More money for USAir

[General Lee]

Press ReleaseSource: US Airways Group, Inc.



US Airways Obtains Second $125 Million Equity Commitment for Plan of Reorganization
Monday March 14, 8:00 pm ET - Agreement with Republic Airways Holdings, Inc., and Wexford Capital LLCAlso Includes Options for $110 Million in Financing for Additional Liquidity

ARLINGTON, Va., March 14 /PRNewswire-FirstCall/ -- US Airways Group, Inc. announced today that it has reached an agreement with Republic Airways Holding, Inc., (Republic) (Nasdaq: RJET - News) and its majority shareholder, Wexford Capital LLC, on an equity and financing package that includes a $125 million investment upon US Airways' emergence from Chapter 11, in addition to options for obtaining $110 million of other liquidity enhancements that would be available prior to emergence to assist the airline in completing its restructuring.

Terms of the agreement are being filed with the U.S. Bankruptcy Court for the Eastern District of Virginia in Alexandria. US Airways will seek the court's approval at the next monthly omnibus hearing scheduled for its case, which is set for Thursday, March 31, 2005, at 9:30 a.m., Eastern time.

Wexford is based in Greenwich, Conn., and holds a majority interest in Republic, which operates Chautauqua Airlines and Republic Airlines. The proposed $125 million equity investment is contingent on US Airways securing a total of $350 million in new cash investment (including the $125 million from Republic and the $125 million previously secured from Eastshore Aviation, LLC) to finance the US Airways Plan of Reorganization and other conditions, including Republic being satisfied with US Airways' business plan. The agreement also provides for comparable treatment -- such as representation on the US Airways board of directors -- as that provided to Eastshore. The agreement also includes a commitment by US Airways to amend and restate its existing jet service agreement with Chautauqua, to assume that agreement and to enter into a new jet service agreement with Republic for regional jet feed using the Embraer (EMB) 170 and 190 aircraft under the US Airways Express brand.

"We are very pleased to have secured the support of a second, well- regarded investor and airline partner to help us build and finance our plan of reorganization," said Bruce R. Lakefield, US Airways president and chief executive officer. "The Republic management team has a proven track record and we look forward to an expanded relationship. We are well on our way to securing at least $350 million in new capital and continue to finalize our business plan that will leverage our competitive cost structure and strong market positions in the eastern U.S. and the Caribbean."

"We appreciate all of the hard work US Airways and its employees have accomplished thus far. We recognize there is more work to be completed but we are pleased we are able to assist US Airways in reaching the final phase of its reorganization process," said Bryan Bedford, chairman, president, and CEO of Republic Airways Holdings.

In addition to the equity investment, the agreement includes options for additional financing for US Airways subject to the consent and approval of the Air Transportation Stabilization Board (ATSB). Those provisions include:

* Prior to the effective date of US Airways' plan of reorganization, but no later than Dec. 31, 2005, US Airways may exercise its option to obtain approximately $110 million through the sale of certain assets, including ten EMB-170 aircraft currently owned by US Airways and the three EMB-170 aircraft currently committed for delivery to US Airways; other EMB 170 related assets, such a flight simulator and other items; and 113 commuter slots at Ronald Reagan Washington National Airport; and 24 commuter slots at New York's LaGuardia airport. In addition, US Airways will assign to Republic the leases for an additional 15 EMB-170 aircraft. Republic would also work with US Airways to locate an Embraer heavy maintenance facility at an agreed upon location within the US Airways network. Republic would enter into a regional jet service agreement that would continue the operation of the aircraft as US Airways Express. In addition, Republic would simultaneously lease back the slots to US Airways. At any time on or after the second anniversary of the slots sale/leaseback agreement, US Airways will have the right to repurchase the LaGuardia and Washington slots at a predetermined price. * After the effective date of US Airways' Chapter 11 plan of reorganization, in the event that US Airways does not exercise the slots sale/leaseback option, Republic has an option to purchase/assume debt and leases for all 28 EMB-170 aircraft and to fly them as US Airways Express. The net effect, should this portion of the agreement be implemented, would be the sale of US Airways' MidAtlantic aircraft to Republic. If either option is exercised, Republic will comply with the applicable provisions of all existing agreements with US Airways regarding MidAtlantic Airways. Customers will not be impacted, as the EMB-170 aircraft that currently comprise the MidAtlantic fleet will continue to fly under the US Airways Express brand, but will be operated by Republic.



