The plane, on its second attempt to land, was reported to have been tipped over by a gust and burst into flames at 8.30am.
However, there were also some reports that a fire started, possibly caused by lightning, before the plane crashed but the pilot had not made any emergency call.
The aircraft, belonging to Martinair, the charter subsidiary of the KLM Dutch airline, split in two on the airport's only runway. It had flown in from Amsterdam's Schiphol airport. The pilot and co- pilot are reported to have survived and the voice and flight recorders have been recovered.
Most of the passengers were Dutch, though there were some Portuguese, Angolan, and at least two British, who both survived. A Martinair spokesman said there were 327 passengers and 13 crew aboard. He would not confirm the plane had been hit by lightning but said the captain of a Martinair Boeing 767, which touched down at Faro just before the crash, reported seeing flames coming from the DC-10 as it landed.
A Portuguese radio reporter, Antonio Provenca, told Spain's state radio there was lightning and thunder as the plane tried to touch down in 40mph winds.
The assistant airport director, Francisco Severino, said: 'The plane had already landed, but the wind came under the wings and lifted it back into the air. The right wing hit the ground, the plane flipped over and then exploded.' The bulk of the wreckage was strewn over some 200m of the airport, with parts of the wings as far away as 400m. The worst fire damage was in the middle and rear of the plane.
The Dutch pilots' association said freak winds could have caused the accident. The winds appeared to have changed direction several times as the plane was attempting to land.
'Apart from extreme cross- winds, a sudden loss of wind under the nose is also a possibility,' Benno Baksteen, chairman of the association, said. 'That can cause the aircraft to lose speed suddenly, so that it can no longer fly and falls.'
A survivor, Marloes Jungerius, told Dutch television that panic broke out when the plane wobbled and crashed as it approached the runway: 'People were screaming and stumbling over each other. Stewardesses with head wounds. Blood everywhere. It was awful to see. Everybody tried to get out of the plane as quickly as they could, then part of the plane exploded.
'Those of us who got out of the plane ran as hard as we could - people were running in all directions. We got to the terminal and there was nothing there, no one to help us, just people screaming all over the place.'
The 27 most badly injured victims of the crash were sent in ambulances, military helicopters, and military planes to three hospitals in Lisbon.
The crash was the second major air disaster to claim Dutch lives in less than three months. An Israeli El Al Boeing 747 cargo jet crashed into flats in Amsterdam on 4 October, killing at least 43 people, when both right-hand engines fell off.
The McDonnell Douglas DC- 10, which was one of only three operated by Martinair, was built in 1975. All three were due to be replaced by more modern MD-11s from 1995. The last fatal crash involving a DC-10 was in September 1989, when a French UTA plane was blown up by a bomb over the Sahara desert in Niger, killing all 170 aboard. The bombers have never been found.
Faro, which opened in 1967, had never had a major crash. It is used by thousands of tourists heading for Portugal's most popular holiday area, the beach resorts of the Algarve.
The airport was reopened around 7pm yesterday, although rescue workers were still searching through the blackened mid- section and tail of the plane. During the day, flights were diverted to Lisbon and Seville in Spain.
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