FORTUNE -- Bankruptcy may be the best option to prevent American Airlines from making a crash landing. While such a move may be painful in the short term, a prepackaged bankruptcy would allow the nation's third-largest airline to erase cost advantages currently held by its peers. American could ostensibly muddle on in its current cash-burning state for a while, but it will struggle to make any headway on profitability if it doesn't get serious about addressing its broken cost structure.
AMR Corp (AMR), the parent company of American Airlines, saw its stock tumble yesterday on talk that it could be headed into bankruptcy. AMR's shares fell as low as 41% at one point during the day but settled down 33% to just under $2 a share after the company publically denied that it was seeking bankruptcy protection. That gives AMR a market value of around $727 million, which is about the cost of buying just five new Boeing 787 aircraft, according to official market prices. That's quite a humbling valuation for a company that has 872 aircraft and 78,000 employees.
American is the only legacy carrier left standing that has managed to avoid a trip to the bankruptcy court in the last decade. Continental Airlines shared that distinction with American, but decided
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