However, he said, GE Aviation would have added some 500 jobs if the project had continued.
"It's a missed opportunity for southwest Ohio, definitely," Kennedy told The Associated Press.
He said some 800 jobs related to the project have been absorbed into other programs.
The Department of Defense declined to include the alternate in its budget, calling it unneeded spending. Members of Ohio's congressional delegation in both parties had pushed for funding and to keep the program alive. After the Department of Defense terminated the program earlier this year, GE Aviation said it would continue working on the project with partner Rolls-Royce while self-funding.
"We had offered to develop it on our own dime," Kennedy said, but he said uncertainty over schedules in the jet fighter program and other issues led GE Aviation to conclude: "The business model just wasn't there for us to do it."
The jet's main engine is built by Pratt & Whitney.
GE Aviation's F136 engine has been in development for some 15 years. GE and its backers have argued that the alternative engine would provide competition that would help save taxpayer money - and add jobs.