The move is unprecedented in airline liability cases.

Flight 111 disappeared from radar screens off Nova Scotia

The offer came during a pre-trial meeting in a Philadelphia federal court where 167 cases are pending.

As part of the proposed deal, the plaintiffs would have to waive their claim for $16bn in punitive damages.

A lawyer for the plaintiffs, Lee Kreindler said: "It's unprecedented. But this is what they should have done in the first place."

A joint statement from Swissair and Boeing said: "The two companies will jointly assume financial responsibility for the total amount of proven damages stemming form the crash of Swissair flight 111."

Alice Coulter reports: "More than a million pieces of evidence have been collectd from the bottom of the Atlantic"

But it stressed the assumption of liability did not represent an admittance of guilt or anticipate any finding of the Transportation Safety Board of Canada investigation.

The judge instructed both sides to put their positions in writing ahead of the next hearing on 13 September.

Lockerbie payout

The Swissair passenger jet, en route from New York to Geneva, crashed last September after the pilot reported smoke in the cockpit.

Everybody on board was killed when it plunged into the water while trying to make an emergency landing at Halifax International Airport, Nova Scotia.

Crash investigators have collected more than one million pieces of evidence from the floor of the Atlantic Ocean.

Boeing spokesman Russ Young: "It allows us to do the right thing"

Mr Kreindler said he believes the Swissair case could surpass the $500m in payouts, which resulted from the 1988 Pan Am jumbo jet crash in Lockerbie, Scotland.