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US Airways Files for Bankruptcy Protection
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767-300ER
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US Airways Files Ch. 11
US Airways files for bankruptcy protection for second time in two years
US Airways Group Inc., the nation's seventh largest airline, filed for bankruptcy protection Sunday for the second time in two years. The company's president vowed to continue restructuring the airline into a low-cost carrier during the bankruptcy process.
"We have come too far and accomplished too much to simply stop the process and not succeed," said Bruce Lakefield, US Airways' president and chief executive. "A restructured US Airways with low costs and low fares will be a dynamic competitor."
US Airways said customers would notice no operational changes as a result of the bankruptcy and that it will seek permission to continue its frequent flyer program.
The Chapter 11 filing in U.S. Bankruptcy Court in Alexandria came after US Airways was unable to obtain $800 million in annual cost cuts from its workers' unions that the airline said it needed to stay afloat.
US Airways' busiest hub is in Charlotte, N.C. The airline carries about 90 percent of the city's passengers and employs 5,700 locally.
North Carolina Gov. Mike Easley said in a statement he has received assurances from US Airways "that there will be no changes in customer service and that their presence in Charlotte will continue."
The company's return to bankruptcy comes as several of its larger rivals also confront the need to repair weak finances. UAL Corp.'s United Airlines has been operating under bankruptcy for nearly two years, AMR Corp.'s American Airlines was on the brink of a filing 18 months ago and Delta Air Lines Inc. warned that it might seek similar protection soon if it cannot trim its labor costs.
Several weeks ago, US Airways Chairman David Bronner warned that the airline would most likely have to liquidate if it filed for bankruptcy. Lakefield subsequently backed off those comments, and on Sunday again sought to assure customers that the airline faced no immediate danger of shutting down.
"I believe that the light of day will convince our employees that sacrifices are needed to keep the airline flying," Lakefield said in a telephone interview Sunday. "When you look at the other choices, I believe our employees will make the right choice."
Last Monday, a deeply divided pilots union refused to allow its membership to vote on a company proposal that would have cut pay by 20 percent and retirement plan contributions by 50 percent.
As recently as Friday, US Airways made a last-ditch effort to reach a deal with the pilots, offering a proposal with minimum pay cuts that would have required more flight hours each month, putting more pilots at risk of furlough.
Some pilot representatives who opposed the new deal said the pilots and other US Airways workers had made enough concessions during the company's first trip into bankruptcy in August 2002. Then, the unions collectively agreed to contract concessions of more than $1 billion a year.
Fred Freshwater, a pilots' union representative from Pittsburgh who opposed management's latest contract offer, said he wasn't surprised the company was unable to reach deals with labor and that it sought bankruptcy.
"When you look at the behavior of management, when you look at their proposals, they were seeking the total capitulation of labor," Freshwater said.
The bankruptcy filing also could cost federal taxpayers. The government loaned the airline $900 million last year as part of a special program to assist airlines after the Sept. 11 attacks.
The airline still owes Uncle Sam $718 million, and it will ultimately be up to a bankruptcy court to determine the government's place in line among creditors. But Lakefield said the Air Transportation Stabilization Board is a secured creditor, and would be first among those seeking repayment.
US Airways said Sunday that it has an agreement in place with the government and with other lenders to use some of its cash reserves to continue operations while in bankruptcy. In its filing, the company listed $8.8 billion in assets, including $1.45 billion, and $8.7 billion in liabilities.
A hearing was scheduled Monday morning in U.S. Bankruptcy Court.
The company said financial deadlines looming on Sept. 30 forced it to file now to conserve cash to navigate bankruptcy. The airline also had a $110 million pension payment due Wednesday if it had not sought protection.
While US Airways has an agreement with its lenders to use some of its existing cash reserves, it does not have a new investor lined up to provide additional financing. When the airline filed for bankruptcy in 2002, investment firm Texas Pacific Group had already agreed to invest $200 million in the airline. That plan was eventually supplanted by the Retirement Systems of Alabama, a pension fund for state workers, which invested $240 million for a 36 percent stake in the carrier and eight seats on its board.
Lakefield said Sunday US Airways likely will need to find an investor to provide additional financing, but with new labor deals, "we won't have any problem finding our way out" of bankruptcy.
Bronner acknowledged the Alabama fund could lose its entire investment, which amounts to less than 1 percent of the fund's portfolio.
"The reluctance of union negotiators to agree to concessions is understandable, but their refusal to acknowledge the realities of the airline industry is a mystery," he said in a statement. "There are thousands of jobs at stake, but if any of them are going to be saved, then all employees are going to have to make sacrifices, as difficult as that might be."