"This transaction provides us with new equity, reduced debt, enhanced liquidity, and a strengthened relationship with a key regional airline partner, as well as efficiencies in running the business that will allow us to focus more of our resources on the mainline operations," said Lakefield. "Overall, we will have both flexibility and a stronger regional jet network that will improve both our bottom line and service to our customers." In light of this new equity commitment and substantial progress being made in US Airways' restructuring, General Electric's GECAS subsidiary and other affiliates have agreed to US Airways' request to extend the date by which the company will file its Plan of Reorganization until April 15, 2005.


Bye Bye--General Lee

 

[lowecur]

This is a band-aid, and I'm sure there are many caveats. The $125M is pure exit financing, and the $110M will probably only be used to keep UAIR above the minimum cash balance requirement of the ATSB($325M) when they approach that in a few months. In essence it buys UAIR time to show any potential large investor that they have a viable plan. This may eliminate JO for anything other than an separate reorganization offer on 3/31/05(which will probably be extended to 4/15/05, since GECAS has extended until that date), as it looks like Air Whiskey and Republic have sewed up the contracts for Regional Jet service if UAIR emerges. It is still my contention that a large investor needs to show up to make the airline viable well into 2006.

In essence if I'm reading this correctly, MidAtlantic would be sold lock stock and barrell to Republic along with slots at LGA and DCA if UAIR taps the $110M. Pretty crafty on Republics part. It would be interesting to see what they would do with those assets if UAIR has to fold.

 

[storminpilot]

The agreement also includes a commitment by US Airways to amend and restate its existing jet service agreement with Chautauqua, to assume that agreement and to enter into a new jet service agreement with Republic for regional jet feed using the Embraer (EMB) 170 and 190 aircraft under the US Airways Express brand.

Looks like the 70 seat ceiling (scope clause) is about to be blown through by Republic.

In addition to the equity investment, the agreement includes options for additional financing for US Airways subject to the consent and approval of the Air Transportation Stabilization Board (ATSB). Those provisions include:

* Prior to the effective date of US Airways' plan of reorganization, but no later than Dec. 31, 2005, US Airways may exercise its option to obtain approximately $110 million through the sale of certain assets, including ten EMB-170 aircraft currently owned by US Airways and the three EMB-170 aircraft currently committed for delivery to US Airways; other EMB 170 related assets, such a flight simulator and other items; and 113 commuter slots at Ronald Reagan Washington National Airport; and 24 commuter slots at New York's LaGuardia airport. In addition, US Airways will assign to Republic the leases for an additional 15 EMB-170 aircraft. Republic would also work with US Airways to locate an Embraer heavy maintenance facility at an agreed upon location within the US Airways network. Republic would enter into a regional jet service agreement that would continue the operation of the aircraft as US Airways Express. In addition, Republic would simultaneously lease back the slots to US Airways. At any time on or after the second anniversary of the slots sale/leaseback agreement, US Airways will have the right to repurchase the LaGuardia and Washington slots at a predetermined price. * After the effective date of US Airways' Chapter 11 plan of reorganization, in the event that US Airways does not exercise the slots sale/leaseback option, Republic has an option to purchase/assume debt and leases for all 28 EMB-170 aircraft and to fly them as US Airways Express. The net effect, should this portion of the agreement be implemented, would be the sale of US Airways' MidAtlantic aircraft to Republic. If either option is exercised, Republic will comply with the applicable provisions of all existing agreements with US Airways regarding MidAtlantic Airways. Customers will not be impacted, as the EMB-170 aircraft that currently comprise the MidAtlantic fleet will continue to fly under the US Airways Express brand, but will be operated by Republic.

