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~~~~~((#))006002000r-Aviation & Airlines

~~~~~((#))016001000f-Company News

Airlines shares fall, hit by American woes, virus

LONDON: Airline shares fell on Monday as the world's largest carrier, American Airlines, battled to fend off bankruptcy, and the spread of a deadly virus hit Asian carriers.

War in Iraq has worsened a record slump for full-service airlines hurt by low-fare carriers, rising costs, weak economies and travel worries since the hijacked plane attacks in the United States in September 2001.

British Airways was down 4.15 percent at 104 pence at 1438 GMT, to lead European airline losses. Air France was down 4.35 percent at 8.36 euros and Germany's Deutsche Lufthansa fell 2.61 percent to 7.83 euros.

"I think the news on American Airlines is weighing on the sector," said one London-based analyst.

American Airlines could file for bankruptcy protection as early as Monday, banking sources close to the matter told Reuters, adding that the carrier had stepped up discussions for $1.5 billion in debtor-in-possession financing.

With the airline losing $5 million a day, parent AMR Corp is looking to cut annual costs by about $4 billion and spent the weekend discussing cost-saving labour deals with unions.

While American teetered, smaller rival US Airways was set on Monday to emerge from Chapter 11 bankruptcy protection, though analysts said sector weakness still posed risks.

CUTS OF FLIGHTS AND JOBS

Airlines have cut flights and jobs to save costs as war slows bookings.

Swiss International Air Lines last week went further by axing a new plane order by more than $700 million from Brazil's Embraer and said it wanted to reschedule deliveries from Airbus.

French brokerage CAI Cheuvreux lowered its outlook on Airbus parent EADS to under-perform from outperform on Monday, citing airlines' financial weakness.

"We have moved from a delicate situation to a much more difficult situation for EADS' clients and their ability to finance their investments," it said.

Shares in EADS -- European Aeronautic, Defence & Space Co NV -- were down 8.05 percent at 6.85 euros.

Swiss said on Sunday it was again looking at its plans, underscoring how quickly market conditions are changing and triggering concern that more carriers could cut new orders from top plane-makers such as Airbus and Boeing Co.

While Airbus has no orders remaining at American Airlines, US Airways is eyeing leaner operations that use more regional jets, casting some doubt on its plans for larger planes on order, which include Airbus.

Conversely, Boeing has no outstanding orders at US Airways but a backlog of orders at American Airlines, data from the companies' websites showed.

Asian airlines closed lower on Monday as Hong Kong-based Cathay Pacific Airways fell 6.86 percent to HK$9.55, hit by the impact of a mystery virus expected to slow economies and ticket sales.

Asian governments have issued travel warnings for destinations where the virus has been linked to deaths, including China, Hong Kong, Taiwan, Singapore and Vietnam.-Reuters