AMR shares fall 14% on tepid outlook

Shares of AMR Corp., the parent of American Airlines, sank 14% on Monday after the company gave a tepid third-quarter outlook and several analysts slashed their profit estimates for the carrier.

The shares slid $3.49 to $20.77 -- their lowest closing price in about a year -- after going as low as $20.28. AMR dragged other airline stocks down too.

Late Friday, AMR said in a regulatory filing that third-quarter revenue per mile flown by American Airlines passengers would rise 4% to 5% from a year earlier -- less than some analysts had predicted for the busy travel period.

Jamie Baker, a JPMorgan analyst, said AMR’s comments pointed to slightly lower revenue and higher nonfuel costs than he had expected for the quarter. He questioned the company’s claim that bad weather had added to summer costs, calling it “a somewhat flimsy excuse.”

Baker cut his estimate of AMR’s July-September profit by one-third, from $1.01 a share to 66 cents.

Robert Barry, a Goldman Sachs analyst, also cited AMR’s Friday comments in cutting his profit prediction Monday. Barry said AMR would earn 66 cents a share in the quarter, down from his earlier forecast of 88 cents.

Before Baker and Barry turned more bearish, a group of 14 analysts surveyed by Thomson Financial had estimated that AMR would earn $1.04 a share in the third quarter. AMR is expected to release results for the period in mid-October.

AMR’s stumble hit other airline stocks as investors worried that industry weakness might be more widespread.

Shares of US Airways Group Inc. tumbled $3.41, or 12%, to $25.98; Delta Air Lines Inc. shares fell $1.53, or 8.7%, to $16.03; Continental shares lost $2.24, or 6.9%, to $30.46; and UAL slipped $2.78 or 6%, to $43.23.

Northwest Airlines Corp. shares lost 88 cents, or 5.2%, to $16.07; shares of Southwest Airlines Co. slipped 35 cents, or 2.3%, to $14.99; and Alaska Air Group Inc. shares lost $1.32, or 5.5%, to $22.87.

Analysts expect Fort Worth-based AMR, which also operates American Eagle, to face pressure to increase labor costs. American Airlines is in the early stages of negotiating new labor contracts with pilots and ground workers and is expected to open talks in the next few months with flight attendants.