This is, without a doubt, the most difficult thing I have had to do in my two decades at American

Donald Carty, American Airlines chairman

American, the world's largest carrier, had already said it would join other carriers in cutting its number of flights by 20%.

But the US Treasury Secretary, Paul O'Neill, told Congress that the US government would move swiftly to give aid to the industry, to ensure that the costs of extra safety measures and the increased costs of insurance did not fall on the industry.

The US government has proposed a $5bn handout to help US airlines and assist with insurance liabilities, but has stopped short of the $12.5bn the industry says it needs to stave off bankruptcies.

Pain spreads to Europe

Hours after the US announcements, UK carrier British Airways said it would sack 7,000 people - about 12.5% of its workforce - mothball planes and cut routes because of plunging demand.

United - America's number two airline which is also shedding 20,000 jobs - has been harder hit by the disaster than any of the other carriers.

In addition to losing two of its planes in the suicide bombings, it is more heavily reliant on business travel, expected to be adversely affected by the attacks.

Announcing the cuts, American Airlines Chairman Donald Carty told his workforce: "This is, without a doubt, the most difficult thing I have had to do in my two decades at American."

Boeing cuts

The news followed an announcement from Boeing, the world's biggest jet maker, that it would be slashing 20,000-30,000 jobs by the end of next year in response to other airline cut backs.

Flags at half-mast outside Boeing's former headquarters in Seattle

Some US airlines have warned that, without a comprehensive rescue package, they may have to start filing for Chapter 11 bankruptcy protection within days.

British Airways and Virgin Atlantic have urged governments to ensure Europe's carriers are not unfairly disadvantaged when US aid is handed out.

Click here to see how the world's airlines are cutting costs

Some estimates suggest the customer downturn is costing the US airlines $1bn a day.

Long term help

Carriers have said they also need longer term help in tackling increased insurance and fuel costs and tighter security.

We profoundly regret that these actions will impact the lives of so many of our highly valued employees

Alan Mulally, Boeing

Shares in US airlines, which have lost nearly half their value since the attacks, made slight gains following news of the government's planned intervention.

The crisis in the industry is already spreading to the firms that depend on airline business.

Honeywell, which makes avionics, the electronic systems used in aircraft guidance, also announced it would be cutting 3,800 jobs, over and above the heavy lay-offs it has made already this year.

• American Airlines owner AMR Corporation, cut 20,000 jobs, shared between American and a number of smaller subsidiaries.
• United Airlines cut 20,000 jobs.
• Aircraft giant Boeing plans to cut up to 30,000 jobs by the end of next year
• US Airways cut 11,000 jobs and slashed its schedule by 23%.
• Continental cut 12,000 staff, reduced its schedule by 20% and postponed the flotation of its ExpressJet unit.
• United Airlines, Delta, Air Canada, American Airlines and American Air Trans all cut schedules by 20%.
• Northwest said they would announce cutbacks later this week
• Midwest Airways said it would abandon financial restructuring and proceed with bankruptcy immediately.
• Avionics manufacturer Honeywell said it would eliminate 12,000 jobs, almost 4,000 more than previously announced.
• British transatlantic carrier Virgin Atlantic shed 1,200 jobs.
• Dutch KLM and Spain's Iberia both warned the attacks could lead them to report losses.
• German Lufthansa cut three of its transatlantic routes and said it was freezing hiring.
• Belgium's Sabena has said that it will not last beyond the end of the year unless it manages to restructure.
• Scandinavia's SAS, which saw its entire board resign on Monday due to an unrelated cartel scandal, said it would cut capacity in relation to the US crisis.
• Irish airline Aer Lingus announced that it was to cut its operations by 25% and would let go more than 600 temporary staff.
• Air France said it was freezing hiring and retiring 17 planes from service.
• Swissair said the freezing of air travel last week cost it 65m Swiss francs ($41m, �28m). It expects its transatlantic passenger numbers to fall 10-15%, and will announce restructuring measures in October.

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