US Airways actually turned a small, $34 million profit in the last quarter. But the April-June period is typically an airline's strongest, and its prospects - both short and long-term - appeared poor because of relatively high labor costs, expensive fuel costs and intense new competition from low-cost carriers.
US Airways first filed for bankruptcy protection in August 2002 after the Sept. 11 attacks devastated the airline industry as a whole and US Airways in particular. The company had lost $2.1 billion in 2001 as it dealt with the prolonged closure of Washington's Reagan National Airport, where it was the largest carrier, after the attacks.
When US Airways emerged from its first bankruptcy in March 2003, the airline made numerous changes, seeking to reinvent itself as a low-fare carrier in the mold of JetBlue Airways Corp. and America West, a unit of America West Holdings Corp.
It de-emphasized its hub-and-spoke system, eliminating its Pittsburgh hub altogether. It implemented a lower, simplified fare structure along parts of its network, including its hub in Philadelphia, where it faces a severe new challenge from Southwest Airlines.
More recently, the company sought to exploit one of its few profitable business segments - its Caribbean flights - by expanding those offerings through a mini-hub in Fort Lauderdale, Fla.
If the airline liquidates, Freshwater said "it would be devastating to many, many people. ... But it's like I've told my kids many, many times, `Don't worry about things you have no control over.'"
Freshwater said he expects the union to continue negotiations in bankruptcy.
US Airways files for bankruptcy protection for second time in two years
US Airways Group Inc., the nation's seventh largest airline, filed for bankruptcy protection Sunday for the second time in two years. The company's president vowed to continue restructuring the airline into a low-cost carrier during the bankruptcy process.
"We have come too far and accomplished too much to simply stop the process and not succeed," said Bruce Lakefield, US Airways' president and chief executive. "A restructured US Airways with low costs and low fares will be a dynamic competitor."
US Airways said customers would notice no operational changes as a result of the bankruptcy and that it will seek permission to continue its frequent flyer program.
The Chapter 11 filing in U.S. Bankruptcy Court in Alexandria came after US Airways was unable to obtain $800 million in annual cost cuts from its workers' unions that the airline said it needed to stay afloat.
US Airways' busiest hub is in Charlotte, N.C. The airline carries about 90 percent of the city's passengers and employs 5,700 locally.
North Carolina Gov. Mike Easley said in a statement he has received assurances from US Airways "that there will be no changes in customer service and that their presence in Charlotte will continue."
The company's return to bankruptcy comes as several of its larger rivals also confront the need to repair weak finances. UAL Corp.'s United Airlines has been operating under bankruptcy for nearly two years, AMR Corp.'s American Airlines was on the brink of a filing 18 months ago and Delta Air Lines Inc. warned that it might seek similar protection soon if it cannot trim its labor costs.
Several weeks ago, US Airways Chairman David Bronner warned that the airline would most likely have to liquidate if it filed for bankruptcy. Lakefield subsequently backed off those comments, and on Sunday again sought to assure customers that the airline faced no immediate danger of shutting down.
"I believe that the light of day will convince our employees that sacrifices are needed to keep the airline flying," Lakefield said in a telephone interview Sunday. "When you look at the other choices, I believe our employees will make the right choice."
Last Monday, a deeply divided pilots union refused to allow its membership to vote on a company proposal that would have cut pay by 20 percent and retirement plan contributions by 50 percent.
As recently as Friday, US Airways made a last-ditch effort to reach a deal with the pilots, offering a proposal with minimum pay cuts that would have required more flight hours each month, putting more pilots at risk of furlough.
Some pilot representatives who opposed the new deal said the pilots and other US Airways workers had made enough concessions during the company's first trip into bankruptcy in August 2002. Then, the unions collectively agreed to contract concessions of more than $1 billion a year.
Fred Freshwater, a pilots' union representative from Pittsburgh who opposed management's latest contract offer, said he wasn't surprised the company was unable to reach deals with labor and that it sought bankruptcy.
"When you look at the behavior of management, when you look at their proposals, they were seeking the total capitulation of labor," Freshwater said.
The bankruptcy filing also could cost federal taxpayers. The government loaned the airline $900 million last year as part of a special program to assist airlines after the Sept. 11 attacks.
The airline still owes Uncle Sam $718 million, and it will ultimately be up to a bankruptcy court to determine the government's place in line among creditors. But Lakefield said the Air Transportation Stabilization Board is a secured creditor, and would be first among those seeking repayment.
US Airways said Sunday that it has an agreement in place with the government and with other lenders to use some of its cash reserves to continue operations while in bankruptcy. In its filing, the company listed $8.8 billion in assets, including $1.45 billion, and $8.7 billion in liabilities.
