Latest at USAirways

[dlredline]

It basically means that the gauntlet has been thrown down. Compensation and work rules (particularly retirement benefits) have eroded to the point that a majority of represented pilots would rather risk almost certain bankruptcy than have their contract gutted further. Expect a lot of noise from the U MEC in the next week or so.

And that noise will be deafening. Rumors already abound about legal action against the PHL/PIT reps. However, it appears they were correctly following bylaws that required them to only send a "tentative agreement" (TA) out to the pilots, not simply a "proposal" from the company. In addition, the MEC voted unanimously 2 weeks ago against a proposal (better than the one last week) stating it was "unacceptable". And this current proposal went against a charging resolution to the negotiating committee (again, unanimously approved by the same MEC) directing that, amoung other things, any agreement protect the existing Defined Contribution plan and not include addtional furloughs (the last "proposal" would have cut the DC plan by up to 50% and allowed 775 addtional furloughs).

It means that even the MEC members are at each others throats and at odds over what they should do...

Understatement of the year! Irregardless of politics, this MEC should, at the very least, remain consistant with their message. This past Spring, they unanimously voted "no confidence" in then CEO Dave Siegal, then 2 days later reentered negotiations with him. They told the pilots they wouldn't send a TA out that included a further eroding of their already devestated retirement plan or additional furloughs, then tried to do exactly that with an end-around manuever to pass a proposal, effectively neutering the Negotiating Committee. The conflicting message from this MEC only deepens the mistrust of the whole process.

The 1113, 1113(E) letter protection that the DCA/LGA reps say would have prevented the company from coming back after the pilots during bankruptcy would only provide 60 days of protection, and would be void after Nov. 12, 2004. At this point, it appears a majority of pilots would rather take their chances through the judicial system. It can then be argued that the pilot group has already contributed their entire DB plan and almost 40% in wages/benefits to assist in the restructuring of USAirways. At some point, Bronner and Lakefield have to figure out how to run an airline, and a BK judge will require them to produce their "Transformation Plan", something they haven't done (or don't have) to date.

Interesting, too, that the company pushed the pilots hard to approve a $295 million/year concession package by this week, a group who already gave up their DB retirement plan to help "save" USAirways, in time for a Sept. 15th required pension obligation of about $115 million to fund the Defined Benefit plan of the employee groups who still have a retirement plan. And keep in mind, the additional sacrifice asked of these 3500 pilots, $295 million/year, in simplistic terms, equates to an additional $84,285/year per pilot (in wages and benefits). That still blows my mind!

I think think the future course of USAirways may be determined within the next week.

Red

 

[halfmoon]

S&P CCC- for UAIR

bad news

 

[dlredline]

S&P CCC- for UAIR

bad news

That no doubt now makes them in default of the loan provisions with GECAS for financing of the E170 purchases. Uh,oh.

 

[On Your Six]

Hurry up and get those E170 type ratings/experience so that you can jump to JetBlue!!!!!! Not a good situation.

 

[xdashdriver]

S&P CCC- for UAIR

bad news

Old news...they made that change on 8/20/04.

 

[halfmoon]

actually they were CCC+ before 8/20/04 then got downgraded to CCC. 2 days ago got further downgraded to CCC-.

hope for the best but plan for the worst!

 

[Dizel8]

Duanes pay,annual compensation and total payments made!
Duane Woerth...$423,705...$536,255...Air Line Pilots

 

[100LL... Again!]

http://www.nytimes.com/2004/09/10/business/10airways.html?ei=5006&en=2c9ee10fb94f099c&ex=1095393600&partner=ALTAVISTA1&pagewanted=print&position=

From the NYT.

 

[dlredline]

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

 

[Erlanger]

Just was watching CNN at 7am Eastern, and they also report that the word they got was that U.S. Air was probably going to file for Chapter 11 this coming Sunday the 12th.

 

[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.