Air Canada filed for bankruptcy as the Iraq war neared the end of its second week on Tuesday, blaming "falling revenues as a result of world events".

And amid signs that the international epidemic of Severe Acute Respiratory Sydrome (SARS) is snowballing -- with around 2,000 people now thought to have been infected -- industry watchers fear the Canadian flag carrier could be just the first in a series of major upheavals.

"The end of March, April, May and early June are the crucial months for the airlines," said one analyst on condition of anonymity. "Most of their profits are made during this period.

"If their results are disastrous it will be a serious blow that will force them into either restructuring, renationalisation or consolidation."

American Airlines appeared to stave off looming bankruptcy on Tuesday through a 1.8-billion-dollar (1.66-billion-euro) cost-saving deal with three unions that included thousands of redundancies. But questions still remain as to how long the company can stay airborne.

"American's financial condition is weak and its prospects remain uncertain," the airline said in a statement, adding that its survival could depend on "meaningful concessions" from its partners and suppliers, as well as restructuring overdue debt.

The US carrier's deal with its unions came as Dutch airline KLM announced plans to cut thousands of jobs in an urgent attempt to find cost savings of around 10 percent.

"Due to the war in Iraq and the outbreak of the SARS epidemic we are forced to speed up our restructuring plans," a company spokesman said.

As the World Health Organisation coordinates attempts to contain the deadly SARS virus in China, Hong Kong, Singapore, Vietnam, Canada and 17 other countries with reported infections, its potential impact on an already weak global economy is beginning to sink in.

In Hong Kong, one of the worst affected places, US investment bank Goldman Sachs on Wednesday slashed its 2003 economic growth forecast to 1.7 percent from 3.0 percent because of impact of the virus alone on tourism and consumer spending.

The virus could wipe up to 1.5 percentage points off growth across the whole of Asia, Paris-based BNP Paribas Peregrine warned.

Airlines are already taking the brunt of the economic impact of SARS, and will inevitably be among its main casualties.

Singapore Airlines, one of Asia's most profitable carriers, said Wednesday it planned to cut flights to Hong Kong by 37 percent and suspend all services to Kaohsiung in Taiwan and Hiroshima in Japan.

And the fallout of the SARS outbreak will not be confined to Asian airlines, analysts say.

An American Airlines plane from Tokyo was quarantined on the tarmac at San Jose International Airport on Tuesday, after a panic on board over four passengers who complained of SARS-like symptoms.

Air France had increased services to Asia for the April-October period by over 11 percent, and is planning to fly to a new Chinese destination, Canton, from September this year.

And the union representing cabin crews for Australian carrier Qantas said on Wednesday they would support staff that refused to fly to countries hit by the virus.

Barbara Beyer, president the US-based aviation consultancy Avmark, said the SARS outbreak would deal a savage blow to the industry.

"The only glimmer of hope in terms of traffic and yield for the US carriers has been the Asian market," she said, adding that domestic, Atlantic and Middle Eastern traffic had already slumped.

"Everyone was relying really heavily on the Asian market, which is going like gangbusters still."

She said airlines with Asian operations including United Airlines, Northwest, American Airlines, and Delta -- which account for about 75 percent of the US market -- could be seriously affected.

European airlines are also fastening their belts for catastrophe. The Association of European Airlines (AEA) on Monday said passenger traffic had fallen 12.3 percent in just the first week of Iraq hostilities -- before the SARS outbreak had had much impact on numbers.

The SARS outbreak also increases the chances that airlines around the world, already struggling to cope with the effects of war in Iraq, will need state bail-outs to survive.

"If the war has clearly identifiable effects on costs ... these should be met by governments," AEA secretary general Ulrich Schulte-Strathaus said.

AEA members are eyeing developments on the other side of the Atlantic, where a US congressional panel on Tuesday approved 3.2 billion dollars in aid for US airlines on Tuesday -- a package some carriers are already saying is not enough.

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