"US Airways warns it may close"

Sunday, September 26, 2004

US Airways warns it may close
Airline tells bankruptcy court it could fold by February without cuts
By Dan Fitzpatrick
The Pittsburgh (PA) Post-Gazette


US Airways, seeking $38 million per month in temporary labor concessions,
faces the "high probability" of liquidation by mid-February 2005 if the cuts
are not approved by U.S. Bankruptcy Court.

The nation's seventh-largest airline made that disclosure in documents filed
late Friday with Alexandria, Va., bankruptcy judge Stephen Mitchell, asking
him to rule on the temporary request by Oct. 14.

Without the emergency concessions, which include an across-the-board 23
percent pay cut and a host of changes to employee retirement plans, US
Airways told the court that it has enough cash to last only another four and
a half months. If the carrier is not able to cut costs by another $200
million by early 2005, US Airways predicted "massive layoffs" and "potential
liquidation," resulting in the loss of 7,600 jobs in the Pittsburgh area and
cessation of all flights.

Not only is the airline worried about revenue dipping during the lean fall
and winter travel months, but it also is concerned about being able to make
$260 million in aircraft debt and lease payments due in January and
February.

US Airways entered bankruptcy on Sept. 12 with approval to use $750 million
from a government-backed loan for daily expenses. But it has been burning
through an estimated $1 million a day, and it could lose its bankruptcy
financing and go out of business if cash dips below $550 million by Oct. 15.

US Airways disclosed Friday night that it is negotiating with the federal
Air Transportation Stabilization Board, backer of the loan, to extend the
use of cash beyond mid-October, and that such an extension is more likely if
US Airways can demonstrate an ability to emerge from its Chapter 11
bankruptcy proceedings and avoid liquidation.

US Airways acknowledged the pain being felt by its 28,000 workers, who
sacrificed $1 billion during the airline's first bankruptcy two years ago.
But it also argued that with the interim, 23 percent pay cuts in place,
employees will still receive an average annual salary of $45,822, slightly
more than the averages at low-cost carriers JetBlue Airways and America West
Airlines.

But the pain could increase in the coming months. The Arlington, Va.-based
airline is still seeking a much larger package of permanent concessions from
its labor groups, which balked collectively at an $800 million
pre-bankruptcy request.

US Airways disclosed Friday that it is now seeking more than $950 million
from its labor groups. If unions do not agree to the permanent cuts, just as
they resisted the temporary cuts requested last week, the airline can ask
the court to enforce the changes.

US Airways also promised the court that it would make some non-labor cuts in
the coming months, including $5 million a month in temporary concessions and
a reduction in management and administrative positions over the next 30
days.

"US Airways must transform or it will fail," it said.


 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dcfp/dcboard.php


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