Republic=the new USAirways

Looks like an orderly liquidation of USAirways to AirWis and Republic. You can only imagine that Johnny O is screaming right now in Phoenix wondering where he now fits.

Just amazing how up to day, down tomorrow. There is no security in this business right now.

 

[LearLove]

MDA's airplanes go to REP, where do MDA's pilots fall? Wonderful.

 

[lowecur]

It looks like the drop dead date is 12/31/05 to use the $110M. UAIR has the option of repurchasing the slots at anytime, but not the a/c. This should go over big with DL and UAL. I guess if UAIR folds by 12/31/05, then Republic will have purchased all the 170's, slots at DCA & LGA for $235M. Not bad.

Does MidAtlantic have a separate operating certificate?

 

[Flying Freddie]

I hear Mid Atlantic is the same certificate as USAir.

 

[Dash8]

MDA is on U's cert.
and the funny part, is that this agreement states

Republic will comply with the applicable provisions of all existing agreements with US Airways regarding MidAtlantic Airways

well as far as i know (lear, please correct me on this if i'm wrong), theres no 'official' agreements, contract wise....
this seems like a big/bad loophole for the mda guys, and here i was hopin to get over there and get the heII outta this suckhole called piedmont....oh well....

wonder if the casino is hiring.....

 

[lowecur]

MDA's airplanes go to REP, where do MDA's pilots fall? Wonderful.

The MDA deal doesn't go through until UAIR exercizes the $110M. Doesn't UAIR and Republic already have a JFJ agreement. So at a minimum 50%, and my guess is all the pilot's from MDA will go. Hell, you're already trained.

 

[storminpilot]

The MDA deal doesn't go through until UAIR exercizes the $110M.

How much do you want to bet that money will be tapped?

On a side note: I wonder if Johnny O. has stopped flinging his office furniture around his office yet?

 

[dlredline]

Does MidAtlantic have a separate operating certificate?

No, it doesn't. They are operating under the same 121 certificate as USAirways. MDA is basically the "Embraer Division" of U.

Red

 

[h25b]

the MDA deal is as good as done... anyone familiar with Wexford can attest to this.

 

[Indypilot]

On a side note: I wonder if Johnny O. has stopped flinging his office furniture around his office yet?

Uh, where do you think the last 100M is coming from?

Smart play by US Air, They now have started a trend of regionals begging to pay millions to their major partner to keep them afloat. I guess the regional business isn't so great afterall.

(Whoo hoo, we made a $125M overs a few years, oh wait we have to give it back or else the major will go out of business, but it's ok because we will eventually get that money back by flying more RJ's.)

And the plot thickens

 

[Captzaahlie]

Something else kind of interesting............. I've noticed some white block overs where the registration numbers are on the tail of several PSA aircraft in CLT recently, with new numbers on them that end in MD. This is the same suffix used on the mid atlantic aircraft! Wonder if everything is being neatly packaged up together? Anyone know anything about this?

 

[lowecur]

DL bankruptcy filing shortly

I think this will push up the date for Chapt 11, unless they pull a rabbit out of their hat and get lots of cash for DCI wholly owned carriers in the next 30 days. DL cannot afford to fiddle while Rome burns the next 6 months. They will have no access to DIP financing, and will have to rely on their existing cash to survive while in bankruptcy.

They are in a tough position. I think the State of Georgia tax payers will bail them out, if all else fails. If DL goes bust, ATL is in deep doo doo. It's either keep them afloat or suffer a tremendous loss of tax revenue.

 

[LearLove]

Fom the U employee website "the hub"......

