AMR shares fell over 14 percent Monday, its biggest one-day loss in more than four years, after the parent of American Airlines issued a disappointing revenue forecast, stoking concerns of slowing demand and rising costs.
In a regulatory filing after the market close Friday, AMR said it expects passenger revenue from its mainline and regional operations to rise 3.7 percent to 4.7 percent in the third quarter.
The pace of growth is slower than its rivals, according to recent data. Continental Airlines Inc earlier this month said passenger revenue per available seat mile, or unit revenue, rose 6.5 percent to 7.5 percent in August.
"Against this backdrop, AMR's result is disappointing. Perhaps more so, given a likely boost from lapping an easy comp in third quarter 2006, when the liquid ban hurt U.S. short-haul and London traffic," said Goldman Sachs analyst Robert Barry. He had expected AMR to post third-quarter unit revenue growth of 5.2 percent.
The weak figures, which come amid concerns that American consumers will rein in spending as the economy slows, dragged down other airline shares. Delta Air Lines dropped about 6 percent, while US Airways fell over 8 percent. The Amex airline index was down 4.25 percent.
"The US economic environment is becoming increasingly more uncertain, per the Fed's recent statement. There is perhaps no company that is more leveraged to that trend than the largest commercial airline in the country," said Brian Nelson, an analyst at Morningstar.
On top of the prospects for softer demand, oil prices, which affect the costs of jet fuel, have recently reached record levels. Amid rising fuel costs and fears of sluggish demand, some investors were positioning themselves for further weakness in AMR by buying put options.
"The puts which give investors the right to sell AMR shares at $20 a piece by mid-October are very active. People are betting on more share downside," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.
Early in the session, the October $20 puts moved 1,434 times and cost 70 cents a contract, up 50 cents on the day.
In the filing with the Securities and Exchange Commission, AMR said it expects third-quarter cargo and other revenue to be "nearly flat" with the second quarter. It also expects unit costs, or the cost of flying a seat one mile, to be higher than previously forecast because of programs to spruce up its cabins and due to weather-related cancellations.