Moving quickly to shore up its finances after the bankruptcy of a rival, AMR Corp. ( AMR) said its American Airlines unit will cut 7,000 jobs and retire a 74-jet fleet of Fokker planes.

The once-successful airline has been racking up losses since the Sept. 11 terror attacks, in which two of its planes were among the hijacked. It posted a half-billion-dollar deficit in the second quarter and was projected to lose a similar amount in the year's second half.

AMR currently employs about 112,000, down from 128,000 at the beginning of the year. Tuesday's cuts come on the heels of a Chapter 11 filing by rival US Airways ( U) and growing concern about the airline industry's viability in the existing environment.

The initiatives and other cost-saving measures will produce $1.1 billion in structural annual operating savings, the company said.

The company hopes to cut capacity 9% by November. It will move up the retirement of 9 TWA 767-300 aircraft, retire its 74-jet Fokker 100 fleet between the third quarter of 2003 and the third quarter of 2005, and defer 35 deliveries that had been scheduled for 2002.

AMR's shares closed down 13% at $8.36 Monday.