From The Hub ......................................................
What will be the impact on MidAtlantic employees?
A: Should the sale of aircraft be completed, Republic
has agreed to honor all existing agreements US Airways
has with regard to MidAtlantic. Consequently, Republic
expects to have jobs for many of the current
MidAtlantic employees.

 

[LearLove]

Here is the whole thing....

To All Employees ... Please Post ... Special Bulletin

Questions and Answers Regarding
the US Airways/Republic Agreement

The Q&A that follows provides employees with additional
information regarding the agreement US Airways has
reached with Republic Airways.

Q: US Airways had previously said that it needed $250
million in new equity financing as part of its plan of
reorganization. Has that now changed?
A: With the combination of record high fuel prices and
the rapid expansion of low fares, the entire airline
industry is feeling the impact of higher costs and
lower revenue. Consequently, we are seeking a higher
level of equity investment than originally contemplated
to ensure the reorganized company is adequately
capitalized.

Q: So does US Airways have other investors lined up?
A: The Republic/Wexford investment agreement is
contingent on our securing at least $100 million more
in equity financing, and we continue to talk to a
number of interested parties. We have every reason to
believe that we will raise at least $350 million of
emergence equity financing, along with added liquidity
from certain financing transactions to supplement our
existing cash that remains from the ATSB loan.

Q: What does this announcement mean with regard to
emerging from Chapter 11 by June 30?
A: The March 15 date to file a plan of reorganization
was established in our agreement with General Electric
and has now been extended to April 15. We are working
closely with GE, the ATSB, the unsecured creditors
committee, and other interested parties, to keep them
fully briefed on our progress. Ultimately, we believe
that all stakeholders have an interest in our
implementing a successful plan and we are committed
to doing that in a timely basis. If it makes sense to
all parties to revise our timeline, we will consider
that. But we have demonstrated our ability to make and
implement difficult decisions and meet various
milestones, and that will not change.

Q: If Chautauqua and Republic as well Air Wisconsin
are all going to get more flying from US Airways
Express, does that mean that other US Airways Express
carriers will see their flying reduced?
A: While there is a limit to the level of 50-seat
regional jet flying that can be supported in the US
Airways network, we continue to work with our partners
on options for 70- and 90-seat aircraft. We cannot
predict the final outcome of our negotiations with our
regional partners.

Q: Why does US Airways want to sell the MidAtlantic
aircraft?
A: One of the goals of our restructuring is to lower
costs and simplify our business. This portion of the
transaction if consummated will provide additional
liquidity, yet also keep these aircraft in the US
Airways network. While we are very pleased with the
EMB-170's operational performance and the passenger
reaction, we have a relatively small fleet of the
aircraft, and at least for the near term, we have no
prospects for growth because of our financial
situation. Republic has a strong operation and balance
sheet and access to financing to fuel its growth plans
for the regional jet business. Consequently, Republic
is in a much better position to help US Airways gain
the efficiencies of being a large EMB 170/190 operator.
By structuring this agreement so that both existing and
future aircraft remain in the US Airways network, we
believe the arrangement substantially benefits both US
Airways and Republic.

Q: US Airways management had previously ruled out
asset sales so why this decision regarding slots?
A: Just as high fuel costs and lower revenue have
impacted our original plan for raising equity, these
factors are also forcing us to look at options to
maintain the necessary liquidity to operate the
airline. The slots portion of this agreement is a
financing transaction, and US Airways will retain use
and control over the slots, as well as have a right to
repurchase the slots at the original price anytime
after the second anniversary of the transaction.
Furthermore, like the aircraft sale, it is not required
it is an option that US Airways and Republic have
structured to give both parties flexibility.

Q: What is the difference between air carrier and
commuter slots?
A: The slots that are part of the financing transaction
are commuter slots, with restrictions on the type/size
of aircraft that can be operated. At Reagan National,
aircraft with 76 seats or less can operate with
commuter slots. At LaGuardia, the general rule is that
jet aircraft with 56 seats or less can use commuter
slots, although there are some exceptions. Overall,
US Airways will still retain all of its air carrier and
commuter slots at Reagan National and LaGuardia,
although Republic might operate the US Airways Express
aircraft that utilize the slots.

