Bankruptcy looms as AMR shares slump, costs soar

Dallas: Shares of American Airlines parent AMR Corp fell on Friday, and an analyst predicted the company will wind up in bankruptcy unless it gets a break from lenders or more cash.

The shares dropped 19 cents, or 6.6 per cent, to close at $2.69 (Dh9.87) and fell as low as $2.59 during the session. Other major US airline stocks also fell, as higher oil prices signalled rising jet fuel costs, but they declined less than half as much as AMR.

Morningstar analyst Basili Alukos said AMR has a "bloated cost structure" and limited ability to raise new cash. He predicted that AMR's unrestricted cash balance will fall from $4.3 billion to $1.2 billion by the end of 2012.

"Unless AMR receives a substantial cash infusion or earns loan forbearance, we believe the company will eventually succumb to financial distress," Alukos wrote Friday in a note to clients.

On Wednesday AMR reported that it lost $162 million in the third quarter, its fourth straight losing quarter and 14th out of the last 16. Revenue increased on higher fares, but not enough to cover rising fuel costs.

The company hopes to begin controlling runaway costs by negotiating a deal with union pilots that would include more flying hours and other changes. It argues that its annual labour costs are $600 million to $800 million higher than those at other airlines.

"We know we need to improve our financial results and we're working hard to achieve that," said AMR spokesman Sean Collins.

The company's task will get slightly easier as debt repayments ease over the next two years. AMR faced $2.5 billion in debt maturities this year. That will fall to $1.8 billion next year and $1 billion in 2013, officials said.