Last minute talks to save American Airlines

American Airlines parent AMR Corporation was locked in eleventh hour talks last night with unions in the hope of wringing out enough in wage cuts to stave off bankruptcy.

As a self-imposed deadline of 11am New York time set by AMR passed, the world's largest airline continued discussions with union leaders representing pilots, flight attendants and engineers.

American was hoping to secure agreements with the unions to clear the way for members to vote on the proposals in two weeks' time.

The airline is losing $5m a day and had warned unions that it could file for bankruptcy anytime.

The carrier is seeking annual cost savings of $1.8bn from workers to help cope with the terrible conditions in the market. The slowing economy had already begun to curtail business travel before the terrorist attacks of September 11 which savaged the industry.

The war in Iraq has worsened the industry's problems. Domestic US bookings have fallen 20% since the conflict opened and 40% internationally. American Airlines lost $3.5bn last year and has been negotiating debtor-in-possession financing to ensure that it would stay airborne in the event of filing for a Chapter 11 bankruptcy.

United Airlines, the number two carrier, filed for bankruptcy in December. The ten largest airlines in the US lost a combined $11.3bn last year.

"Everyone is still talking," said a spokesman for American. "Many people worked through the night. Our entire focus is on getting these deals done." The company is also looking to cut another $2bn non-labour related costs.

The Allied Pilots Association has outlined a plan to save $660m including pay cuts and work rule changes.

The Association of Professional Flight Attendants has also offered $340m in concessions. The mechanics union put forward its proposals late yesterday. But the airline has yet to agree to the deals on the table.

The airline is known to have had differences with the pilots over the method for calculating the value of concessions.

Steve Blankenship, a spokesman for the pilots union, said: "We are doing all we can do to try to squeak this thing out. We clearly understand the urgency."

Even if a deal is reached with the unions, the airline could still file for bankruptcy.