"$125 million deal may save US Airways"

Tuesday, March 15, 2005

US Air: Deal Reached on Financing Package
By John Crawley 


WASHINGTON (Reuters) - Bankrupt US Airways Group Inc. on Monday secured $125
million from a regional partner to help it restructure and said it would
seek a short extension of its right to file a reorganization plan without
interference from creditors. 

The seventh-largest U.S. domestic airline, based in Arlington, Va., said it
had finalized a conditional equity and financing package with Republic
Airways Holding Inc. and its top investor, Wexford Capital LLC, that
includes for the first time the possibility of selling major assets to raise
cash. 

"This transaction provides us with new equity, reduced debt, enhanced
liquidity and a strengthened relationship with a key regional airline
partner," said Bruce Lakefield, US Airways' chief executive. 

The deal, which would include new and extensive regional jet flying
guarantees to Republic's subsidiaries -- Republic Airlines and Chautauqua
Airlines -- is contingent on US Airways finding another equity partner to
invest at least $100 million. 

The agreement with Wexford also includes an option for US Airways to raise
$110 million by selling 13 Embraer 170 regional jets as well as 113 coveted
takeoff and landing slots at Washington's Ronald Reagan National Airport and
24 at New York's LaGuardia Airport. US Airways could repurchase those slots
at a later date. 

In addition, US Airways would assign leases for another 15 Embraer 170 jets
to Republic. 

APPROVAL NEEDED 

Those transactions would need approval from the federal Air Transportation
Stabilization Board, which controls US Airways' assets as collateral for a
loan guarantee that is providing cash for the company's day-to-day
operations. 

US Airways has not sold any assets since entering bankruptcy in September
and only recently announced it was shrinking the size of its mainline fleet
by nearly 5 percent as part of its restructuring. 

The airline has secured more than $1 billion in wage and pension cuts from
employees to keep flying this winter and operate more like low-cost rivals.
Budget airlines, such as Southwest Airlines and AirTran Airways, have put
enormous pressure on US Airways' ability to survive with fuel prices
continuing to soar and revenues still soft because of low fares. 

US Airways said the deal with Wexford would be presented to the US
Bankruptcy Court in Alexandria, Va., on March 31, the current deadline for
the carrier to file a restructuring plan.

However, the airline said that it would seek a two-week extension, to April
15, for maintaining its exclusivity for filing a restructuring plan without
the court having to consider any alternative plans from third parties. 

US Airways had been scheduled to present a restructuring proposal to its
largest creditor, General Electric Co., on Tuesday, but that, too, will be
pushed back. 

The deal with Republic and Wexford is the second in recent weeks involving
one of US Airways' feeder carriers. Air Wisconsin's financing arm, Eastshore
Aviation, plans to loan US Airways $125 million to help it restructure. The
financing can be converted into equity if the carrier steps out of court
protection. 

US Airways has been looking for at least $250 million in investments to help
it emerge from bankruptcy. 

Under the deal with Wexford, US Airways will enter into a new agreement with
Republic for feeder service using regional jets.


 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


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