DALLAS (AP):

The parent of American Airlines plans to issue new stock and debt in a move to raise more than US$500 million as it heads into the slower fall and winter travel season.

AMR Corp said this week it would issue up to US34.5 million shares and sell up to US$287.5 million in senior notes that can be converted to stock.

At Monday's closing price of US$9.03, gross proceeds from the stock sale could total US$311 million. But news of the stock and debt sales sent shares tumbling 63 cents, or 7 per cent, to US$8.40 in extended trading.

Monday's moves come four days after AMR announced it had lined up US$2.9 billion in new financing by selling miles in its frequent-flier programme and mortgaging planes, including sale-leaseback deals on jets it doesn't even own yet.

Remove any doubts

American officials said last week that their actions should remove any doubts about the company's liquidity. Some analysts had warned over the summer that AMR could run low on cash by next winter, often ranking AMR, United and US Airways as the carriers in the most difficulty from a cash standpoint.

Stifel Nicolaus analyst Hunter Keay said on Monday that "it appears AMR is suddenly ripe with cash". He said AMR could end the third quarter with about US$3.9 billion in unrestricted cash, among the best of the biggest five carriers as part of annual revenue.

AMR still has major debt, capital spending and pension obligations looming, but Keay said Monday's announcement further solidifies the company's likelihood of avoiding bankruptcy.

Airlines are facing a severe slump in travel, with both the amount and quality of travel declining. Paying passengers are travelling less, and with corporate travel down, they are more likely to buy cheaper coach seats than high-priced premium fares.