AMR Shares Sink on Concerns about Labor Contract with Pilots

Shares of AMR Corporation (NYSE: AMR), the parent company of American Airlines, are sinking in trading today on rising concerns about the airline’s lack of progress toward a labor contract with its pilots union.

AMR shares fell to an intra-day low of $1.87. At last check, the stock was down 10.51% to $1.91 on above average volume of 19.52 million.

AMR’s financial results have lagged behind other major U.S. airlines, primarily due to the company’s higher labor costs. Many analysts believe that the Fort Worth, Texas-based airline will have to file for bankruptcy if its labor costs continue to remain high.

AMR, in fact, was the only major U.S. airline that did not file for bankruptcy a few years ago. Filing for bankruptcy allowed other airlines to lower their labor costs. Meanwhile, labor costs at AMR have remained high all these years, which has made it difficult for the airline to post a profit. The airline, however, continues to reject any plans of filing for bankruptcy, saying it would prefer to cut its costs without protection.

This makes negotiating a labor contract crucial for the company. The airline has been negotiating with the Allied Pilots Association for weeks; however, it has failed to make any significant progress.

Bill Warlick, Senior Director at Fitch Ratings, said in a research note that the absence of progress this week in contract talks between AMR management and the Allied Pilots Association raises the risk that America Airlines will be forced into Chapter 11 bankruptcy filing. Walrick also said in the research note that after five years of unsuccessful bargaining for new contracts, American Airlines’ pilots appear committed to proposals that would drive AMR’s labor costs still higher at a time when the airline’s margin performance continues to lag substantially behind that of competing U.S. carriers.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.