By Kyle Peterson
AMR shares fell 4.2 percent to $2.70 in midday trade on the New York Stock Exchange.
"It's American and it's disappointing because they should be doing better than they are," said Helane Becker, a Dahlman Rose & Co director.
She said she wanted to hear more from AMR executives on an analyst conference call later Wednesday about what the company can do to bolster its position against rivals.
AMR is the third-largest U.S. airline -- behind United Continental Holdings Inc and Delta Air Lines Inc -- and is the only major carrier expected to post a third-quarter loss. Analysts have debated the chances of a bankruptcy filing from AMR as it works to cut its labor costs.
AMR said its third-quarter fuel costs rose 40 percent from a year earlier, and a September spike in the value of the dollar eroded overseas sales as well as the value of repatriated funds.
It also suffered a loss in the value of some of its fuel hedges when WTI crude oil prices fell while jet fuel prices remained high.
The quarterly results were weaker than many Wall Street forecasts that did not factor in the previously disclosed foreign exchange loss or losses related to ineffective fuel hedging, Becker said.
AMR's third-quarter net loss was $162 million, or 48 cents per share, compared with a profit of $143 million, or 39 cents per share, a year earlier.
Wall Street analysts on average had expected a loss of 41 cents per share.
Revenue was $6.4 billion, in line with Wall Street expectations.
AMR ended the quarter with $4.8 billion in cash and short-term investments, including a restricted balance of $474 million.
"While the third quarter was challenging for American Airlines, we are taking aggressive actions to improve the company's performance and strengthen its foundation for long-term success," AMR Chief Executive Gerard Arpey said in a statement.
U.S. airlines are bracing for an economic downturn that could see travel demand sag this year. Some top airlines, including AMR, have announced service reductions to offset weaker demand.
Earlier this month, American said it would cut its fall and winter flying to reduce fourth-quarter capacity by about 3 percent compared with its initial outlook in January. It expects full-year capacity to be up about 0.4 percent year-over-year.
"AMR has its back against the wall and is doing everything it can to return to profitability, but I still believe AMR's viability is outside of its control," said Morningstar equity analyst Basili Alukos.
Industry experts are awaiting updates on AMR's efforts to reach a labor contract with the union representing its pilots.
AMR was on the verge of Chapter 11 bankruptcy in 2003 when unions agreed to concessions. But the airline remains the only major airline that still must fund worker pensions.
Speculation about a potential Chapter 11 filing boiled over earlier this month. AMR, American Airlines and its pilots reported "significant progress" in contract talks over weekend. The talks recessed on Monday but were set to resume Wednesday.
(Reporting by Kyle Peterson, editing by Maureen Bavdek and John Wallace)