Canada is "very worried" by a US proposal that its airlines provide passenger lists for planes flying through American airspace rather than actually landing in the United States, Transport Minister Jean Lapierre said.

Lapierre said the proposal could have "a major effect" on Canadian sovereignty since flights between Canadian cities are often routed over US territory to save fuel.

Of the 160,000 Canadian flights that enter US airspace every year, around 120,000 are traveling domestically.

After the September 11 suicide attacks, US authorities drew up a watch list -- or no-fly list -- of suspected terrorists who were barred from boarding a flight to the United States.

Lapierre said Washington was now considering whether to expand the system and demand passenger lists for Canadian aircraft that merely intended to fly through US airspace.

"I'm very worried about it... right now we're in discussion with the Americans," he told reporters.

"We don't think it's a good idea that Canadians traveling from one (Canadian) city to another would have to be checked (against) the American no-fly list."

The issue reflects fears among some Canadians that the country's sovereignty could be harmed by the US administration's crackdown on terrorism.

Last year the province of British Columbia imposed controls on private data firms to prevent them from sharing information about Canadians with US authorities.

The left-leaning New Democratic Party, which is keeping the minority Liberal government in power, said the passenger list proposal was unacceptable.

"This is certainly a step toward the kind of deeper integration between our two countries that I think a lot of Canadians are concerned about," said party leader Jack Layton.

Lapierre said the new proposal was prompted by the case of a KLM Royal Dutch Airlines flight from Amsterdam to Mexico that was barred from flying over American airspace in April because two passengers were found to be on the no-fly list.

He dismissed the idea that Canadian domestic flights could be hijacked and aimed at US targets.

"When we have Canadians traveling from one city to another in Canada I think there is no risk involved and I think we should not have to submit to the American (proposal on the) lists," he said.

Asked what Ottawa would do if Washington insisted, he replied: "Well, we will insist too."

Lapierre said Washington had promised to show the draft proposal to Ottawa when it is ready.

The Air Transport Association of Canada said that although Canadian carriers would cooperate if the US proposal became law, it would prefer a more harmonized system whereby passengers were checked as they arrived at airports rather than once a plane had left the gate.

"There is really no reason that we can't share and cooperate in terms of our bad guy lists," association vice-president Fred Gaspar said.