Shares of American Airlines’ parent AMR (NYSE:AMR) rebounded more than 17% Tuesday on analyst upgrades, a day after the company’s stock plunged on rumors that it may need to file for bankruptcy protection.
The carrier regained some of its losses as fears retracted and Capstone raised AMR to "buy" from "hold."
The company's stock saw a 33% selloff on Monday -- triggering several trading halts -- as investors reacted to fears that the former leader among U.S. airlines might have to succumb to bankruptcy as it struggles to compete against post-consolidated rivals.
“It has dropped from what was the number one network to what is now the number three,” said Bob Mann, airline consultant at R.W. Mann. He noted that the top two carriers by the end of next year will be United Continental (NYSE:UAW) and Delta (NYSE:DAL) if AMR doesn’t alter its cost structure.
AMR was the only major U.S. airline not to restructure under the court’s supervision a decade ago, leaving it with older, more costly labor contracts and a less efficient fleet, while its rivals were able to renegotiate and cut operating costs.
Independent airline analyst and airlinefinancials.com founder Bob Herbst said he expects an AMR bankruptcy will be inevitable.
“I don’t predict it’s going to happen this week or this month, but I think within the next two to three quarters American is going to have to reorganize,” he said.
Other industry analysts have placed the chances of a bankruptcy much lower.