US Airways Dividend Miles (Pre-FlightFund Merger) - Embraer halting delivery of remaining 63 E170s

From Bloomberg News 9/15:
"Embraer Halts Delivery of 63 Aircraft to US Airways (Update2)
September 15, 2004 16:55 EDT -- Empresa Brasileira de Aeronautica SA suspended delivery on 63 aircraft worth about $1.4 billion to US Airways Group, Inc. after the U.S. carrier filed for bankruptcy protection, forcing it to renegotiate contracts to buy new aircraft. "

They've only received 22 thus far. The E170 was a key part of the transformation plan.

And thus, the slope gets steeper and more slippery.....

Can you blame them? They are #1 on the debt list at a shade over $1B owed! I wonder how much of that includes these planes or would these be in addtion too... I wonder how much US needed to put "down" on these planes?

I can only pray that they foresaw this obvious move. They'll need to somehow find a way to renegotiate/make side payments to Embraer without pissing off all the other creditors.

Embraer cant take a huge hit on this.

Embraer probably has other customers for these aircraft, so by suspending deliveries to US, they can move-up their deliveries to their other, "healthier", customers. I doubt Embraer would allow the planes to sit on a tarmac in Brazil if they had no other takers for them.

Should US be in a position to resume paying for deliveries, Embraer can always assign them other aircraft / production slots that have freed-up and resume deliveries to them.

Bombardier announced almost immediately after the filing that they had suspended deliveries for the rest of the year. Some are going to GECAS and some to other carriers. Wonder if GECAS will then turn around and lease them to US. IIRC there were only 12 aircraft scheduled for delivery during the balance of the year.

EDIT: Tuesday, they announced an indefinate deferal of the rest of the aircraft. GECAS has committed to 16 of the 45 remaining aircraft and they will be pushing up DL's deliveries (unless they file for C11 too...)
http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20040914/RBOMB14/TPBusiness/?query=us+airways

A supplier, such as EMB or Bombardie, is guaranteed of receiving payment by the BK court for contracts that are consumated while their customer is under Federal BK Protection. I would expect that suppliers such as these will invalidate the existing contracts (which are not protected).......and negotiate new contracts for which the BK judge will guarantee payment.

Will the quantity / price / terms be the same? Probably not. But US will get more RJ's if they can sell the BK court/judge on the necessity of them for a viable reorganization plan.

forcing it to renegotiate contracts to buy new aircraft. "




Will they really just will stop receiving them? Or is this just a sign that Embraer wants to up the interest rate % by a lot of the payments that US is making?

Will they really just will stop receiving them? Or is this just a sign that Embraer wants to up the interest rate % by a lot of the payments that US is making?


My perception is that once the wage and benefit reductions are approved by Judge Mitchell, the aircraft pipeline will be re-opened.