American Pilots Don't See Near-Term Bankruptcy

The pilots union at American Airlines has moved to clarify the suggestion that some of its members are retiring due to an imminent bankruptcy.

"Our advisers have in fact indicated that the airline does not face any immediate liquidity crisis and possesses respectable cash reserves," the Allied Pilots Association said late Monday in a prepared statement.

The statement indicates that the union, which represents the carrier's 10,000 pilots, is committed to working together with the carrier, a far cry from its adversarial position before a change in leadership last year, and potentially a positive sign as the carrier faces financial uncertainty. AMR shares fell 32% on Monday, closing at $1.98, as they were engulfed in bankruptcy chatter. But most airline analysts do not foresee an imminent bankruptcy filing.

On Tuesday, Avondale Partners analyst Bob McAdoo upgraded shares to market outperform from underperform, retaining a $6.50 price target. Dahlman Rose analyst Helane Becker maintained a sell, but with a $3 price target.

"We continue to be concerned about liquidity at AMR Corp., but that is no different from where we were a week or two ago," Becker wrote in a note issued Tuesday. "It's clear that American Airlines would ... benefit from good news about long-running contract negotiations with its represented employees," the APA said in its statement. "To that end, we remain focused on intensive bargaining with management, with the goal of reaching agreement on a new collective bargaining agreement in the near future that benefits both the airline and its pilots."

In the past two months, 240 American pilots have retired, fueling bankruptcy chatter. But in its statement, the union said the retirements are due to both stock market volatility and a 2007 change four years ago in federal regulations, allowing commercial pilots to retire at 65 rather than 60.

The provision in the defined-contribution pension plan lets pilots take out shares of American stock based on the stock price 60 days before the retirement date, the union said, while the regulatory change created a bulge in the number of pilots now eligible to retire.