"US Airways to lose 2 gates at Philadelphia airport"

Tuesday, September 28, 2004

Airline to lose 2 gates at airport
Bankrupt US Airways has not fully used the facilities. Its new rival,
Southwest, may soon start using them.
By Tom Belden and Thomas Ginsberg
The Philadelphia (PA) Inquirer


Philadelphia airport officials, who are closely monitoring US Airways Group
Inc.'s financial condition, will transfer two gates from the beleaguered
carrier to another airline, probably its rival Southwest Airlines Co.

Losing two gates would shrink US Airways' presence at the airport only
modestly - it would still use about 75 of the 120 available gates - but it
illustrates the airline's precarious position as it tries to restructure
itself under U.S. Bankruptcy Court protection.

The airline, which filed for Chapter 11 protection Sept. 12, warned in a
court motion filed late Friday that it could be out of business by
mid-February if it is not allowed to slash the wages of its unionized
employees by 23 percent and trim other labor costs next month.

At the airport, officials said yesterday that they had told US Airways that
they wanted to reclaim two gates in Terminal D that the airline had not been
fully using and had been on month-to-month leases.

Airport chief of staff Jeff Shull would not say what was planned for the two
gates, but if Southwest wants them, "we'll accommodate their needs," he
said.

Veronica Moreno, Southwest Airlines' manager of ramp and operations in
Philadelphia, confirmed that the airline had been trying for some time to
secure two gates in Terminal D.

Southwest plans to increase its service from Philadelphia on Oct. 31 from 28
to 41 daily flights, and now has only four gates in Terminal E.

Asked about the logistical difficulties of dispatching flights out of two
terminals, Moreno said: "We'll make it happen."

US Airways missed its regular August gate-rental payment to the airport and
other fees but has promised U.S. Bankruptcy Court Judge Stephen Mitchell
that it would try to make the September payment.

US Airways owes the city-owned airport about $4 million. City and airport
officials have a seat on the official creditors' committee in the Bankruptcy
Court.

Airport officials said discussion about transferring the two gates began
many months ago, but they confirmed that they finally made the decision in
recent days. They did not disclose when the gates would be taken away.

US Airways has long been the airport's dominant carrier, with two-thirds of
the passenger traffic. "US Airways has not operated a full schedule out of
those gates," Shull said. "We knew it would not have a negative effect on
them."

Asked about the loss of the gates, US Airways spokesman David Castelveter
said: "We continue to work with the airport to accommodate our planned
growth."

In its filing with the U.S. Bankruptcy Court for the Eastern District of
Virginia, US Airways said that over the next four months it needed to
accumulate about $200 million more in cash than it had now to avert a crisis
in early 2005. Yesterday, Mitchell scheduled a hearing for Oct. 7 to
consider the motion to cut most employees' pay on an interim basis while the
company continues to try to negotiate with its unions.

The company said that it had sufficient cash to last through the end of the
year, but that its resources could be depleted early in 2005 by required
payments on its aircraft fleet.

US Airways said in its motion that it needed the emergency relief unless its
unions agreed to new contracts that cut the wages of 25,000 unionized
employees by 23 percent. The company warned the unions last week that it
would file the motion unless they voluntarily agreed to the cuts in wages
and other compensation and make money-saving changes in work rules.

The airline's motions "reflects a fairly draconian scenario," said airline
analyst William T. Warlick of Fitch Ratings in Chicago. "It reflects the
rather tenuous liquidity of this airline."

US Airways negotiated for much of this summer with unions representing
pilots, flight attendants, mechanics and ticket agents, asking for $800
million a year in labor-cost savings as part of a plan to cut its annual
operating costs by $1.5 billion.

US Airways and other airlines have seen their revenue fall below
expectations this year because of the rapid spread of low-fare airlines,
including Southwest, at the same time jet-fuel prices are at record highs.


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