American Airlines parent to sell 30M shares, issue $280M in debt

DALLAS -- The parent of American Airlines will issue more than $500 million worth of stock and debt to raise cash as it heads into the slower fall and winter travel season.

AMR Corp. said Monday it would issue up to 34.5 million shares and sell up to $287.5 million in senior notes that can be converted to stock. At Monday's closing price of $9.03, proceeds from the stock sale could total up to $311.5 million.

The news of the new stock and debt sales sent shares tumbling 63 cents, or 7 percent, to $8.40 in extended trading.

Monday's moves came four days after AMR announced it had lined up $2.9 billion in new financing by selling miles in its frequent-flier program and mortgaging planes, including sale-leaseback deals on jets it doesn't even own yet.

American officials said last week that their actions should remove any doubts about the company's liquidity. Some analysts had warned over the summer that AMR could run low on cash by next winter, often ranking AMR, United and US Airways as the carriers in the most difficulty from a cash standpoint.

Airlines are facing a severe slump in travel, with both the amount and quality of travel declining. Paying passengers are traveling less, and with corporate travel down, they're more likely to buy cheaper coach seats than high-priced premium fares.

With the peak summer season now over, the revenue outlook for airlines is expected to grow even more dire. Analysts expect the airline's third-quarter revenue -- including part of the summer season -- will be about 20 percent below the same period in 2008.

On Monday, AMR said it would issue 30 million shares plus up to 4.5 million more to cover overallotments. And it said it would sell $250 million in convertible notes and up to another $37.5 million worth to cover overallotments.

It said the offers were independent, with neither hinging on the success of the other. Fort Worth, Texas-based AMR said it planned to use the proceeds for "general corporate purposes."

Citigroup, Morgan Stanley and UBS are managing the offerings.

Last Thursday, AMR said it raised $1.6 billion by agreeing to sell Boeing aircraft it has ordered to General Electric and then leasing them back. And AMR added $1 billion by selling frequent-flier miles to Citigroup, which offers an American-branded credit card.

American, the No. 2 U.S. airline operator behind Delta Air Lines Inc., also mortgaged other planes and said it would increase flights at hubs such as Chicago, Miami and Dallas while sharply reducing them in St. Louis.