Shares of AMR ( AMR) leapt 17% Thursday morning, boosted by an analyst upgrade and news that the company had reported positive cash flow from operations in May.

In an 8-K filing with the SEC Wednesday, AMR said its May cash flow was helped by $1.8 billion in annual wage cuts that American Airlines workers had adopted. The cash-flow gains exclude $358 million in government aid that AMR had received.

Furthermore, costs have fallen, pushing May unit revenue, or the money generated per seat mile flown, up 4% from year-ago levels, with June unit revenue also doing well. That news topped analyst expectations, prompting an upgrade from Credit Suisse First Boston and earnings revisions from others who cover the company.

"Last night, AMR provided third-quarter cost guidance that was 5% better than our prior estimate at $0.1060 per available seat mile, making us much more comfortable with the liquidity outlook," said CSFB analyst Jim Higgins, who raised his rating to outperform from neutral.

Shares in AMR, which have rallied nearly 500% since bankruptcy fears sent it below $2 a share in March, were up $1.56 at $10.64 Thursday morning.

Because of the improved revenue performance, Higgins feels the company will be able to avoid larger problems that loom at the end of 2003. "Incorporating the improved cost outlook and assuming some sequential revenue improvement from a depressed second quarter owing to SARS and the Iraqi war, this suggests a year-end cash balance of $1.4 billion to $1.5 billion," said Higgins. "This level should provide AMR with enough of a cushion above the $1 billion balance required by various debt covenants to substantially reduce the odds of a bankruptcy filing."

Higgins narrowed his expectation for a second-quarter loss to $1.95 a share, which is below current consensus estimates of a loss of $3.42 a share, according to Thomson First Call. Other brokerages followed suit, with Goldman Sachs, Bear Stearns and J.P. Morgan all boosting their estimates.

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