Shares of AMR ( AMR), parent of American Airlines, jumped on Friday after Standard & Poor's upgraded the company's debt rating, citing improving business fundamentals. S&P debt analyst Philip Baggaley upped the ratings of both AMR and American Airlines by two notches, to B- from CCC. While S&P's outlook is still negative on the company, Baggaley removed AMR from CreditWatch, saying liquidity has improved greatly since March 28. "The upgrade of AMR and American is based on expected earnings and cash-flow improvement as a result of the April 2003 agreement with labor groups on $1.8 billion of annual concessions over the next five years," said Baggaley. "AMR remains highly leveraged and vulnerable to any further airline industry revenue deterioration, but near-term liquidity is adequate, with about $1.45 billion in unrestricted cash." While the upgrade is an indication of AMR's improvement over the last couple months, the analyst warned that the company's financial condition is "improved but still fragile." Specifically, Baggaley noted that AMR has $22 billion in debt and $6 billion in unfunded pension liabilities, which could become a problem if the revenue environment weakens again. S&P said it expects the new labor contracts to save AMR $200 million in the upcoming second quarter, with $850 million in savings over the second half of the year. The wage concessions are part of AMR's master plan to cut costs by $4 billion annually in order to compete with low-cost carriers and avoid filing Chapter 11. The company's shares, which were moving lower at midday Friday, reversed direction on the news and were up 20 cents, or 2.2%, at $9.31 in late trading. AMR shares have gained more than 500% since the broader market bottomed on March 11.