The U.S. airline sector, to say the least, has not offered investors any excitement lately.

The flat-to-declining number of travelers, intense competition, and yet another battle with sky-high fuel prices in 2008 have created an environment that's ripe for further industry consolidation, and sluggish share price gains.

Even so, selected entry points are possible, for high-risk investors only. AMR Corporation (NYSE: AMR), parent company of American Airlines, is one. Here's why:

AMR Corp (NYSE: AMR - option chain) stock is falling today after the company reported a fourth-quarter loss of $340 million, or $1.22 per share. Excluding one-time items, AMR lost 77 cents per share, which was worse than analysts' projections of a 73 cents per share loss. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AMR.

This morning, AMR opened at $10.50. So far today the stock has hit a low of $7.37 and a high of $10.50. As of 12:10, AMR is trading at $8.17, down $2.29 (-21.9%). The chart for AMR looks neutral and S&P gives AMR a 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider a May bear-call credit spread above the $15 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in four months as long as AMR is below $15 at May expiration. AMR would have to rise by more than 82% before we would start to lose money. Learn more about this type of trade here.

AMR hasn't been above $15 in almost a year and shown resistance around $12.50 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in AMR.

MAJOR PAPERS:

• According to people familiar with the situation, the Wall Street Journal reported that Yahoo! Inc (NASDAQ: YHOO) is again talking to Time Warner Inc (NYSE: TWX), this time about taking over AOL, with Time Warner taking a stake in the combined entity. News Corporation (NYSE: NWS) has its eye on any Yahoo moves. Meanwhile, Microsoft Corporation (NASDAQ: MSFT) is considering what its next move against Yahoo might be and is talking to News Corp.
• The Wall Street Journal also reported that, as part of the company's plan to cut costs, Tribune Co's Los Angeles Times newspaper may look to cut about 250 jobs, including about 17% of its news staff.
• The Financial Times reported that Chrysler, which has been searching for foreign partnerships, signed with China's Great Wall Motor a memorandum of understanding to explore long-term business ties in areas that include technology, distribution and components.

OTHER PAPERS:

• According to the Dallas News, AMR Corporation's (NYSE: AMR) American Airlines informed its flight attendants' union that is may lay off 900 flight attendants on August 31.

WEB SITES:

• Yonhap reported that LG Electronics will release "Dare," a new touch-screen mobile phone in the U.S. that will compete with Apple Inc's (NASDAQ: AAPL) latest iPhone models.

AMR Corp (NYSE: AMR) shares are trading higher today helped by oil futures prices that are showing signs of losing momentum. It is possible that the speculators are getting out of oil and the price may of crude may be finding a more reasonable level. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AMR.

After hitting a one-year high of $29.32 in July, the stock hit a one-year low of $6.00 in May. AMR opened this morning at $7.36. So far today the stock has hit a low of $7.26 and a high of $7.90. As of 12:20, AMR is trading at $7.75, up $0.43 (5.9%). The chart for AMR looks neutral but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $6 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just seven weeks as long as AMR is above $6 at July expiration. AMR would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.

Shares of AMR Corp. (NYSE: AMR) crashed today on Wall Street on a string a bad news out of its principal subsidiary, American Airlines, as current record-high oil prices continue to wreak havoc on the airline industry.

Oil prices have been continuing to soar, and earlier today crude traded through the $133 mark, and nearly busted $134, trading as high as $133.82.

What does this mean for airlines? You guessed it... major changes in order to combat the rising costs of keeping their planes in the air, and after announcing a few new changes today, AMR took the full brunt of Wall Street, as nervous traders pushed the already beaten-up stock down another 24.2%.

So what exactly got the market so spooked? Well, I am not really sure which of the following was the final nail in the coffin; you can almost just take your pick:

• The company announced that it would be slashing the number of flights that it offers
  
• The company announced that it would start charging for all checked luggage
  
• And, last but not least, the company is being forced to reduce its workforce

We have all been there before, standing beside the luggage conveyor belt after a long flight, quietly praying for our luggage to magically pop out of that little window and slide our way. When our luggage finally shows up, it typically means the end of a long day that generally has the potential to stress out most travelers.

