Is a bankruptcy filing on the horizon for AMR Corp.?
The b-word is starting to swirl around the parent of American Airlines after the question was raised during a recent investor conference and the treasurer didn't completely dismiss the possibility.
The Fort Worth-based carrier has had only two profitable years in the past decade, its stock has slipped to a one-year low near $3 and credit-rating agency Moody's downgraded AMR's outlook to "negative" last week.
Some industry analysts think that the company is running out of cash and that a bankruptcy filing is possible. But others say the airline still has another year or two to turn its finances around.
"They have a mess on their hands when it comes to their operating costs and their financial commitments," said Bob Herbst, an industry consultant who runs AirlineFinancials.com. "They are just in bad shape right now."
Herbst said AMR needs to reorganize because its current business model is uncompetitive and unsustainable. He puts the odds that American will file for bankruptcy in the next year at higher than 50-50.
The company's assets look adequate. AMR expects to have $4.7 billion in cash and short-term investments at the end of the third quarter.