The war will affect the airline whatever happens

The company is already struggling to save itself from bankruptcy protection.

"Even as we keep working, day in and day out, to keep this company afloat, we will have to trim some capacity as prices and supplies are impacted by the war," Donald Carty, chief executive of parent company AMR told employees.

"There can be no denying it: whenever the conflict ends, even if it's very soon, our airline will be affected," he said.

At the same time Air Canada announced it was reducing its workforce of about 40,000 by 3,600.

It said the war in Iraq underlined its need to cut labour costs.

Prolonging the agony

The world's airlines were already struggling to cope with a fall in demand following the September 11 terrorist attacks and a global economic slowdown.

Now the war with Iraq has put many people off booking flights.

The trans-Atlantic carriers have been worst affected.

Just hours before the US began to attack Iraq, Continental Airlines announced $500m of cost cuts and 1,200 job losses.

In Europe, Germany's biggest airline Lufthansa warned that war with Iraq could prolong the company's troubles.