American Airlines parent AMR (NYSE: AMR) is freezing the hiring of management and support personnel. The move is a sign of distress at the carrier. It comes after Skybus, ATA, and Aloha Air have shut down.
According to The Dallas Morning News, a spokesman for AMR said, "I think it's no secret that the entire industry, including us, has been struggling to contain costs, mainly the cost of fuel." AMR may get an award for best understatement of the year.
According to the AMR 10-K, the company say it may be unable to raise money to retain sufficient liquidity. If fuel prices rise and passenger traffic drops due to the recession, that could become a real problem. AMR's operating income of $965 million in 2007 was tiny compared to its revenue of over $22.9 billion. Interest expense was over $900 million. The company has long-term debt of $9.4 billion.
Given how many large airlines have been through Chapter 11 during that last decade, AMR is not immune. It may not get through the year without a reorganization.
Douglas A. McIntyre is an editor at 247wallst.com.
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