flyguppy
Well-known member
- Joined
- Sep 25, 2003
- Posts
- 130
Haven't found this on Reuters or anywhere else. Any other sources?
>>>>>>>>>>>>>>>>>>>>
Airline expected to file today
Bankruptcy decision in hands of board; talks with unions collapse
STAN CHOE AND TED REED, Charlotte Onserver Staff Writers
US Airways is expected to file for bankruptcy protection today after a last-ditch effort to reach new cost-saving labor agreements collapsed on Saturday, according to sources familiar with the airline's plans.
Even though Charlotte's dominant carrier made new proposals to its pilots and flight attendants on Friday, no talks occurred Saturday.
The airline has warned for months of the possibility of bankruptcy -- under which it could still fly -- and it has been consulting the past few days with hired bankruptcy advisers.
US Airways spokesman David Castelveter said Saturday evening no decision on bankruptcy had been made. The board would make the final call, but he would not say when the directors would meet.
Under a bankruptcy court's protection, US Airways could get time and new cost-cutting tools to continue its quest for metamorphosis into a low-cost carrier similar to America West or JetBlue.
One of the main incentives for going to bankruptcy court would be for US Airways management to get access to a new hammer to require concessions from labor unions.
Negotiations to extract $800 million in annual labor savings have been the most difficult piece for US Airways' transformation plan. As talks escalated in recent weeks, the unions have strongly resisted the airline's proposals, saying management has been inflexible in negotiations. The drama has featured infighting within the pilots' union. Two groups have argued over whether to let the rank-and-file vote on a company proposal.
The airline negotiated proposed cuts with flight attendants until late Friday. The union found the proposal "absurd," said Mike Flores, president of the Charlotte local of the Association of Flight Attendants.
The proposal cut benefits, eliminated a pension plan and reduced pay. "I think they know that when they go into bankruptcy, they will get some or all of that," Flores said.
Pilot leaders, meeting Friday in Pittsburgh, sent their negotiators back to the airline with a counteroffer that the airline had rejected last month. Talks were a nonstarter.
Negotiations with US Airways' other major unions are even further behind than pilots and flight attendants.
Key to Charlotte economy
Charlotte is US Airways' busiest hub; the airline carries about 90 percent of the city's passengers and employs 5,700 locally. The airline's service has also been one of the city's economic development engines, drawing companies looking for an abundance of nonstop flights. The near monopoly also means some of the highest fares in the nation, which has drawn the ire of passengers.A bankruptcy filing would not mean an immediate shutdown for the airline; US Airways emerged from a bankruptcy filing last year after cutting expenses by $1.9 billion annually.
But a filing would leave US Airways vulnerable to new dangers, analysts say. Foremost is the possibility that it would find no investors to infuse the cash needed to exit a bankruptcy. That could lead to a shutdown of the airline.
In its last bankruptcy, the Retirement Systems of Alabama was the white knight, investing $240 million. But the pension fund's leader, David Bronner, has said he would not do so again. If he doesn't invest, analysts say, outsiders would be even less likely to sink in their own money.
In a bankruptcy, the airline also would need to fend off suitors looking to pick up US Airways' most valuable pieces, such as its coveted gates at crowded Northeast airports, at bargain prices.
US Airways also would need to convince a bankruptcy judge and its creditors that its transformation plan would help the airline survive. By getting labor savings, management hopes to show them that the airline is on course.
Established hub-and-spoke airlines such as US Airways have been hammered by high fuel costs and travelers' penchant for low fares, with several in or close to bankruptcy and all losing money.
To survive, US Airways wants to emulate low-cost carriers. Earlier this year, it announced plans to lower fares to attract more customers; fly more from its key Northeastern cities of Boston, Washington and New York; increase flying to the Caribbean from Charlotte; and eliminate its Pittsburgh hub.
