bravoecho
Sep 12, 04, 5:25 pm
ALEXANDRIA, Va., Sept 12 (Reuters) - US Airways Group Inc.
<UAIR.O>, squeezed severely by low-cost rivals and soaring fuel
prices and failing in its drive for new labor concessions,
filed for bankruptcy protection on Sunday for the second time
in two years.
The No. 7 U.S. airline sought protection from its creditors
in the U.S. Bankruptcy Court for the Eastern District of
Virginia, only 18 months after emerging from Chapter 11 as a
leaner carrier with new financing and a fresh focus on regional
jet operations.
Expectations are slim that the airline will be able to
borrow more money or find new equity partners during this
bankruptcy, but some industry and corporate restructuring
experts interviewed by Reuters in recent days gave US Airways a
fighting chance of being able to cut its way back to health.
The Arlington, Virginia-based airline, which employs 28,000
people, has said that liquidation is also a possibility.
The company said in its court filing that flights would
operate normally and customers should expect no change to their
frequent flier and other programs.
Bruce Lakefield, US Airways' president and chief executive,
said in a statement that the failure to obtain concessions
heightened the need for the company to conserve its cash and
proceed with its plans to overhaul the business.
"We have made the difficult but necessary decision to
complete this process with the help of the court," Lakefield
said. US Airways' first bankruptcy court hearing will be on
Monday.
LABOR BLOCKS MORE CUTS
The bankruptcy filing comes one day after the third
anniversary of the Sept. 11, 2001 hijack attacks, which
accelerated a cyclical softening of business into the
industry's worst-ever financial crisis.
US Airways was the first big U.S. carrier to enter into
bankruptcy during the downturn, filing in August 2002. It was
followed by No. 2 United Airlines <UALAQ.OB>, which continues
to operate under protection from its creditors.
American Airlines <AMR.N>, the world's largest airline,
restructured out of court and barely escaped Chapter 11
protection, while Delta Air Lines <DAL.N>, the U.S. third
largest carrier, is currently struggling to avert a filing.
US Airways has said it needs to cut costs by $1.5 billion
in order to make its business to operate more like its discount
rivals. The centerpiece of the cost-cutting blueprint, which it
had hoped to get voluntarily, was $800 million in concessions
from labor unions.
But the airline failed to get another penny from pilots,
flight attendants, mechanics and other unions, who yielded
nearly $2 billion to help the company out of its first
bankruptcy.
The Retirement Systems of Alabama pension fund, which
agreed to finance US Airways' prior bankruptcy restructuring,
holds the biggest stake in the airline at about 36 percent.
The Air Line Pilots Association holds a 19 percent stake.
The U.S. government, which granted a $900 million loan
guarantee as a crucial part of the airline's first
restructuring, holds 10 percent. General Electric Co. <GE.N>, a
supplier of regional jet financing, owns 5 percent.
CASH CRUNCH
US Airways warned all summer that its cost-cutting plan had
to be in place this month to avert bankruptcy. With a $110
million pension payment due Wednesday and no outside financing
or labor givebacks in sight, the company's need to conserve
cash became acute in recent days.
Much of US Airways' collateral is tied up in its federal
loan guarantee, which underpinned most of $1 billion in private
financing the carrier obtained to exit Chapter 11 in 2003.
According to terms of the guarantee administered by the Air
Transportation Stabilization Board, US Airways must have $700
million in cash on hand at the end of the month to avoid
violating terms of the loan agreement.
The company's bankruptcy petition listed assets of
approximately $8.8 billion, including $2.5 billion of goodwill,
and liabilities of approximately $8.7 billion. It has
approximately $1.45 billion in cash, cash equivalents and
short-term investments.
Some industry experts do not believe the government will
call in the loan -- a move that would likely prompt
liquidation. But the Bush administration already agreed once
last spring to restructure the deal's terms.
One major problem has been fuel costs, which the company
said are expected to be approximately $300 million higher than
previously thought. Its mainline passenger revenues are
expected to be $450 million lower than forecast.
US Airways named aircraft makers Embraer <EMBR4.SA> and
Bombardier <BBDb.TO> as its two largest unsecured creditors.
The airline placed an order last year for 170 regional aircraft
worth an estimated $4.3 billion, split between both companies,
as part of a restructuring plan.
It said it owes $1.47 billion to Brazil's Embraer for
future aircraft commitments and $948 million to Canada's
Bombardier.
