AMR Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of American Airlines parent AMR (NYSE: AMR  ) fell to an eight-year low of $1.63 each, MarketWatch reports, amid fears of a bankruptcy filing. US Airways (NYSE: LCC  ) also fell sharply.

So what: Early trading saw AMR fall more than 10%, but the stock had recovered to a 6% loss as the closing bell approached. Trading volume is slightly above average but not enough to suggest panic selling when the Dow Jones Industrial Average (INDEX: ^DJI  ) is trading off close to 1.5% for the day.

Now what: The seesaw pattern suggests there's a cadre of Big Money buyers who believe enough in American to prop up the shares as bears sell. Who's right? AMR's debt is now 149% of available capital. By contrast, United Continental Holdings (NYSE: UAL  ) and Delta (NYSE: DAL  ) report 76.4% and 79.7% of capital, respectively, as debt. The difference is stark enough that fears of AMR becoming insolvent are at least understandable, and perhaps even warranted. Do you agree? Would you buy shares of AMR at current prices? Please weigh in using the comments box below.

Interested in more information about AMR? Add it to your watchlist by clicking here.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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Read/Post Comments (5) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 17, 2011, at 4:39 PM, BridgetofYore wrote:

    I can't help but feel that AMR will recover, albeit slowly, and,therefore, am going to purchase some stock.

  • Report this Comment On November 17, 2011, at 5:24 PM, jbirdq wrote:

    AMR should not need to go the Chapter 11 route based on it's pilot contract. There are several other airline pilot groups that make more income; and the AMR pilot retirement plan is approximately 50%-pension and 50%-contribution plan. These issues are portrayed as the 'cause' of a possible bankruptcy. But a review of the peer group pilot contracts shows costs pretty close to competitors in my opinion. Even though there are other costs that need addressed, I think AMR will recover and this is a buying opportunity. AMR has cash, credit and tools to work through all this.

  • Report this Comment On November 17, 2011, at 10:39 PM, rolmbo wrote:

    AMR is going to file bankruptcy the only question now is how big will the bonuses be that the executives give themselves prior to filing? The response to the question the Unions will have regarding these bonuses will

    be. In order to retain the most talented individuals we had to give ourselves these big hog bonuses. The truth is that they shouldn't have to give anyone a bonus. Who do they think is hiring anyway? All you investors who think Uncle Sam is coming to the rescue this time are urinating in the wind.

    Rolmbo

  • Report this Comment On November 17, 2011, at 10:55 PM, orange1688 wrote:

    rolmbo,

    opening your hole and without facts backing it up, it's the same as farting. it's just nothing but noise and annoying.

  • Report this Comment On November 19, 2011, at 6:20 PM, pd82 wrote:

    AMR may be fluttering but with 15% return on one month calls, why not stay and cover?

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