The airline also would likely seek to downsize in bankruptcy, possibly eliminating either its fleet of Airbus jets or, more likely, its older Boeing jets, said sources familiar with the airline's planning. Any downsizing would likely result in more furloughs or layoffs.
"They are not going to grow in bankruptcy," said Jack Stephan, spokesman for the US Airways pilots union.
To keep paying its bills while under court protection, the airline could ask the judge to allow it to spend some of the money it borrowed with the backing of the federal government.
The Arlington, Va.-based carrier, the nation's seventh largest, has bank loans of about $720 million guaranteed by the Air Transportation Stabilization Board, which was created as part of a post 9-11 federal bailout of airlines. Loan guarantee requirements state that US Airways must have $700 million in cash at the end of each month. US Airways had $975 million in cash on June 30.
The airline has been unable to arrange debtor-in-possession financing -- which companies like to have going into Chapter 11 -- because its collateral is already tied up in the federal loan guarantees and its regional jet financing.
A negotiating tool
Bankruptcy would offer the airline a powerful enough tool that some labor leaders, including the financial consultant for the pilots' union, worry it could result in more draconian cuts than the airline has been requesting.
Under bankruptcy law, the airline can ask a judge to force new, temporary contracts and allow management to impose its own wages and conditions on workers.
The law also allows the airline to ask a judge to permanently dissolve the contracts of unreasonably recalcitrant unions. If approved, the airline and union would have to negotiate entirely new contracts.
To get a judge's approval for either request, the airline must pass several tests. Chief among them is that the airline's proposal be reasonable. What constitutes reasonable is up to the judge.
That uncertainty over the definition of reasonable pushes many unions and management groups to strike a deal before having to file for bankruptcy, said William Sullivan, head of the bankruptcy division at law firm Womble Carlyle.
It would have helped US Airways tremendously to get even one labor union to agree to concessions, Sullivan said. With that, a bankruptcy judge likely would have seen the airline's offers to unions as reasonable, if one group found it so.
"Conversely, if management goes in and has a problem with every major union and is filing motions to reject every collective bargaining agreement, what judge is going to think that management has met the standards (of the code)?"
>>>>>>>>>>>>>>>>>>>>
Airline expected to file today
Bankruptcy decision in hands of board; talks with unions collapse
STAN CHOE AND TED REED, Charlotte Onserver Staff Writers
US Airways is expected to file for bankruptcy protection today after a last-ditch effort to reach new cost-saving labor agreements collapsed on Saturday, according to sources familiar with the airline's plans.
Even though Charlotte's dominant carrier made new proposals to its pilots and flight attendants on Friday, no talks occurred Saturday.
The airline has warned for months of the possibility of bankruptcy -- under which it could still fly -- and it has been consulting the past few days with hired bankruptcy advisers.
US Airways spokesman David Castelveter said Saturday evening no decision on bankruptcy had been made. The board would make the final call, but he would not say when the directors would meet.
Under a bankruptcy court's protection, US Airways could get time and new cost-cutting tools to continue its quest for metamorphosis into a low-cost carrier similar to America West or JetBlue.
One of the main incentives for going to bankruptcy court would be for US Airways management to get access to a new hammer to require concessions from labor unions.
Negotiations to extract $800 million in annual labor savings have been the most difficult piece for US Airways' transformation plan. As talks escalated in recent weeks, the unions have strongly resisted the airline's proposals, saying management has been inflexible in negotiations. The drama has featured infighting within the pilots' union. Two groups have argued over whether to let the rank-and-file vote on a company proposal.
The airline negotiated proposed cuts with flight attendants until late Friday. The union found the proposal "absurd," said Mike Flores, president of the Charlotte local of the Association of Flight Attendants.
The proposal cut benefits, eliminated a pension plan and reduced pay. "I think they know that when they go into bankruptcy, they will get some or all of that," Flores said.
Pilot leaders, meeting Friday in Pittsburgh, sent their negotiators back to the airline with a counteroffer that the airline had rejected last month. Talks were a nonstarter.
