Boeing has dropped a lawsuit against SilkAir and the pilot of the passenger jet that mysteriously crashed in 1997 after new evidence suggested a mechanical fault, a Singapore newspaper reported on Tuesday.

SilkAir Flight MI 185 from Jakarta to Singapore crashed into Indonesia's Musi River on December 19, 1997, killing all 104 people aboard.

Air traffic controllers received no distress call and Indonesian transport authorities said the wreckage "yielded no evidence to explain the cause of the accident".

SilkAir was not immediately available for comment.

Lawyers representing the families of the passengers had argued in a Singapore court two years ago that the aircraft was deliberately put into a nose-dive by the pilot.

Singapore's New Paper in its afternoon edition said lawyers for SilkAir's insurers said Boeing had dropped its suit against the pilot Captain Tsu Way Ming and the carrier, a unit of Singapore Airlines.

Boeing had also reached an out-of-court settlement with families of the crash victims, the newspaper reported.

The aircraft maker had previously alleged that pilot action had caused the crash. But the newspaper said new evidence points to a rudder malfunction, which likely caused the plane to go into a fatal nose dive.

Indonesia's National Transportation Safety Committee said in an earlier crash report that the highly fragmented wreckage "yielded no evidence to explain the cause of the accident".

Most victims' families have accepted a USD$200,000 compensation deal offered by SilkAir.

(Reuters)