For me at least, as long as I get my luggage I am satisfied with my trip. But for a lot of us, there are several factors we use to grade the airlines, and a recent survey shows that customer dissatisfaction is running at near record level lows. These factors include anything from planes leaving and arriving on time, to the service inside the plane from fight attendants, to just how easily mishaps get handled by the agents at the ticketing desks.

Having lived in Europe the past few years, I have been no stranger to the long distance flight back and forth to the States. I suppose I have traveled roughly 100,000 miles on airlines over the past couple of years, and I have to say that for the most part I have had very pleasant experiences. My girlfriend was unfortunate enough to have lost some luggage for a week over this past Christmas, but other than that, I have been pretty lucky.

MAJOR PAPERS:

• According to internal company and agency documents, the Wall Street Journal reported that the FAA is investigating into why AMR Corporation's (NYSE: AMR) American Airlines ordered mechanics to skip specific safety instructions to detect damage to planes from potential lightning strikes.
• In order to compete more effectively against Apple Inc's (NASDAQ: AAPL) iPhone, the Wall Street Journal reported that Research in Motion Limited (NASDAQ: RIMM) is planning to introduce "Thunder," a touch-screen version of its BlackBerry device.

OTHER PAPERS:

• Yahoo! Inc (NASDAQ: YHOO) is trying to quickly put the finishing touches on a search advertising deal with Google Inc (NASDAQ: GOOG) as billionaire Carl Icahn launches a proxy fight for control of Yahoo's board, according to the New York Post. Yahoo! hopes to announce a deal with Google to create an open platform system within the next week, two inside sources said.
• The New York Post reported that a partnership of MGM Mirage (NYSE: MGM) and investment company Dubai World may seek to buy the Drake Hotel site from developer Harry Macklowe. If a deal is reached, MGM and Dubai World would assume $580M in defaulted debt and interest, inside sources said.

In reaction to surging fuel costs, several major airlines announced today that they were raising their fares in order to recoup some of their rapidly increasing flying costs.

The increase this time around is $20 and effects passengers traveling on UAL Corporation (NASDAQ: UAUA), Delta Air Lines, Inc. (NYSE: DAL), and AMR Corporation (NYSE: AMR)'s American Airlines. The $20 jump in prices will be added to the airline's fuel surcharges, and consequently, these charges are now running at $130 round trip on most flights that you will book through the airlines.

The current rate hike was first initiated by Delta, and marks the second time in just over a week that the airline has been forced to raise fares in order to combat record high fuel costs. Times are definitely tough for airlines, and they are doing everything they can to combat fuel prices, but regardless of the rate increases most analysts are still expecting to see huge losses this year from most, if not all, airline carriers.

AMR Corporation (NYSE: AMR) shares are trading higher after the company announced that it will charge passengers $25 for a second checked bag beginning on May 12 to counteract higher fuel costs. AMR is also receiving support from declining oil futures and speculation that airline mergers may allow carriers to increase fares. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AMR.

After hitting a one-year high of $29.32 in July, the stock hit a one-year low of $6.81 last week. AMR opened this morning at $8.00. So far today the stock has hit a low of $7.95 and a high of $8.63. As of 12:20, AMR is trading at $8.50, up $0.76 (9.8%). The chart for AMR looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $6 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just seven weeks as long as AMR is above $6 at June expiration. American would have to fall by more than 29% before we would start to lose money. Learn more about this type of trade here.

As you know, American Airlines -- AMR Corp (NYSE: AMR) has been having a tough week. The company started running a new round of inspections on Tuesday which has led to large cancellations for the past 4fourdays.

Today, once again there were more cancellations, with another 595 flights being grounded. It can be very frustrating to find out your flight has been canceled, but some airports are upping their efforts to accommodate the unlucky passengers. All combined, the airliner has been forced to cancel in excess of 3,000 flights this week, impacting some quarter of a million travelers.

