American Airlines' parent company AMR Corporation has filed for Chapter 11 bankruptcy protection.
Shares in the airline plunged 85% when they resumed trading on Tuesday. They are now worth 25 cents each.
The company expects the airline to continue to operate as normal throughout the bankruptcy process.
Speculation about AMR's financial position surfaced in recent weeks after cost-cutting negotiations failed.
AMR said agreements with its workforce forced it to spend $600m (£384m) more than other airlines on staff costs.
The airline employs 78,000 staff worldwide and operates out of five major US hubs.
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