S&P puts AMR, UAL on watch, negative outlook

NEW YORK - Standard & Poor's late Wednesday put American Airlines, United Airlines and their parent companies on watch with negative outlooks, a possible precursor to downgrades at the big carriers.

S&P said it was concerned about weak revenue and liquidity at the airlines.

U.S. airlines are struggling with a decline in air travel and a resurgence in jet fuel prices, leading to questions about whether some might face a cash crisis, possibly during the winter, typically a light period for travel.

Revenue in the second quarter, typically a strong period for travel, fell at both American parent AMR Corp. and United parent UAL Corp.

AMR finished the quarter with about $2.8 billion in unrestricted cash and short-term investments, down from nearly $5.1 billion a year ago, although the company still has assets that could be mortgaged to raise more cash.

United parent UAL Corp. had $2.6 billion of unrestricted cash on June 30 and raised $155 million more in early July, but S&P warned the cash pile will likely decline without new liquidity measures from the company in the third and fourth quarters.

Both companies' ratings are already below investment-grade, at "B-."

Those notices came just as another ratings agency, Moody's Investors Service, downgraded about $3 billion in Southwest Airlines Co. debt by two notches, to one rung above junk status.

Southwest and UAL reported small second-quarter profits this week, although UAL fell to a $323 million loss after excluding one-time gains from fuel hedges and other items. AMR posted a $390 million loss for the quarter ended June 30.

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