Q: What will be the impact on MidAtlantic employees?
A: Should the sale of aircraft be completed, Republic
has agreed to honor all existing agreements US Airways
has with regard to MidAtlantic. Consequently, Republic
expects to have jobs for many of the current
MidAtlantic employees.

Q: What is the impact on passengers?
A: None. Should the aircraft and slot sale option of
this transaction be enacted, all the Embraer regional
jet aircraft will continue to fly as US Airways
Express, besides the fact that Republic may also fly
even more 70- and 90-seat regional jets in the US
Airways network. In addition, the slots will be used
solely for US Airways and US Airways Express service.

End of Special Bulletin for Monday, March 14, 2005
Corporate Affairs/Telex:HDQCYUS/COMATCA-H850

 

[General Lee]

I think this will push up the date for Chapt 11, unless they pull a rabbit out of their hat and get lots of cash for DCI wholly owned carriers in the next 30 days. DL cannot afford to fiddle while Rome burns the next 6 months. They will have no access to DIP financing, and will have to rely on their existing cash to survive while in bankruptcy.

They are in a tough position. I think the State of Georgia tax payers will bail them out, if all else fails. If DL goes bust, ATL is in deep doo doo. It's either keep them afloat or suffer a tremendous loss of tax revenue.

Lowecur (Mrs. Cleo),

What? Thanks dad. Our main deal was the cost of fuel, and surcharges are helping with that. The last two stuck. That has been the wild card here, and thank gawd NW has done something about it. Also, we will have a great Spring and Summer, and then the extra cash (from a DCI sell) will help fill in the gaps for the Fall and early Winter. Look Lowecur, you were wrong about this thread already-----You just said "Wall St. was wrong" and you seem to be wrong quite often too. Didn't you say DL would be Chap 11 last year too? You did. There is a plan and selling the DCI carriers was probably always in it. We are on our way to cutting $5 billion a year, but that takes time to fully implement. There is room for some more non-union pay cuts too--since they gave a full 10% last time. That would be a last resort, and we aren't there yet. Keep throwing darts at your dart board Mrs. Cleo......


Bye Bye--General Lee


Shares of Delta stock (DAL: news, chart, profile) closed down 3 cents at $4.30 after touching on $3.80 earlier.
"This is not new news because high oil prices put the whole industry at risk, but we believe Delta shares are oversold," Calyon Securities analyst Ray Neidl told clients. "We believe a springtime rally in airline stocks is possible (depending on the price of oil), in which we would expect DAL to participate."

Susan Donofrio, analyst at Fulcrum Global Partners, also downplayed reports. She cut her price target from $16 to $13 a share, but maintained a "buy" rating, claiming that "none of the news headlines are new pieces of information."

She said that she feels "comfortable with the estimated future level of liquidity at Delta and would take the current weakness in the airline's stock price as a buying opportunity."




And here is another article:


Delta, the No. 3 U.S. airline, raised its fares by $5-$10 late last week, matching increases by Northwest Airlines (NWAC.O: Quote, Profile, Research) , which initiated a previous round of ticket price hikes last month.


"The fact they actually got (the fare increase) to stick was pretty much a good sign," said Suzanne Betts, an analyst at Argus Research. "They can't go on forever with fares the way they have been, especially the legacy carriers."

"It's impeding their ability to offset the cost of fuel," she said, adding that a decline in oil prices, whose surge hammered the entire sector last week, was also helping the shares.

Low cost carrier Southwest Airlines Inc. (LUV.N: Quote, Profile, Research) , which has managed to stay profitable as surging fuel prices have forced losses at most rivals in part because it is well hedged against fuel costs, followed the traditional airline hikes with a smaller increase of $3. "We feel Southwest's participation in the fare increases provides a strong signal to investors that the industry is capable of taking the steps needed to put the industry back on a reasonable financial path," said Prudential analyst Bob McAdoo in a research note.

