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UPDATE 2-Embraer halts flights of military cargo jet after test incident

(Adds orders already placed for aircraft)

SAO PAULO, Nov 8 (Reuters) - Embraer SA has stopped flying the first prototype of its new military cargo jet after a stall test last month pushed the aircraft beyond its operating limits, the planemaker said on Wednesday, adding that the project is still on schedule.

The KC-390 prototype suffered no damage to its "primary aircraft structure," but some of its access hatches and aerodynamic fairings must be repaired before the aircraft can resume flights, Embraer said in a statement.

Embraer shares fell as much as 2 percent in Sao Paulo trading before paring losses to 1 percent.

Embraer said the incident would not affect the certification schedule of the KC-390, which enters service next year. The Brazilian Air Force has already ordered 28 of the aircraft for 7.2 billion reais ($2.3 billion), with two deliveries in 2018 and three in 2019.

Earlier on Wednesday, Brazilian trade publication Aero Magazine reported that test equipment inside the plane had come loose during a maneuver, throwing off its center of gravity, according to an unnamed engineer involved in the project.

Embraer did not address the cause of the Oct. 12 incident, but said the crew recovered control after losing substantial altitude that surpassed the plane's airspeed and load factor envelope. The company said at the time it was testing the KC-390 at low speeds with simulated ice shapes on the aircraft.

"All aircraft systems have behaved as expected during the whole flight," Embraer said in the statement.

Flight records from plane-tracking website Flightradar24 on Oct. 12 show the KC-390 prototype lost more than 8,000 feet (2,400 meters) in altitude during a two-minute stretch before leveling off at around 3,000 feet. Pilots deal with an aerodynamic stall, or loss of lift, by pointing the nose downwards and dropping altitude to get air back under the wings.

Portugal has agreed to purchase six of the KC-390 airlifters, Brazil's President Michel Temer said in August.

Executives have said the KC-390 could eventually account for $1.5 billion in annual exports, as Embraer aims to compete with Lockheed Martin Corp to replace more than 700 aging C-130 Hercules turboprops around the world.

(Reporting by Brad Haynes; Editing by Lisa Shumaker)