Latest at USAirways

[Heavy Set]

September 10, 2004

US Airways Seen as Likely to Declare Bankruptcy

[size=-1]By MICHELINE MAYNARD[/size]


http://graphics8.nytimes.com/images/dropcap/b.gifarring a last-minute change of heart by its recalcitrant unions, US Airways appears all but certain to seek bankruptcy protection on Sunday, people briefed on the situation said yesterday.

In that event, the airline is considering a bankruptcy filing without debtor-in-possession financing, a standard feature of most Chapter 11 cases. Instead, it would rely on cash on hand to finance its operations and would explore whether it needed additional financing in the future, these people said.. . .

...US Airways ended the second quarter with $925 million in cash, about $200 million more than it is required to have on hand under the terms of its federally backed loans and more than it had when it filed for bankruptcy protection last time.
But that floor will quickly loom if US Airways makes a $110 million contribution to its employee pension funds, due Wednesday, a move that seems unlikely because that would leave it with little surplus cash.

It cannot seek outside financing because its collateral is pledged to secure its remaining $700 million in federally backed loans. In fact, US Airways pledged assets worth $1.4 billion, or two times the value of the guarantees. The stabilization board also received a 10 percent stake in the airline. So in the event it defaults on its loan package, the board would essentially have the right to claim US Airways' cash, as well as aircraft, gates, routes and other assets.


Folks, this is a risky proposition at best. Remember, without DIP financing during a judicial restructuring, and no way to tap into the credit markets, a company in BK must use it's cash to maintain it's daily operations. That means they pay salaries, leases, fuel, et al with cash. You don't need a calculator to figure how long (not very) they can continue operations until they go below the $700 million floor required by the ATSB. Will a BK judge grant emergency relief for USAirways from a government backed loan guarantee? Uncharted territory at this stage. If so, they live to fight another day. If not, and the ATSB stakes claim to U assets, you and I and all taxpayers would then own the remaining assets of USAirways.

Red

I like the quote "recalcitrant unions." How about incompetent and greedy management?

 

[OhDannyBoy]

The same question, over and over

What happens to the wholly-owned subsidiaries? Are they owned by US Airways, or a parent company that owns USAirways? Are they sold off as complete companies? or are they 'parted out' piece by piece? I'm sure this has been hashed and re-hashed but as we draw closer to the dead line I'd like a fresh take.
thanks.

 

[blzr]

The W/O carriers, Piedmont, PSA, and MDA are all part of HMS TITANIC. If the big ship goes down, so will the others. I doubt any company would want to take on Airways employees (unfortunately) but would gladly take the equiptment (likely). The CRJ's at PSA and the E170's at MDA would be some of the more sought after hardware. I'm not sure about what would become of the mainline equiptment.

 

[Boeingman]

Why don't you share with us then Yaks what you were doing in '83 that gives you in insight to prove him wrong?

Mugs:

He didn't answer either of us. Doesn't surprise me.