Analysts Debunk AMR Bankruptcy Fears (AMR, FAA)

AMR lost roughly one-third of its value to close at $1.98 on Monday after shares were halted numerous times.  Now we have analysts making some defense for AMR and shares are up almost 20% right after the open on the NYSE. 

Rodman & Renshaw raised the rating to Market Outperform from Market Perform this morning. R&R said that a bankruptcy would have likely been telegraphed by the company, and no such indication has been made. 

Another firm called Capstone Investments raised the rating to “Buy” from “Hold” this morning.

Last night came word from Morningstar that it was being put under review: “We are placing AMR under review as we reassess the company’s ability to remain solvent, and expect to factor some probability of financial distress.”

The Allied Pilots Association is no research firm but the group did clarify the news of AMR losing a much higher number of pilots to retirement.  While it is defending AMR’s finances, it die note “This increase in retirements can be attributed in part to the stock market’s decline during that same period.” It also noted a mandatory retirement age change to 60 from 65.

Here was the defense of AMR’s finances from the association: “We have seen some rumors suggesting that our pilots are acting on inside information about the financial state of American Airlines. That is not the case. APA’s rank-and-file members are not privy to inside financial information. Our advisers have in fact indicated that the airline does not face any immediate liquidity crisis and possesses respectable cash reserves.”

As far as we know, AMR is still planning a divestiture of its American Eagle unit.  Whether or not that remains the case is anyone’s guess.
 
AMR shares are up 13.6% at $2.25 after 20 minutes of trading, but shares were trading above $2.35 earlier this morning.  The Guggenheim Airline (NYSE: FAA) ETF is trying to chase AMR up but only marginally with a 1% gain to $24.28 this morning on the usual thin volume.

JON C. OGG