An exchange traded fund that follows the airline industry is facing significant headwinds as AMR Corp. (NYSE: AMR) shares lost a third of their value Monday on speculation that the parent of American Airlines is filing for bankruptcy.
Guggenheim Airline ETF (NYSEArca: FAA) ended down about 9% on Monday.
AMR was down as much as 35% on Monday after rumors circulated that management may voluntarily file for bankruptcy to renegotiate labor costs, the Financial Times reported.
AMR shares ended down 33%. [Can United Outlook Boost Airline ETF?]
“AMR needs to get its costs down in line with the rest of the industry. That is why I suggest a pre-packaged bankruptcy filing would be the best thing,” Ray Neidl, airline and aerospace analyst at Maxim Group, commented in the FT report.
However, an American Airlines spokesman assured that a Chapter 11 filing was “certainly not our goal or our preference.”
The company is currently sitting on $5 billion in cash. Neidl also noted that the airline was not at risk of an imminent bankruptcy, given its current balance sheet. The broad sell-off in airlines in stocks Monday was “a signal that people think we are heading for a recession,” Neidl added.
Guggenheim Airline ETF
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.