"US Airways bankruptcy reorganization plan awaits counteroffers"

Friday, July 1, 2005 

US Airways plan awaits counteroffers
By Thomas Olson
The Pittsburgh (PA) Tribune-Review


US Airways Group formally submitted a bankruptcy reorganization plan
Thursday and other interested parties have until 5 p.m. today to trump it
with a better offer for the airline's assets. 

The carrier submitted a plan to federal court which, as expected, centers on
its proposed merger with America West Airlines. The deal, struck on May 19,
would create the nation's largest low-fare airline, with 3,600 daily flights
to 229 cities in North America, Europe and Latin America. 

Existing stock in US Airways would be canceled when the merger becomes
effective. Major creditors would be given stock in the combined airline.
Those holding bankruptcy claims of $50,000 or less would receive cash for 10
cents on the dollar, a common payout in commercial bankruptcies. 

The proposal contained little detail of US Airways' plans for continued
service at Pittsburgh International Airport. The airline operates 235 daily
flights here, down from about 500 four year ago, when the airport was a US
Airways hub with hundreds of connecting flights 

The successor -- to be called US Airways -- would keep US Airways' current
hubs in Philadelphia and Charlotte, as well as America West's hub in
Phoenix. 

US Airways asked U.S. Bankruptcy Judge Stephen Mitchell to schedule a
hearing on its reorganization plan on Aug. 9. 

The two airlines anticipate the deal will close by the end of September or
early October. America West Holdings shareholders also must approve the
deal, but the owner of 55 percent of its shares already has promised to
support the merger. 

The federal bankruptcy judge in eastern Virginia has scheduled a hearing in
the court in Alexandria on July 7 to consider any competing bids that
surface by the deadline at close of business today. 

Analysts doubt another bidder will surface. No such bids were received by
the court by late yesterday. 

"I don't think there's enough value in either airline to attract a competing
bid," said Michael Boyd, an airline consultant who heads The Boyd Group, in
Evergreen, Colo. 

He said US Airways and America West would have to do more than "put two
airlines together" and consolidate US Airways' Arlington, Va., headquarters
into America West's in Phoenix, as planned. 

"There's not a lot of strong brand loyalty for either carrier. They need to
do something to fill in that gap," Boyd said. 

Yesterday, US Airways did not try to amend its controversial $51 million
management retention plan. Mitchell on June 16 let US Airways spend $37
million of its request on 1,898 salaried workers to persuade them to stay
and complete the merger. He denied another $14 million in "golden
parachutes," but invited the company to resubmit the request as part of its
reorganization plan. 

The two airlines would maintain separate operating licenses for about two
years. Then they intend to integrate work forces, facilities and other
operating assets. 

The deal is anchored by pledges of $500 million in equity capital from five
companies. In addition, US Airways hopes to raise another $150 million from
a rights offering to purchase stock in the new carrier. 

If the deal is not closed by Oct. 31, either airline has the right to
terminate the merger agreement but would have to pay the other $15 million.
They could also agree to extend the closing date to as late as Dec. 31,
according to documents.


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