Monday 13 September 2004 08:54:04 AEST
<UAIR.O>, squeezed severely by low-cost rivals and soaring fuel
prices and failing in its drive for new labor concessions,
filed for bankruptcy protection on Sunday for the second time
in two years.
The No. 7 U.S. airline sought protection from its creditors
in the U.S. Bankruptcy Court for the Eastern District of
Virginia, only 18 months after emerging from Chapter 11 as a
leaner carrier with new financing and a fresh focus on regional
jet operations.
Expectations are slim that the airline will be able to
borrow more money or find new equity partners during this
bankruptcy, but some industry and corporate restructuring
experts interviewed by Reuters in recent days gave US Airways a
fighting chance of being able to cut its way back to health.
The Arlington, Virginia-based airline, which employs 28,000
people, has said that liquidation is also a possibility.
The company said in its court filing that flights would
operate normally and customers should expect no change to their
frequent flier and other programs.
Bruce Lakefield, US Airways' president and chief executive,
said in a statement that the failure to obtain concessions
heightened the need for the company to conserve its cash and
proceed with its plans to overhaul the business.
"We have made the difficult but necessary decision to
complete this process with the help of the court," Lakefield
said. US Airways' first bankruptcy court hearing will be on
Monday.
LABOR BLOCKS MORE CUTS
The bankruptcy filing comes one day after the third
anniversary of the Sept. 11, 2001 hijack attacks, which
accelerated a cyclical softening of business into the
industry's worst-ever financial crisis.
US Airways was the first big U.S. carrier to enter into
bankruptcy during the downturn, filing in August 2002. It was
followed by No. 2 United Airlines <UALAQ.OB>, which continues
to operate under protection from its creditors.
American Airlines <AMR.N>, the world's largest airline,
restructured out of court and barely escaped Chapter 11
protection, while Delta Air Lines <DAL.N>, the U.S. third
largest carrier, is currently struggling to avert a filing.
US Airways has said it needs to cut costs by $1.5 billion
in order to make its business to operate more like its discount
rivals. The centerpiece of the cost-cutting blueprint, which it
had hoped to get voluntarily, was $800 million in concessions
from labor unions.
But the airline failed to get another penny from pilots,
flight attendants, mechanics and other unions, who yielded
nearly $2 billion to help the company out of its first
bankruptcy.
The Retirement Systems of Alabama pension fund, which
agreed to finance US Airways' prior bankruptcy restructuring,
holds the biggest stake in the airline at about 36 percent.
The Air Line Pilots Association holds a 19 percent stake.
The U.S. government, which granted a $900 million loan
guarantee as a crucial part of the airline's first
restructuring, holds 10 percent. General Electric Co. <GE.N>, a
supplier of regional jet financing, owns 5 percent.
CASH CRUNCH
US Airways warned all summer that its cost-cutting plan had
to be in place this month to avert bankruptcy. With a $110
million pension payment due Wednesday and no outside financing
or labor givebacks in sight, the company's need to conserve
cash became acute in recent days.
Much of US Airways' collateral is tied up in its federal
loan guarantee, which underpinned most of $1 billion in private
financing the carrier obtained to exit Chapter 11 in 2003.
According to terms of the guarantee administered by the Air
Transportation Stabilization Board, US Airways must have $700
million in cash on hand at the end of the month to avoid
violating terms of the loan agreement.
The company's bankruptcy petition listed assets of
approximately $8.8 billion, including $2.5 billion of goodwill,
and liabilities of approximately $8.7 billion. It has
approximately $1.45 billion in cash, cash equivalents and
short-term investments.
Some industry experts do not believe the government will
call in the loan -- a move that would likely prompt
liquidation. But the Bush administration already agreed once
last spring to restructure the deal's terms.
One major problem has been fuel costs, which the company
said are expected to be approximately $300 million higher than
previously thought. Its mainline passenger revenues are
expected to be $450 million lower than forecast.
US Airways named aircraft makers Embraer <EMBR4.SA> and
Bombardier <BBDb.TO> as its two largest unsecured creditors.
The airline placed an order last year for 170 regional aircraft
worth an estimated $4.3 billion, split between both companies,
as part of a restructuring plan.
It said it owes $1.47 billion to Brazil's Embraer for
future aircraft commitments and $948 million to Canada's
Bombardier.
Monday 13 September 2004 08:54:04 AEST