Crash seen pushing Spanair closer to the brink

By Tracy Rucinski and Ben Harding

MADRID (Reuters) - The deaths of 153 people on board a Spanair flight at Madrid airport on Wednesday massively increase the financial pressure on the already-troubled SAS-owned airline, analysts said on Thursday.

SAS's shares fell more than 4 percent on Thursday, taking losses since the crash to over 10 percent. The stock has fallen as Spain's No.2 airline seeks to pull back from losses of $81 million in the first half.

"This is something that couldn't have come at a worse time for Spanair," said Douglas McNeill, transport analyst at Blue Oar broker in London.

Falling sales, as scared travellers steer clear of the airline, could now be added to the carrier's financial woes. Just last week SAS said it will cut Spanair's fleet by a quarter and lay off over 1,000 staff -- a third of its workforce.

"All airline crashes have a short-term impact on revenues before later recovering. But in Spanair's case it could affect the company's viability," an analyst in Spain said.

American carriers Pan Am and TWA both eventually went out of business after air disasters in 1988 and 1996 respectively.

GOING UNDER

Bermuda-based insurance firm ACE Ltd is expected to pay claims related to flight JK5022 but additional operational costs if the company ultimately decides to ground more of its fleet, coupled with charges from planned lay-offs and a potential decline in revenues may push the company out of business.