AMR Corporation (NYSE:AMR) announced a plan today to reduce its interest expense amid pressure from activist shareholders to improve its financial results. The plan calls for the American Airlines parent company to prepay $545 million in aircraft debt in the forth quarter and should cut annual interest expenses by $25 million, according to their press release.

"With our improving financial performance, we have bolstered our liquidity position and we have opportunistically strengthened our balance sheet by reducing debt," said Thomas W. Horton, Executive Vice President of Finance and Planning and Chief Financial Officer of AMR. "While we have more work to do, our recent decisions not only improve our balance sheet, but also reduce our interest burden going forward and give us more financial flexibility for the future."

This new plan supplements existing actions taken by the company in the first half of 2007, including debt prepayments, bond refinancings and the lowering of interest rates on a credit facility. Combined, these actions eliminated an incremental $27 million of annual net interest expense, in additional to the net interest expense savings from AMR's scheduled debt amortizations. In the end, the company expects its net interest expenses to be $130 million lower than its expenses for the same period in 2006.

Clearly, AMR is doing what it can to reduce its expenses and improve its balance sheet to help unlock value for shareholders. Shareholders also applauded the move as AMR stock rose over 10% during the past two days. In the end, this is great news that makes AMR a stock worth watching over the next few months!

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