 

[storminpilot]

Q: If Chautauqua and Republic as well Air Wisconsin
are all going to get more flying from US Airways
Express, does that mean that other US Airways Express
carriers will see their flying reduced?

A: While there is a limit to the level of 50-seat
regional jet flying that can be supported in the US
Airways network, we continue to work with our partners
on options for 70- and 90-seat aircraft. We cannot
predict the final outcome of our negotiations with our
regional partners.

Translation=YES

 

[lowecur]

Lowecur (Mrs. Cleo), That's Miss Cleo to you.

What? Thanks dad. Now I'm Dad...gender confusion? Our main deal was the cost of fuel, and surcharges are helping with that. OK. The last two stuck. That has been the wild card here, and thank gawd NW has done something about it. Peanuts. Also, we will have a great Spring and Summer, What exactly is a great Spring and Summer? and then the extra cash (from a DCI sell) will help fill in the gaps for the Fall and early Winter. Sorry, I just don't see much being generated from a sale if it takes place. Look Lowecur, you were wrong about this thread already-----You just sa id "Wall St. was wrong" and they were. and you seem to be wrong quite often too. Impossible Didn't you say DL would be Chap 11 last year too? Yes. You did. There is a plan and selling the DCI carriers was probably always in it. Now if a buyer would only agree. We are on our way to cutting $5 billion a year, but that takes time to fully implement. There is room for some more non-union pay cuts too--since they gave a full 10% last time. That would be a last resort, and we aren't there yet. Keep throwing darts at your dart board Mrs. Cleo......OK.


Bye Bye--General Lee

Mgt for DL has already said they have just about mtg'd everything but ACA/CMR with the AMEX deal. Now if you believe DL will "Make Money" in the Spring and Summer, then that would be a basis for your projection. However, I have my doubts they will make money in those 6 months, and they cannot afford to take a chance. The ACA/CMR deal will have to be struck in the next 30 days, or the UAIR deal will have to unravel to keep DL out of 11. Oil below $45 bbl would also be needed. What was the cash on 12/31/04....$1.8B? What do you think that number will be on 3/31/05?

ps: I hope your right.

 

[P38JLightning]

desperation

This just illustrates how desperate Delta truly is. There hasn't been a better example during this whole downturn of burning the furniture to heat the house than Delta's "need" to spin off Comair and/or ASA.

Wether they sell off assets or whole things, or IPO either/or, their value is very low. Regionals are the ultimate commodity now. Everyone has jets and lots of them. Everyone is underbidding everyone for growth. Everyone is flying 90 hours a month with self funded retirements. Heck, everyone is flying for everyone in the first place (Lorenzo's wet dream).

But, the majors still have to pay for the service. While there has been lots of talk about "risk sharing" over the past few years, fact is it just hasn't materialized. Regionals still run on guaranteed profit margins. A monkey could run a regional airline and make it profitable as long as they had a contract. No one will buy Comair without a nice, cushy, long term contract with guaranteed growth.

Even then the "experts" (yeah, I know) all guesstimate Comair's value for example to be around 400 to 500M. Delta will then immediately have to start paying around 200M a year (or more with growth) for the lift. This equates to little more than taking out a loan with the mafia. If they spin off Comair this year it gains Delta maybe 300M for the year. Total gain from the sale will be 100M by the end of next year, and the "value" of said sale would be -100M or more the following year. Double the bleeding if its Comair and ASA.

Hardly the day saving, time buying cash cow people are making it out to be. If Delta does sell us, it shows how truly desperate they are, and more importantly, how prescious little time they have left for the long awaited rapid revenue recovery and/or sudden drop in fuel prices that let's face it, ain't gonna happen.