American is continuing negotiations

American Airlines has reached a last-minute wage deal with its mechanics' and flight attendants' unions as it tries to stave off bankruptcy.

The world's largest airline will file for Chapter 11 bankruptcy protection if it fails to reach a deal with its three unions to cut 21% from its $8.4bn payroll.

American Airlines and the Transport Workers' Union, the biggest of the airlines' unions, said on Monday they had reached a deal, while the Association of Professional Flight Attendants (AFPA) also announced an agreement between the two parties.

Now the cash-strapped carrier only has to reach an agreement with their pilots.

Shares in American's parent company AMR closed 52 cents, or 33%, higher to $1.58 on the news.

Downturn

American Airlines has suffered from a downturn in business since the September 11 terrorist attacks and because of the world economic slowdown.

We are confident that the savings we are offering will enable American Airlines to compete both in the short and long-term Allied Pilots' Association

But the war in Iraq has accelerated the problems by putting people off flying.

American's parent company, AMR, said it was asking all employees, including management, for a total of $1.8bn (�1.1bn) in permanent, annual savings to help save the company.

The pilots' union said on Sunday that it had presented the carrier with a concession deal worth $660m a year.

This consisted mainly of work rule changes and across-the-board salary cuts.

Burning cash

The Allied Pilots' Association said that it had analysed a tentative deal reached earlier this week by rival United Airlines with its pilots.

While American Airlines is in trouble, its smaller rival US Airways has managed to pull itself back out of bankruptcy More on US Airways

"We are confident that the savings we are offering will enable American Airlines to compete both in the short and long-term with a newly restructured United and US Airways, as well as with low-cost carriers in our industry."

On Friday the union representing flight attendants said it had presented a proposal to the company that would meet the airline's goal of achieving $340m in cuts from flight attendants.

American had already reached agreement with its fleet service workers.

But deals with staff alone will not be enough to help the airline avoid bankruptcy.

It is also continuing to hold talks with its bankers about its debt.

Analysts said the airline was currently burning through more than $5m a day because of a fall in bookings following the outbreak of war in Iraq.