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Deal lets US Airways stay in the air
The financing accord keeps the airline flying through June, but what it needs is an investor.
Associated Press
Published January 14, 2005
ALEXANDRIA, Va. - US Airways will have access to the cash it needs to keep flying through June as a result of a bankruptcy judge's approval Thursday of a deal between the nation's seventh-biggest carrier and the federal Air Transportation Stabilization Board.
An interim financing deal between the two parties had been set to expire Saturday, but U.S. Bankruptcy Judge Stephen Mitchell gave his blessing to an extension through June 30.
By then, the airline hopes to find a new investor to provide hundreds of millions of dollars needed to emerge from bankruptcy protection.
The extension comes after US Airways, a unit of US Airways Group Inc., extracted more than $800-million in annual concessions from its labor unions. Most unions reluctantly agreed to accept pay and benefit cuts, but Mitchell last week imposed an estimated $269-million in concessions on the International Association of Machinists when that union failed to reach a deal.
US Airways said it needed those savings to persuade the ATSB to extend the financing agreement.
The airline had previously warned it would likely have been forced to liquidate if it had not obtained an extension.
Airline executives said the six-month extension from the ATSB is a sign that they have confidence in the airline's efforts to transform itself into a low-cost carrier.
"While we still have much work to do, I think our most difficult period is behind us and my sense is that our employees are united in working with us to complete the restructuring," CEO Bruce Lakefield said.
"Our customers should book us with confidence, knowing that we have sufficient cash to operate as well as to implement the many changes that are already under way."
Under various deals with its creditors, US Airways is required to emerge from bankruptcy by June 30. Those deadlines could be extended, though.
The biggest obstacle facing the airline is finding an investor willing to risk $250-million or so in a weak industry, particularly in an airline that has gone bankrupt twice since 2002 and projects it will not turn a substantial profit until at least 2008.
[Last modified January 14, 2005, 00:30:19]
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