Sixteen passengers and crew were hurt in the January 2011 incident, when the first officer rammed the control stick forward to avoid a U.S. plane he wrongly thought was heading straight toward him.

"Under the effects of significant sleep inertia (when performance and situational awareness are degraded immediately after waking up), the first officer perceived the oncoming aircraft as being on a collision course and began a descent to avoid it," Canada's Transportation Safety Board said.

"This occurrence underscores the challenge of managing fatigue on the flight deck," said chief investigator Jon Lee.

The incident occurred at night on board a Boeing 767 twin engine passenger plane flying from Toronto to Zurich in Switzerland with 95 passengers and eight crew.

The report said the first officer had just woken up, disoriented, from a long nap, when he learned from the pilot that a U.S. cargo plane was flying toward them.

"The FO (First Officer) initially mistook the planet Venus for an aircraft but the captain advised again that the target was at the 12 o'clock position (straight ahead) and 1,000 feet (305 meters) below," said the report.

"When the FO saw the oncoming aircraft, the FO interpreted its position as being above and descending towards them. The FO reacted to the perceived imminent collision by pushing forward on the control column," the report continued.

The airliner dropped about 400 feet before the captain pulled back on the control column. Fourteen passengers and two crew were hurt, and seven were taken to hospital in Zurich. None were wearing seat belts, even though the seat-belt sign was illuminated.

The safety board said the crew did not fully understand the risks of tiredness during night flights.

The first officer, whose young children often interrupted his sleep at home, had napped for 75 minutes rather than the 40-minute maximum laid down by airline regulations. This meant he fell into a deep sleep and was disoriented when he woke up.

The report is yet another problem for Canada's largest airline, which has been facing prolonged labour unrest and flight cancellations.

Air Canada, expressing regret that passengers were injured, said it had taken steps to prevent a recurrence.

The steps include reminding pilots to follow the rules for napping during flights and increasing efforts to heighten crews' awareness of fatigue and its effects.

"Air Canada has developed a special fatigue report form for use in its safety reporting system ... this enhanced system should be in place in summer of 2012," said spokesman Peter Fitzpatrick.

The Air Canada Pilots Association - which wants Canada to limit the amount of time pilots are allowed to stay on duty - was not immediately available for comment.

The full TSB report is here

(Reporting by David Ljunggren; Editing by Janet Guttsman)

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