ARLINGTON, Va. -- A federal judge gave US Airways approval Monday to continue operations temporarily while it tries to reorganize its finances under bankruptcy protection.
To dig itself out, the airline is also seeking an Aug. 30 deadline to negotiate wage and benefits concessions from unions representing more than half its work force.
The company is seeking $290 million in givebacks. If representatives of its machinists and communications workers unions do not reach an agreement by then, the airline will ask the court to invalidate those labor agreements.
Pilots, flight attendants and transportation workers have already agreed to concessions that will yield $550 million in annual savings.
US Airways, the nation's seventh-largest carrier, became the first major airline to declare bankruptcy since last year's terrorist hijackings. The filing came 11 months to the day after the industry was rocked by the attacks.
US Airways said flights will continue normally, and the company expressed optimism that it will emerge from bankruptcy early next year.
In its Chapter 11 bankruptcy filing Sunday, the company listed assets of $7.81 billion and liabilities of $7.83 billion and said its cash flow was relatively stable. But Chris Chiames, US Airways' vice president for corporate affairs, said that would not last with the peak summer travel season about to end.
"You do not want to enter bankruptcy in a poor cash position," Chiames said at a brief news conference.
Chapter 11 allows a company to continue operating and hold its creditors at bay while it puts its finances in order. A hearing in U.S. Bankruptcy Court in Alexandria was scheduled for Monday to discuss the filing.
US Airways shares did not open for trading by midday but Wall Street sent other airline shares sharply lower. UAL Corp., the parent of United, dropped 15.8 percent, down 82 cents to $4.38, by early afternoon on the New York Stock Exchange while AMR, the parent of American, were down 95 cents to $8.64.
Delta fell 51 cents to $14.09, and Northwest declined 65 cents to $8.06. Continental fell 81 cents to $8.31, and Southwest declined 37 cents to $12.89.
US Airways had been struggling well before Sept. 11. In July of 2001, the airline suffered a blow when federal regulators balked at a proposed purchase by United Airlines that would have given US Airways investors $60 a share.
After the attacks, no airline was harmed financially more than US Airways. The Arlington-based carrier is the largest airline at Reagan Washington National Airport, which remained closed for weeks after the attacks.
In addition, Chiames said, the airline suffered disproportionately when many travelers opted to drive or take the train instead of making short-haul flights up and down the East Coast - US Airways' strength.
"Clearly US Airways was impacted more than any other carrier after Sept. 11," Chiames said.
Last month, the federal government agreed to guarantee $900 million of a $1 billion loan package the airline had hoped would allow them to stave off bankruptcy. But US Airways executives had always warned that bankruptcy was a possibility even if they obtained the federal loan guarantee.
Chiames said the bankruptcy will not affect the company's long-term restructuring plan, which calls for cutting costs by $1.2 billion a year.
The company also said it expects to generate an additional $200 million a year through a recently announced "code-share" agreement with United that allows the two airlines to sell tickets on each other's flights. The partnership combines US Airways' strength on the East Coast with United's strength on east-west routes.
United has lost more than $850 million this year, and the Chicago-based carrier retained a bankruptcy lawyer shortly after the Sept. 11 attacks. United Airlines is also seeking $1.8 billion in government guarantees.
The commercial aviation industry has lost a combined $1.4 billion this year.
US Airways has had the industry's highest labor costs, but they have been cut back significantly through a series of deals with its labor unions. US Airways has been trying to get $950 million in annual savings from its employees.
Recently completed deals with the flight attendants and pilots contain provisions for a bankruptcy filing. Roy Freundlich, a spokesman for the pilots' union, said the airline promised that it would not seek further concessions from them in bankruptcy court.
"The company has agreed that we have already given a tremendous amount," Freundlich said, noting that the new deal includes $465 million in annual concessions. "We are disappointed the company has found itself in a situation where it has to file for bankruptcy."
US Airways which owns 340 jets, last year carried 56 million passengers to 200 destinations in the United States, Canada, Mexico, the Caribbean and Europe.
On the Net:
© 2018. All Rights Reserved. | Contact Us