The stability of supported, circular cylindrical shells in compressible, inviscid axial flow is investigated. Nonlinearities due to large amplitude shell motion are considered by using the nonlinear Donnell shallow shell theory and the effect of viscous structural damping is taken into account. Two different in-plane constraints are applied to the shell edges: zero axial force and zero axial displacement; the other boundary conditions are those for simply supported shells. Linear potential flow theory is applied to describe the fluid-structure interaction. Both annular and unbounded external flow are considered by using two different sets of boundary conditions for the flow beyond the shell length: (i) a flexible wall of infinite extent in the longitudinal direction, and (ii) rigid extensions of the shell (baffles). The system is discretised by Galerkin projections and is investigated by using a model involving seven degrees of freedom, allowing for travelling wave response of the shell and shell axisymmetric contraction. Results for both annular and unbounded external flow show that the system loses stability by divergence through strongly subcritical bifurcations. Jumps to bifurcated positions can happen much before the onset of instability predicted by linear theories, showing the necessity of a nonlinear study.