We have all had to deal with canceled, or delayed flights... and one thing is for sure, it is never a pleasant feeling, so you can just imagine the mood in airports all across America in reaction to this week's mess. Well, according to a story from MSNBC, some airports are taking extra steps to help make American passengers as comfortable as possible.

It's another day of cancellations for American Airlines -- AMR Corp (NYSE: AMR) -- as its current round of plane inspections is moving slower than had been anticipated.

Roughly 900 of the airlines flights have been canceled today, representing around 40% of its usual daily flight volume. The delays started on Tuesday when the American announced that it had to re-run inspections that it held last month after the FAA decided that the work done did not meet its standards.

On Tuesday the airline canceled 460 flights, and then another 1,094 yesterday, so it has been a tough few days for passengers trying to get to their destinations. All in all, over 100,000 passengers have been effected by the current situation at American.

American Airlines -- AMR Corp (NYSE: AMR) -- is once again canceling massive amounts of flights in order to inspect the bundling of wires in some of its airplanes. You may recall, that this is the same situation that led to around 400 cancellations last month, and this current inspection is estimated to affect even more flights, with up to 500 flights being canceled.

The current round of cancellations, which represents about 20% of total American flights, started late Tuesday afternoon, and was expected to last Tuesday night and into Wednesday, and possibly even beyond.

Passengers that were scheduled to fly the canceled American flights have been switched over to alternative American flights, or placed on other airlines that service the selected routes.

If you have a trip planned on United Air Lines, Inc. (NASDAQ: UAUA) over the next couple of days, you may want to call ahead and verify that your flight is still on schedule. According to news reports today, the airline is going to be performing comprehensive inspections of 52 of its 777 aircraft.

Air travelers have been dealing with delays for the past week as all the major airlines are working to get all their planes inspected and given the "all clear" by the FCC. Last week, we saw major cancellations and delays for travelers flying American Airlines (NYSE: AMR) and Delta (NYSE: DAL) as those two carriers were having scores of planes inspected for potential problems with their wiring bundles.

The United inspections are looking at the fire suppression system in the cargo bays. The company wants to make sure that this system is working correctly, and notified authorities when it discovered that one of the five bottles in the suppression system was skipped over during the last inspection of the system.

For anyone who has plans to fly on American Airlines, AMR Corp (NYSE: AMR) or Delta (NYSE: DAL) today, you may want to call ahead and verify that your flights are still taking off as planned, as both airlines are canceling hundreds of scheduled flights today.

Both carriers are grounding a large number of flights as they continue to hold inspections on wiring bundles on some of their planes. For American, the company is planning to ground 132 of its flights today, while Delta is canceling 275 flights.

The Federal Aviation Administration is in the middle of a massive inspection project, in which it stated that it will be inspecting 10 safety orders (also known as airworthiness directives) at every single major airline by March 28. This comes after a scandal broke out over missed inspections at Southwest Airlines (NYSE: LUV) earlier this year.

AMR (NYSE: AMR) hit the market with two pieces of bad news yesterday. The parent of American Airlines announced that its fuel costs would rise well above projections made by the company two months ago. AMR's new forecast projects the firm will have a 2008 fuel bill of $9.29 billion -- more than $1 billion above what it was expecting earlier in the year -- assuming prices don't rise even further than planned, according to an SEC filing.

AMR was also hit with a downgrade from S&P. According to MarketWatch, the ratings agency changed the company's "long-term ratings of B/Negative/B-3 and its subsidiary American Airlines Inc. to negative from positive. S&P also lowered AMR's short-term rating to B-3 from B-2."

AMR's shares, which traded at $40 at the beginning of 2007 now change hands at $9.62. S&P is asking, by way of its rating, whether all of the US carriers will make it through the year if fuel keeps rising and travelers cut back. It is a legitimate question.

Douglas A. McIntyre is an editor at 247wallst.com.