In “The Gambler,” one of country and western singer Kenny Rogers’s biggest hits, the standout lyrics are, “You got to know when to hold ’em, know when to fold ’em, know when to walk away, know when to run.”

Morningstar’s airline analyst, Christopher Lazier, figures investors should take heed of those words by folding one of Wall Street’s hottest rebounding stocks – AMR Corporation, parent of American Airlines, the world’s biggest carrier.

Actually, for those investors canny enough to have been able see through such dark industry clouds as overcapacity, increasingly fierce competition, and declining fares, AMR has given its shareholders a marvelous market ride the past couple of years. In that period, the stock soared to a 2006 high of $29.32 from a 2004 low of $1.25. It closed yesterday at $24.66.

“AMR is so overpriced right now,” Mr. Lazier says. He takes sharp issue with some fellow airline analysts who rate AMR, along with Continental Airlines, as their two favorite carrier stocks. Mr. Lazier says he thinks it would be okay to buy AMR’s stock at $3.10, which, given its present price, would really be great if you could do it. Likewise, he rates AMR – which once sold as high as $89.93 – as a sale at $7.40 or above.

The industry is not doing as badly as last year, but crude oil at current levels (about $70 a barrel) rules out any kind of meaningful profit, he says.

The main reason he’s such a gloomy Gus is his earnest belief that the major airline business model is unsustainable in its current form, particularly for those carriers still sponsoring defined benefit pension plans. He figures an easing of market conditions should enable AMR to turn in some profitable performances in coming years, but he contends they’ll be moderate and impermanent. One reason: Low-cost competition will only intensify in domestic and international markets, putting ongoing pressure on yields.

While AMR has been one of the strongest major airlines in recent years, bankruptcy courts are helping its peers to change that, Mr. Lazier observes. In brief, the spread between the lowest and highest unit costs among the major airlines has shrunk considerably, and AMR’s low-cost position is threatened. This advantage used to translate into wider operating margins (or smaller operating costs) for AMR, but probably won’t anymore, Mr. Lazier says.

More important, the analyst points out, is that the spread between the majors’ unit costs and those of low-cost carriers (such as Southwest Airlines) remains substantial and very likely permanent. The nature of the business of the major airlines, including the high cost and limited flexibility of unionized work forces, has kept AMR’s unit operating costs, excluding fuel, about 20% higher than Southwest’s (the difference is more than 75% when adjusted for the length of the haul). And because it must offer competitive prices to fly empty planes, AMR will be in the position of earning considerably thinner operating margins than Southwest, Mr. Lazier adds.

Is there any airline stock he would advise investors to buy? No, he says. Because of overcapacity, airlines, he observes, can no longer charge a lot of money for tickets to offset their many problems. The days of sky-high ticket prices are history, he says. Accordingly, he tells me, “I’m negative on the industry as a whole, and there’s no airline stock I would recommend as a buy and a hold.” And that includes, he adds, the best low-cost carriers, notably Southwest and AirTran.

The bottom line: If you own a stock in the problem-riddled airline industry, which Mr. Lazier notes is becoming increasingly commodified with each passing day, maybe you should head for the exit doors while you still can.

dandordan@aol.com