Airline that collapsed beside a canal (6)
I believe the answer is:
panama
'canal' is the definition.
'airline that collapsed beside a' is the wordplay.
'airline that collapsed' becomes 'Pan Am' (US airline which collapsed in 1991).
'beside' means one lot of letters go next to another (I've seen this in other clues).
'panam'+'a'='PANAMA'
(Other definitions for panama that I've seen before include "Great American canal or tropical hat" , "Great canal connecting Atlantic and Pacific" , "Country - hat - canal - cigar" , "Central American country" , "Canal state; hat" .)