AMR Corp's American Airlines said on Friday it expects September mainline passenger traffic to slide 16.4 percent from August levels and sees costs rising 1.7 percent during that time.

Mainline unit revenue in the third quarter will fall between 14.5 percent and 15.5 percent from a year earlier, American said in a filing with the Securities and Exchange Commission.

Shares fell 5 percent, or 44 cents, to $8.36 in early trading on the New York Stock Exchange.

The airline said it expects to shrink mainline capacity 9.7 percent in September from the previous month, with a greater dip in international capacity, measured as available seat miles.

Third-quarter mainline costs are expected to be about 12.28 cents per available seat mile, American reported. In 2009, American expects mainline CASM of 12.06 cents.

Fuel costs in the third quarter would be $2.07 per gallon and $1.99 for the full year. In the third quarter, American hedged 33 percent of its fuel consumption, and for 2009, it has hedged 36 percent.

American said its expects to end the third quarter with a cash balance of least $3.7 billion, including the $1.2 billion in cash related to financing it announced Thursday.

(Reporting by Deepa Seetharaman, editing by Dave Zimmerman)