Air crash: Final straw for carriers

AVIATION experts warned that Monday's New York crash could push major US airlines to the edge. It might also make a merger with British Airways the best solution for the stricken American Airlines, but BA would first need to examine AA's liabilities.

The fear is that, if either American or United Airlines, the two biggest carriers, suffer a further slump in traffic, their losses could spiral out of control. 'This could have a devastating effect on the industry, whatever the cause of the crash,' warned Patrick Harris of HMG Aviation.

Phil Butterworth-Hayes of Jane's Information said: 'This will have a huge knock-on effect for the industry.' He said America could be very hard-hit if passengers' relatives sue for damages.

US traffic is still 25% down on normal levels. Shares of AA's owner, AMR, fell to a 14-year low, as did those of United.

Losses at major aircraft financing companies are mounting. ILFC, one of the biggest leasing firms, has taken three big blows in a month from the failure of Swissair, Sabena and Canada 3000.

Shares bounced back after slumping 198 points in New York and 179 in London. But JP Morgan strategist Bill O'Neill warned: 'The greatest impact of this will be on confidence. The US public remains embattled.'

HSBC global strategist Peter Oppenheimer said: 'The recovery is fragile and we could easily see shares falling back.'