The sell-off reflected investors’ increasing nervousness that American Airlines, with high debt levels and high labor costs, might be too weak to weather another economic downturn. Its competitors, meanwhile, have consolidated and strengthened their share of the airline market.
The decline on Monday was the steepest drop for American’s parent, the AMR Corporation, in a decade, and it precipitated a general sell-off in airline stocks throughout the day. AMR shares closed at $1.98 after setting off repeated automatic trading halts meant to prevent widespread losses. Still, Delta Air Lines and United Continental Holdings both fell more than 11 percent, and US Airways lost nearly 16 percent.
Even before Monday’s drop, American’s shares were down 62 percent since the start of the year. The severity of the decline, which sent the stock price to its lowest level since 2003, forced the carrier to dismiss speculation that it might be considering a prepackaged bankruptcy.
“Regarding rumors and speculation about a court-supervised restructuring, that is certainly not our goal or our preference,” Andrew Backover, a company spokesman, said in a statement. “We need to improve our results, and we are keenly focused as we work to achieve that.”
Most network airlines have gone to bankruptcy court in the last decade, sometimes repeatedly, to restructure their obligations and rewrite contracts as fuel prices soared and the industry struggled against low-cost competitors. American, however, managed to avoid filing for bankruptcy after obtaining major concessions from its labor groups.
The strategy still left the airline with higher operating costs than the other legacy carriers, including pension obligations, higher labor costs and less flexible work rules for its pilots. American has struggled in recent years to make up that gap, posting losses for much of the decade even as other airlines managed to turn a profit last year.
But even as Wall Street has grown impatient with the company’s troubles, some analysts did not think it was under any immediate duress to restructure.
AMR’s total debt was $17.1 billion at the end of the second quarter, up from $16.1 billion in the same period last year. But the company was still able to raise money last month when it completed a $725.7 million 10-year bond offering.
The airline said last month that it would end the third quarter with $4.2 billion in cash. It is expected to post a loss of $110 million in the third quarter.
Some analysts said the sell-off had been set off by news that an exceptionally large number of American pilots had taken an early retirement offer last week and opted for a lump-sum payment on their pension.
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