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BY IRIS ZHANG
ANCHOR CHRISTINA HARTMAN
You're watching multisource business news analysis from Newsy.com.
A little market turbulence has analysts wondering if American Airlines has should be permanently grounded.
Shares in American Airlines’ parent company AMR plunged 33% Monday.
The New York Times reports the steep decline stems from fears the company will file bankruptcy protection, as...
“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.”
Rumors, as an AMR spokesperson calls it. Bloomberg quotes his statement from an email to reporters on Monday.
"While we generally don’t comment on AMR’s share price performance, there is no company-driven news that has caused the volatility in AMR shares.”
And one analyst tells Yahoo! - cash in hand, American Airlines is not ready for bankruptcy.
“There is no immediate danger of involuntary bankruptcy. They’ve got free cash, I think they’ve got 4.2 billion, that’s over 12 dollars a share. So they do have good resources right now.”
But a reporter for The Dallas Morning News argues, AMR is just downplaying the situation.
“You'll note that the AMR statement didn't dismiss the idea of bankruptcy... Otherwise, we might see a statement along the lines of ‘pish-posh, what a silly idea.’ When you lose money for four straight years, including 2011, and you're expected to lose money in 2012, you probably shouldn't paint yourself into a corner.”
Finally, according to CNBC, bankruptcy could even be a good thing for American Airlines.
“I’ve talked to analysts this morning. There are those who believe the company would be best off if it did file some sort of a prepackaged bankruptcy because it’s facing very high labor costs. And it is also dealing with very high fuel costs because of its very fuel inefficient fleet.”
AMR shares bounced back by 15.7 percent on Tuesday.
Transcript by Newsy.
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