Shares of AMR Corp. fell near an 8-year-low on Wednesday as the parent of American Airlines pushed union workers to accept contracts that would boost productivity at the money-losing company.
A longtime airline industry analyst said compromise was possible with the pilots' union, but American _ the world's biggest airline just three years ago _ must accept that it will become a smaller carrier.
Other airline stocks were down too, as oil prices surged to a four-month high and raised the threat of higher costs for jet fuel.
THE SPARK: American tried to wrap up a contract with pilots this week by making an offer _ two options, actually _ before it was accepted by union negotiators. Union leaders balked, however, leaving the talks in limbo.
THE BIG PICTURE: A deal with the Allied Pilots Association could establish a precedent for deals with flight attendants and mechanics, who are represented by separate unions.
Leaders of all three unions, and many of their members, are angry about what they see as overly generous executive compensation while workers continue to labor under wage and benefit cuts they accepted in 2003.
American claims that it spends at least $600 million more on labor than it would if it had the same work rules as other airlines. It offered pilots pay raises in exchange for more flexible rules and longer hours.
AMR, which also owns the American Eagle regional airline, is also struggling with high fuel costs and hasn't turned an annual profit since 2007 _ it's lost $4 billion since then.
THE ANALYSIS: Some analysts suggested this week that the lack of labor deals would increases chances that AMR could file for bankruptcy protection. Rodman & Renshaw LLC analyst Daniel McKenzie said Wednesday that the company and the pilots' union are close enough to compromise. He said AMR's future will hinge on fuel prices and routes, and it is shrinking in several key markets.
"AMR needs to resign itself to being a smaller airline turbocharged by deeper domestic and international alliance relationships" with other airlines, McKenzie said. He added that any such restructuring must be accompanied by new labor contracts.
SHARE ACTION: AMR shares fell 11 cents, or 5.5 percent, to $1.82 in afternoon trading. That's near the 52-week intraday low of $1.75, hit on Oct. 3. If they drop below $1.75, they would be at their lowest levels since March 2003, when the company was on the verge of bankruptcy.