US AIRWAYS Judge backs ATSB deal
Executives said the extension from the ATSB is a sign there's confidence in the airline.
ALEXANDRIA, Va. (AP) -- 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 it will have found 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, which has major operations in Philadelphia and Pittsburgh, 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.
Sign of confidence
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 now 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.
After Thursday's hearing, Chris Chiames, the airline's senior vice president for corporate affairs, said the new labor deals, along with the extended financing agreement, create the atmosphere in which investors will be willing to take a look at the airline.
The ATSB, created after the Sept. 11 attacks to help the industry recover from a severe downturn, gave the airline a $900 million federally guaranteed loan when it emerged from its first trip into bankruptcy in March 2003.
According to court documents, US Airways still owes the ATSB about $646 million of the original $900 million loan as of year's end. The airline has been using the cash to fund basic operations while in bankruptcy.
Two other airlines that received federal loan guarantees -- ATA Airlines and Aloha Airlines -- have also subsequently filed for bankruptcy.
Wednesday, the airline announced that its senior vice president of marketing, B. Ben Baldanza, is leaving the company to join low-fare carrier Spirit Airlines. Baldanza had been responsible for route planning, scheduling and pricing as well as marketing.