Shares in AMR, parent company of American Airlines, slumped by 33% on the New York Stock Exchange (NYSE).
The dramatic drop lead to increased fears that the carrier, one of the largest in the world and the strategic partner of BA and Iberia, would seek Chapter 11 bankruptcy protection.
AA said the fall was a not connected to any company news and said restructuring, inevitable after bankruptcy, was “certainly not our goal or our preference.”
The company narrowly staved off Chapter 11 protection in 2003 when other rivals opted for that course.
US analysts said this had made carriers like Delta Air Lines and United Airlines, now merged with Continental Airlines, leaner and fitter companies while AA remained bulky and struggling.
In a frantic day on the NYSE for AMR, the company saw its share plummet from $2.96 to $1.75 before recovering to $1.98 by close of business.
Durign the drop, trading in AMR stock was halted seven times becasue the intensity of the buying and selling.
Altogether 76m AMR shares changed hands, compared with about 12m on a “normal” day.
It was the first time AMR shares fell below $2 since its 2003 crisis. The dealings wiped $670m off its capital value.
A spokesman for the company dismissed talk in the NYSE of Chapter 11 protec tion as “rumour and speculation.”
He added: “We know we need to improve our results, and we are keenly focused as we work to achieve that."
Reuters reported that AMR said in regulatory filing last month that it expects to end the third quarter with unrestricted cash of $4.2bn.
Also last month, AMR sold $725.7m bonds to offset a significant portion of the $1.3bn in debt maturities remaining for 2011.
The news agency added that AMR is renegotiating its labour contracts. Management told the Allied Pilots Association union last week that 129 pilots said in September they would retire on October 1, an unusually high number for a single month.
The mass retirement spurred the bankruptcy talk on Monday because the move by those pilots locks in pension values that might have been in jeopardy if the workers risked sticking with the company through a bankruptcy reorganisation when it is easier for a company to jettison pensions.