Negotiations with US Airways' other major unions are even further behind than pilots and flight attendants.
Key to Charlotte economy
Charlotte is US Airways' busiest hub; the airline carries about 90 percent of the city's passengers and employs 5,700 locally. The airline's service has also been one of the city's economic development engines, drawing companies looking for an abundance of nonstop flights. The near monopoly also means some of the highest fares in the nation, which has drawn the ire of passengers.A bankruptcy filing would not mean an immediate shutdown for the airline; US Airways emerged from a bankruptcy filing last year after cutting expenses by $1.9 billion annually.
But a filing would leave US Airways vulnerable to new dangers, analysts say. Foremost is the possibility that it would find no investors to infuse the cash needed to exit a bankruptcy. That could lead to a shutdown of the airline.
In its last bankruptcy, the Retirement Systems of Alabama was the white knight, investing $240 million. But the pension fund's leader, David Bronner, has said he would not do so again. If he doesn't invest, analysts say, outsiders would be even less likely to sink in their own money.
In a bankruptcy, the airline also would need to fend off suitors looking to pick up US Airways' most valuable pieces, such as its coveted gates at crowded Northeast airports, at bargain prices.
US Airways also would need to convince a bankruptcy judge and its creditors that its transformation plan would help the airline survive. By getting labor savings, management hopes to show them that the airline is on course.
Established hub-and-spoke airlines such as US Airways have been hammered by high fuel costs and travelers' penchant for low fares, with several in or close to bankruptcy and all losing money.
To survive, US Airways wants to emulate low-cost carriers. Earlier this year, it announced plans to lower fares to attract more customers; fly more from its key Northeastern cities of Boston, Washington and New York; increase flying to the Caribbean from Charlotte; and eliminate its Pittsburgh hub.
The airline also would likely seek to downsize in bankruptcy, possibly eliminating either its fleet of Airbus jets or, more likely, its older Boeing jets, said sources familiar with the airline's planning. Any downsizing would likely result in more furloughs or layoffs.
"They are not going to grow in bankruptcy," said Jack Stephan, spokesman for the US Airways pilots union.
To keep paying its bills while under court protection, the airline could ask the judge to allow it to spend some of the money it borrowed with the backing of the federal government.
The Arlington, Va.-based carrier, the nation's seventh largest, has bank loans of about $720 million guaranteed by the Air Transportation Stabilization Board, which was created as part of a post 9-11 federal bailout of airlines. Loan guarantee requirements state that US Airways must have $700 million in cash at the end of each month. US Airways had $975 million in cash on June 30.
The airline has been unable to arrange debtor-in-possession financing -- which companies like to have going into Chapter 11 -- because its collateral is already tied up in the federal loan guarantees and its regional jet financing.
A negotiating tool
Bankruptcy would offer the airline a powerful enough tool that some labor leaders, including the financial consultant for the pilots' union, worry it could result in more draconian cuts than the airline has been requesting.
Under bankruptcy law, the airline can ask a judge to force new, temporary contracts and allow management to impose its own wages and conditions on workers.
The law also allows the airline to ask a judge to permanently dissolve the contracts of unreasonably recalcitrant unions. If approved, the airline and union would have to negotiate entirely new contracts.
To get a judge's approval for either request, the airline must pass several tests. Chief among them is that the airline's proposal be reasonable. What constitutes reasonable is up to the judge.
That uncertainty over the definition of reasonable pushes many unions and management groups to strike a deal before having to file for bankruptcy, said William Sullivan, head of the bankruptcy division at law firm Womble Carlyle.
It would have helped US Airways tremendously to get even one labor union to agree to concessions, Sullivan said. With that, a bankruptcy judge likely would have seen the airline's offers to unions as reasonable, if one group found it so.
"Conversely, if management goes in and has a problem with every major union and is filing motions to reject every collective bargaining agreement, what judge is going to think that management has met the standards (of the code)?"
