AMR Shares Bounced: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of embattled airline operator AMR (NYS: AMR) flew 16% on Tuesday after its pilot union cleared up speculation over why several of its members have been retiring in recent months.

So what: AMR shares were pummeled yesterday on fears that an unusually large number of its pilots have been retiring due to an imminent bankruptcy, so today's statement from the the Allied Pilots Association, or APA -- which represents 10,000 American Airline pilots -- obviously eases some of those concerns. "We have seen some rumors suggesting that our pilots are acting on inside information about the financial state of American Airlines," APA said. "That is not the case. APA's rank-and-file members are not privy to inside financial information."

Now what: I wouldn't get too excited about the stock just yet. While APA states that its advisors have "indicated that the airline does not face any immediate liquidity crisis," AMR's massive debt load and copious cash burn remain just too scary for a long-term commitment. Of course, if you just have to pick through the carnage in the space, look to a beaten-up name like Southwest Airlines (NYS: LUV) -- with profits, decent balance sheet, and identifiable competitive advantage -- instead.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Southwest. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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