American Airlines has moved to quash speculation that a dramatic fall in its stock price on 3 October is a precursor to a Chapter 11 reorganisation.
American and its parent AMR have repeatedly prided themselves over the fact the carrier has never filed for Chapter 11, especially during the 2000-2010 timeframe when nearly every other US major declared bankruptcy.
The result is American has battled consistently higher labour costs than its peers and is currently in negotiations with a large number of employee groups to achieve more cost effective collective bargaining agreements.
Shares of American Airlines on the New York Stock Exchange closed at $1.98 on 3 October, roughly 33% below the 30 September close of $2.96. The precipitous decline triggered a freeze in trading of the company's shares. But American issued a statement explaining the pause in trading was due to automatic triggers established by the exchange that pause trading based on share price volatility.
American's chronic financial under-performance compared with its US legacy peers has bolstered speculation during the last few months that the carrier would enter bankruptcy protection, and the plummeting share price has intensified that sentiment.
However, American on 3 October specifically stated: "That is certainly not our goal or our preference. We know we need to improve our results, and we are keenly focused as we work to achieve that."
American is also facing higher than expected rates of pilot retirements this autumn, and has sought relief from the Allied Pilots Association on staffing stipulations in the current contract.
Wall Street has been scrutinising American's under-performance relative to its peers for quite some time. Weeks ago analysts at CRT highlighted American's unit revenue growth lagged behind the industry in every region during the second quarter, noting that American's domestic unit revenues grew by 4.9% compared with 8.9% for the industry.
While American's stock decline on 3 October was dramatic, the carrier's share price has been on an overall decline since it announced a record order with Airbus and Boeing on 20 July. From that time to mid-August its share price fell roughly 25%.
American while acknowledging its structural problems, has also asked for patience from the financial community as it institutes long-term strategic moves designed to reverse its fortunes including its "cornerstone" strategy to focus the majority of its flying in Dallas, Chicago, New York, Miami and Los Angeles as well as its new joint venture agreements with its Oneworld partners over the Atlantic and Pacific.
American has roughly $1.3 billion in debut maturities due in 2011, and recently the carrier launched a $726 million enhanced equipment trust certificate (EETC) to offset some of that debt.
Source: Air Transport Intelligence news
