Us airways may declare bankruptcy

[dunn]

CHICAGO (Reuters) - US Airways Corp. (NYSE:U - News) said on Friday it will seek federal loan guarantees following huge losses since the Sept. 11 attacks and will consider a bankruptcy filing if it cannot reach agreement with employees, suppliers and lenders to cut costs.
ADVERTISEMENT



US Airways, the No. 6 U.S. carrier based in Arlington, Virginia, had said during its first-quarter earnings conference call it would seek the guarantees, but has not previously talked about the possibility of filing for bankruptcy protection from creditors.

At the end of the first quarter, its cash on hand had dwindled to about $500 million.

"The preferred path is a consensual agreement with our employees and our stake holders to reach an agreement and to file (a loan) application," airline spokesman Dave Castelveter said.

Shares of US Airways plunged 11 percent to $4.40 Friday as the stocks of most major U.S. carriers also traded lower. US Airways would become the second major U.S. carrier to apply for loan guarantees under the $15 billion federal airline bailout approved following the attacks last year. America West Airlines was the first.

In a quarterly filing with the U.S. Securities and Exchange Commission on Friday, US Airways said it is working with employees, suppliers and financial providers to lower costs and significantly increase the use of regional jets.

"However, because there is no assurance that this will occur, the company also recognizes that in order to successfully restructure the company, alternative restructuring scenarios in the context of a judicial reorganization also must be considered," US Airways said.

LOSSES ONGOING

US Airways has reported more than $2 billion in net losses in the last three quarters hurt by the closure and slow resumption of flights at Reagan National Airport and fierce competition along the East Coast.

Under a new chief executive, David Siegel, the carrier has secured a deal with pilots to operate more regional jets.

Former CEO Rakesh Gangwal had announced plans to shrink US Airways last August, before the attacks threw the industry into chaos that sparked about $9 billion in 2001 losses. That plan was greeted with skepticism by veteran airline analysts and Gangwal has since left the company.

America West Airlines (NYSE:AWA - News), the No. 8 U.S. carrier, received loan guarantees covering $380 million in January after teetering on the brink of filing for bankruptcy protection. A handful of smaller carriers have also sought loan guarantees.

In return for agreeing to repay the private sector loans in case of default, America West gave away warrants for a one-third equity stake in the airline.

That would SUCK!!! The only thing I recommend is to get rid of Steven Wolfe!! images/icons/wink.gif

[alitalia_747]

aaaaaawwwwwwww I hope we don't lose another major airline images/icons/frown.gif

[B747-437B]

Some quick observations after skimming through the filings today :

a) The filing stressed that bankruptcy re-organization was an option IF US was unable to secure the ATSB loan guarantee.

b) Labor contracts are not dischargable through bankruptcy unless a judge rules that they are unreasonable and may hamper a restructuring. I don't foresee that being the case here.

c) Steve Wolf has pretty much marginalized himself by appointing Seigel. While Seigel is an exceptional operations manager (judging by what he did at CAL and NWAC before), Wolf has been around the block many times over and his experience, however negative it may be perceived by organized labor, is useful to count on for US provided it is Seigel's ship to run operationally.

d) US needs a restructuring BADLY and whether that will come voluntarily or as a condition of the ATSB loan or in Chapter 11 is really a matter of time. If labor and management can reach agreement, it will be sooner rather than later, but it needs to happen if US is to survive.

[quickcallqueen]

I don't think that anyone of us wants to see US AIRWAYS go through a Chapter 11 bankruptcy.
I really do hope that the ATSB approves US AIRWAYS application for a loan guarantee. After all, DCA was closed longer than any other airport in the nation and it really hurt us because Shuttle is an integral part of our business. Therefore, that is one more reason that the ATSB should approve our application for a loan guarantee.
As all of you know, there has been discussion for the need of concessions. When the ATSB give loans, not only does labor and management have to make concessions. Additionally, concessions also have to be made with creditors , vendors , and local governments as well. Also, the federal government would be entitled to a percentage of stock warrents.
America West had to agree to all these terms and conditions to be approved for the loan, and the federal government got 1/3 of their stock warrents as well.

[FrqtTrav]

This was an email sent to me by US Airways keeping their frequent flyers up to date.

**************************************************

I wanted to take this opportunity to report to you on US Airways and our plans for making sure the airline continues to provide you the best service possible.

Looking back to last summer, our airline faced a number of difficult, but foreseeable financial challenges. But these difficult challenges quickly grew with the tragic - and unforeseeable - terrorist attacks of September 11. As you know, these attacks have changed our industry dramatically.

One effect has been to alter significantly the mindset of the traveling public. Every traveler knows the attacks have had a substantial impact. And while all airlines are contending with the business fallout from September 11, economically, US Airways has been the hardest hit. The post-September 11 reluctance to fly has been most pronounced on the East Coast, where most of our flights are concentrated. US Airways was most heavily impacted by the prolonged closure of Reagan Washington National Airport. Additionally, we're the only airline that has to compete not only with our airline competitors, but also with cars and trains on many of our short-haul routes. The end result is that the events of September 11 and the ensuing deep-rooted changes to our industry are challenging the short and long-term financial health of US Airways.

We are moving quickly towards both a short-term and long-term solution. Today, we filed a document with the Securities and Exchange Commission describing our various restructuring options, including our intention to apply for financing assistance from the Air Transportation Stabilization Board (ATSB). Clearly, our preferred approach, which we are vigorously pursuing, is to reach an accord with our stakeholders, including our employee groups and vendors, on a restructuring plan and to obtain the federal assistance. As the filing with the SEC indicates, however, if US Airways is unable to do so, alternative restructuring scenarios in the context of a judicial reorganization also must be considered. Simply stated, this means reorganization under the protection of the U.S. bankruptcy laws.

Under existing federal law we will submit a loan application to the ATSB by June 28. If we were going to meet this short timetable everyone in the US Airways family, including management, labor, and our vendors, has to sign off on a new business plan in the coming weeks.

We expect to meet all the criteria to be eligible for the ATSB loan guarantees and to meet the application deadline. As part of this process, we will take steps to restructure this company, but we are committed to preserving our existing routes, and serving our communities.

As this process moves forward, I will continue to keep you abreast of our plans. As a frequent traveler, you are familiar with the challenges facing the airline industry. We at US Airways are taking immediate action to ensure that we can build on our legacy of providing outstanding service and getting you where you want and need to go.

Sincerely,

B. Ben Baldanza
Sr. Vice President, Marketing and Planning