AMR shares decline as pilot retirements spike - MarketWatch
AMR Shares Decline As Pilot Retirements Spike
By Christopher Hinton, MarketWatch
WASHINGTON (MarketWatch) — Shares of American Airlines parent AMR Corp. plunged to record low Monday before a trading halt after reports of a sharp jump in pilot retirements since August amid anticipation of a potential bankruptcy.
In an emailed statement, AMR said bankruptcy was “not our goal or our preference.”
Shares of AMR AMR -23.76% fell as much as 33% to $1.75 each, trading below its 2003 trough, when a steep drop in demand led to a sharp contraction in revenue. The NYSE Arca Airline Index declined 6.5%, while the benchmark Standard & Poor’s 500 Index slumped 1.4%.
AMR’s stock was halted for a short time Monday afternoon before resuming trade.
“We are in a down market today, but the exceptional number of American pilots retiring is a sign that they want to protect their pensions and get out before a possible filing further [depresses] the stock price,” said Ray Neidl, an analyst with Maxim Group LLC.
“I still believe that AMR management wants to avoid filing,” he said.
In August, 111 AMR pilots retired, up sharply from the dozen monthly retirements typically seen. In September, 129 pilots retired.
“While more of our pilots than might normally be expected made the decision to retire in on October 1, we expect to operate our schedule with minimal customer inconvenience,” AMR said.
Last month the company said it would trim an additional 0.5% from its fourth-quarter capacity amid concerns of a slowing economy and traffic growth.
A spokesperson from the Allied Pilots Association, which represents AMR pilots, said that though it was possible the jump in pilot retirements was tied to concern over a possible AMR bankruptcy, the predominant factor is overall volatility in the stock market.
“A portion of their retirement plan is in a defined contribution, and that is not vulnerable to bankruptcy,” said APA spokesman Greg Overman. “The defined-benefit-plan portion is a bit different, and pilots have the option to take a lump sum or an annuity that is vulnerable to bankruptcy, [and] pilots overwhelming pick the lump sum.”
As of Sept. 1, some 500 pilots were over the age of 60 and eligible for retirement, and many had been looking for a reason to get out, said Overman. “Many of the pilots don’t want their fortunes tied to the fortunes of the airline,” he said.
The Ft. Worth, Texas–based carrier has long been considered a potential bankruptcy candidate by Wall Street because of its high cost structure. It was also one of the few major airlines not declare to bankruptcy in the wake of the terrorist attacks of Sept. 11, 2001.