Quite the Sales Pitch, AMR

Two days ago, American Airlines’ parent company, AMR Corp., submitted to the Securities and Exchange Commission a prospectus in which it announced it was selling precisely 15,002,091 shares of its common stock. As of yesterday, that stock was selling for $25.40 a share–which was way down from $27.63, its price at the beginning of the week. AMR needs the dough. Why? Well, let the company explain in its own filings, underneath the subhead “Risk Factors,” which is not a reality TV show but a reality check for the Fort Worth-based carrier:

“As a result of significant losses in recent years, our financial condition has been materially weakened. We have incurred significant losses in recent years: $92 million in the first quarter of 2006, $861 million in 2005, $761 million in 2004, $1.2 billion in 2003, $3.5 billion in 2002 and $1.8 billion in 2001. As a result, our financial condition has been materially weakened, and we remain vulnerable both to unexpected events (such as additional terrorist attacks or a sudden spike in jet fuel prices) and to general declines in the operating environment (such as that resulting from a recession or significant increased competition).

Our initiatives to generate additional revenues and significantly reduce our costs may not be adequate or successful.

As we seek to improve our financial condition, we must continue to take steps to generate additional revenues and to significantly reduce our costs. Although we have a number of initiatives underway to address our cost and revenue challenges, a number of these initiatives involve significant changes to our business which we may be unable to implement.”

You gotta admire the honesty. Then you gotta wonder why someone would buy one share of AMR. Or a ticket on American. –Robert Wilonsky