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   US Airways Files Bankruptcy

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Topic: US Airways Files Bankruptcy (Read 638 times)

Rhune
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US Airways Files Bankruptcy
« on: Aug 12^th, 2002, 1:26am »

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USAir files for bankruptcy

Carrier says it will continue operations, obtains $500M in debtor financing.
August 11, 2002: 9:25 PM EDT

NEW YORK (CNN/Money) - US Airways Group Inc. filed for bankruptcy Sunday, saying it will continue to operate while it tries to restructure its finances and emerge from protection early next year.

"Ultimately, this effort is about our customers , employees and the communities we serve as we seek to fix the airline's finances and return to profitability," said US Airways President and CEO David Siegel in a statement.

Siegel said Arlington, Va.-based US Airways (U: Research, Estimates) will continue to serve the more than 200 cities in its network. The Dividend Miles frequent flier program will continue, as will the company's co-branded credit card with Bank of America. US Airways says its 35,857 employees will receive scheduled paychecks and all other benefits, and that vendors will continue to be paid for goods and services as delivered.

The carrier says it has secured $500 million in debtor financing from a group led by Credit Suisse First Boston and Bank of America. It also says it will receive a $200 million equity investment from Texas Pacific Group upon emergence from Chapter 11 protection.

"In the face of an uncertain and trying time for the industry, we have been impressed with the major strides taken by US Airways' management and employees to significantly improve the competitiveness of the airline," said Richard P. Schifter, a Texas Pacific partner, in a statement released by US Air. "Our capital and industry experience can contribute to the company's prompt emergence and long-term prosperity."

US Air is also expecting a $1 billion collateralized loan backed by a federal guarantee that has been conditionally approved by the Air Transportation Stabilization Board, provided the company is able to get cost-cutting accords with its unionized employees.

US Airways says it expects the court-supervised restructuring will be accomplished on a "fast track" basis, and that it will emerge from Chapter 11 protection in the first quarter of 2003.

The filing was made Sunday at the U.S. Bankruptcy Court for the Eastern District of Virginia in Alexandra. US Airways says a hearing before Judge Robert G. Mayer is scheduled Monday at 10:30 a.m. ET. In its petition, US Air says it listed assets of $7.81 billion and liabilities of about $7.83 billion.

US Air says the bankruptcy filing will allow it to derive cost savings from aircraft lessors, financiers and "other key stakeholders."

US Airways has tried to cut lease rates on some of its 311 planes, but was having trouble, said Senior Vice President Chris Chiames.

"We've been putting off payments on aircraft for going on two months now," he told reporters. "The financial condition of the airline was such that it was unsustainable to continue to operate with such a high cost involving older aircraft that have high lease rates and those kinds of things."

Unions making concessions
Among those other "key stakeholders" are the airline's employees. US Air says it has negotiated cost savings from several of its unions, with those representing pilots, flight attendants and flight crew training instructors ratifying the accords. In exchange, it has promised union representation on its board of directors.

The International Association of Machinists and Aerospace Workers (IAM) said Sunday it will put a cost-cutting proposal to a vote of its 6,800 mechanics, and that a meeting is scheduled Monday between the carrier and officials representing an additional 5,450 fleet workers.

"Our members will not give up on US Airways, and neither should anyone else," IAM General Vice President Robert Roach Jr. said in a statement. "We believe US Airways can successfully restructure while it continues to serve the traveling public and provide employment for our members."

US Airways says it has not received a formal response to its request that one other union, the Communications Workers of America, submit a cost-cutting measure to its members. The carrier also says that officers, management and non-union employees are taking pay cuts and foregoing bonuses and benefits.

"We recognize the impact the sacrifices they are making will have on them and their families," Siegel said. "In exchange for their participation, we have committed that this will be a labor friendly Chapter 11 reorganization, in which we will honor new agreements that have been ratified, and provide labor a voice in the company's governance."

The airline, already hit by a drop in business travel, suffered with the overall drop-off in travel after the Sept. 11 terrorist attacks. One of US Airways' major bases -- Washington Reagan National Airport -- did not completely reopen to commercial flights for months after the attacks because of security concerns.

