NEW YORK, March 29: Standard & Poor’s late on Friday cut its “junk” credit ratings for the four largest US airlines not under bankruptcy protection, saying the Iraq war is damaging their businesses, and that a prolonged conflict or big terrorist attacks might further hurt them.

The credit rating agency cut its rating for AMR Corp. and its American Airlines Inc. unit, the largest US carrier, two notches from “B-minus” to “CCC,” its fourth lowest “junk” grade other than default.

All the airlines S&P downgraded have announced cuts in jobs, flights or both in the last two weeks.

S&P last downgraded American one month ago. The airline is negotiating with unions to seek concessions and avoid a possible bankruptcy filing as soon as next week, people familiar with the matter said.

S&P also cut No. 3 US carrier Delta Air Lines Inc. to “BB-minus” from “BB”; No. 4 Northwest Airlines Corp. to “B-plus” from “BB-minus; and No. 5 Continental Airlines Inc. CAL.N to “B” from “B-plus.”

S&P said it may cut the ratings for Continental, Delta and Northwest again, and may change American’s ratings. Downgrades often boost borrowing or refinancing costs, but capital markets are now effectively closed to most big US airlines.

Rating agency Fitch Ratings warned earlier on Friday of “far-reaching” negative effects from a long Iraq war, and said any prospective US government assistance would probably be insufficient to keep all the big US carriers in the air.

The No. 2 US carrier, UAL Corp.’s United Airlines Inc., sought bankruptcy protection in December.

S&P analyst Philip Baggaley said: The downgrades reflect financial damage from reduced revenues and deeper losses leading up to and during the Iraq war, and the risk of further deterioration should the war prove long and difficult, or if significant terrorist attacks occur.

Although fuel prices have fallen since the war began, aiding airlines somewhat, an accelerating erosion in passenger traffic will further undermine already weakened airline liquidity, he added.

The Air Transport Association, an industry trade group, said this week passenger that traffic dropped 10 per cent last week, when the war began. It said domestic bookings for the next 60 to 90 days are down 20 per cent, while international bookings have sunk 40 per cent.

AMR is based in Fort Worth, Texas, Delta in Atlanta, Northwest in Eagan, Minnesota and Continental in Houston.—Reuters