Defense Systems Ltd.
The Israelis neither confirm nor deny the assessments of many independent experts who assert that some of Israel's drones are also equipped to fire precision-guided missiles.
Ephraim Segoli, a retired Israeli air force brigadier-general with the Fisher Brothers Institute for Air and Space Strategic Studies near Tel Aviv, said the Cobras were more expensive to maintain than drones and older than the Apaches.
He said Israel also saw a shift to drones as a means of reducing the danger posed by guerrillas armed with shoulder-launched heat-seeking missiles. These have been fired at Israeli helicopters - so far unsuccessfully - from Gaza and the Egyptian Sinai.
"The more the technologies of the drones has improved, the more they have been able to take over close air support roles," Segoli said, envisaging a time when piloted helicopters would be "niche" assets in a mostly remote-controlled fleet.
The Cobra is manufactured by Bell Helicopter, a Textron company. The Apache, which Israel began receiving in 1990, is manufactured by Boeing Co.. Israel buys most of its U.S. arms out of annual defence grants from Washington.
An Israeli infantry officer said troops fighting Palestinian guerrillas in Gaza now routinely call in drones, rather than helicopters, for support.
Another officer said that the air force aimed to carry out strikes "within minutes" of receiving a request from ground troops - a timing that he said would likely be met by drones and helicopters rather than jets.
Israel briefly grounded its Cobras after one of the helicopters crashed during training in March 2013, killing two crew.
Segoli said there were originally two Cobra squadrons but the first was disbanded in the mid-2000s. (Writing by Dan Williams; editing by Jeffrey Heller and Jason Neely)