The closure hurt the airline; US Airways lost nearly $2 billion last year and losses continue to mount. The bankruptcy filing will allow the airline time to get back on its feet.

"We feel that we're in a good position, that this will make us a stronger airline," said Chiames. "We'll be able to clean up our financial status with regard to balance sheets and aircraft that are too expensive to fly, and emerge as a stronger, more viable competitor on the East Coast, where most of our flights are operating."

US Airways shares closed Friday at $2.45, up 5 cents.

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Rhune
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Re: US Airways Files Bankruptcy
« Reply #1 on: Aug 13^th, 2002, 10:23am »

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CHICAGO (Reuters) - American Airlines, the world's largest air carrier, which is still losing huge amounts of money nearly a year after the Sept. 11 hijackings, said Tuesday it will cut another 7,000 jobs by March 2003 and shrink its operation by retiring aircraft and cutting back more flights.

American, a unit of Dallas/Fort Worth-based AMR Corp. , said on its Web site it will retire 74 costly Fokker 100 aircraft and defer 35 aircraft deliveries in 2002. The airline will also "seek every opportunity" to defer or cancel new deliveries going forward.

AMR will take a charge against earnings, but the amount is not yet known, said spokesman Tim Doke. The job cuts will be widespread across the system, he added, with about 40 percent coming from the ranks of pilots and flight attendants.

No cuts are expected in the maintenance and engineering side, Doke said.

Jarring news in the airline industry has yet to abate.

Demand for air travel is still off since Sept. 11, particularly from lucrative business flyers that big, full-service carriers like American rely upon to generate profits. AMR Chief Executive Don Carty warned at the airline's annual meeting in May that he would leave no stone unturned in his quest to restore profitability.

MORE BAD NEWS

American's cutbacks come two days after the No. 6 U.S. carrier, US Airways Group Inc. , filed for Chapter 11 bankruptcy protection.

That renewed fears that UAL Corp. , the parent of No. 2 carrier United Airlines, might also file for bankruptcy before the end of the year as it faces huge cash outlays in the fourth quarter. The industry has lost more than $10 billion since the attacks and the bleeding shows no signs of stopping.

Citing recent economic and consumer confidence reports, American said it aims to reduce capacity by nine percent by November, compared with levels this summer.

As of March, American had 101,706 employees.

After the attacks on New York and Washington, which involved two American Airlines planes, AMR laid off about 20 percent of its staff and cut back capacity by 20 percent as well, moving in step with most other major U.S. airlines.

Industry capacity has recovered some ground since then. After the new round of cutbacks, American's capacity will be about 13 percent lower than had the Sept. 11 attacks not happened, Doke said.

As part of the new capacity reduction, American said it will accelerate the retirement of nine Boeing 767-300 aircraft to November 2002.

The new moves, along with those already implemented, will save more than $1.1 billion annually, the airline said.

"STRUCTURAL CHANGE"

American has "undertaken both long-term structural change and measures responsive to current industry conditions," Carty said in a statement.

Carty said the initiatives are focused on cutting costs and improving profitability. AMR lost $1.8 billion in 2001 and another $1.1 billion in the first half of this year.

The initiatives announced on Tuesday will increase efficiencies at American's largest hub at Dallas/Fort Worth by utilizing people, gates and aircraft more productively, simplifying its fleet and adjusting capacity for the fall and winter, the company said in its release.

Cutting aircraft types will reduce the fleet to seven different aircraft models from 14. The first F100 will leave the fleet in the third quarter of 2003 and the last plane will retire by the third quarter of 2005.

The planned job cuts will realign American's workforce with the planned fall capacity reductions, fleet simplification and hub restructurings.

AMR stock closed at $8.36 on Monday after hitting its lowest level since the attacks, $8.15, earlier in the day. The stock has lost 62 percent in 2003 and is far from its peak of $85.59 which it hit in July 1998.

American's news follows the interim approval on Monday of emergency financing for US Airways, allowing the carrier to access $75 million immediately to keep flying through September while it attempts to reorganize under bankruptcy protection.

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