A hearing was scheduled Monday morning in U.S. Bankruptcy Court.
The company said financial deadlines looming on Sept. 30 forced it to file now to conserve cash to navigate bankruptcy. The airline also had a $110 million pension payment due Wednesday if it had not sought protection.
While US Airways has an agreement with its lenders to use some of its existing cash reserves, it does not have a new investor lined up to provide additional financing. When the airline filed for bankruptcy in 2002, investment firm Texas Pacific Group had already agreed to invest $200 million in the airline. That plan was eventually supplanted by the Retirement Systems of Alabama, a pension fund for state workers, which invested $240 million for a 36 percent stake in the carrier and eight seats on its board.
Lakefield said Sunday US Airways likely will need to find an investor to provide additional financing, but with new labor deals, "we won't have any problem finding our way out" of bankruptcy.
Bronner acknowledged the Alabama fund could lose its entire investment, which amounts to less than 1 percent of the fund's portfolio.
"The reluctance of union negotiators to agree to concessions is understandable, but their refusal to acknowledge the realities of the airline industry is a mystery," he said in a statement. "There are thousands of jobs at stake, but if any of them are going to be saved, then all employees are going to have to make sacrifices, as difficult as that might be."
US Airways actually turned a small, $34 million profit in the last quarter. But the April-June period is typically an airline's strongest, and its prospects - both short and long-term - appeared poor because of relatively high labor costs, expensive fuel costs and intense new competition from low-cost carriers.
US Airways first filed for bankruptcy protection in August 2002 after the Sept. 11 attacks devastated the airline industry as a whole and US Airways in particular. The company had lost $2.1 billion in 2001 as it dealt with the prolonged closure of Washington's Reagan National Airport, where it was the largest carrier, after the attacks.
When US Airways emerged from its first bankruptcy in March 2003, the airline made numerous changes, seeking to reinvent itself as a low-fare carrier in the mold of JetBlue Airways Corp. and America West, a unit of America West Holdings Corp.
It de-emphasized its hub-and-spoke system, eliminating its Pittsburgh hub altogether. It implemented a lower, simplified fare structure along parts of its network, including its hub in Philadelphia, where it faces a severe new challenge from Southwest Airlines.
More recently, the company sought to exploit one of its few profitable business segments - its Caribbean flights - by expanding those offerings through a mini-hub in Fort Lauderdale, Fla.
If the airline liquidates, Freshwater said "it would be devastating to many, many people. ... But it's like I've told my kids many, many times, `Don't worry about things you have no control over.'"
Freshwater said he expects the union to continue negotiations in bankruptcy.
scouts out!
Active member
- Joined
- Dec 24, 2001
- Posts
- 38
I dont know how much truth there is to this but what I have been told is that airways is planning on dropping the contract carriers. I know that in the previous chapter 11 airways stated that they wanted to eliminated or severly reduce that amount of contract carriers on property. I would not expect them to disappear over night though, rather their contracts being dropped and when airways is able to support the system with their own jets then you will see them go away. Why pay them operating cost plus 8 percent when you can pay just operating cost. At this time it is anyones guess and that is all I am doing right now. Time will tell and lets hope for the best.
This is really a sad day for the industry.
A lot of people miss the worst part of this news that affects all of us. JO at Mesa has been very outfront with his views that he wants larger airplanes to compete on the East coast should USAirways go under.
He has a pilot group (Freedom guys) that has proven that they are willing to work for sub-standard wages to get ahead.
We are all in trouble if he starts flying 737's and the FO's are only making $25/hour.
A lot of people miss the worst part of this news that affects all of us. JO at Mesa has been very outfront with his views that he wants larger airplanes to compete on the East coast should USAirways go under.
He has a pilot group (Freedom guys) that has proven that they are willing to work for sub-standard wages to get ahead.
We are all in trouble if he starts flying 737's and the FO's are only making $25/hour.
efiscompmon
...
- Joined
- Jun 24, 2002
- Posts
- 198
Pointing Fingers is Fun and Easy!
Not hat it's right, mind you. On several levels.
Sure--work for free. Are you volunteering? Might want to think of what the "competitive costs" effect would have on your own carrier...and career.
I do believe that the creditors ARE the management.
Still not sure why everyone sees the rush to end contract carriers--if it's cheaper, why would mgmt want to get rid of them? Fairly sure that a Colgan Saab can move 20 some pax cheaper than a PDT/ALG Dash can.
Not hat it's right, mind you. On several levels.
jetflyer
Concerned Citizen
- Joined
- Mar 8, 2002
- Posts
- 2,040
Yes, efiscompmon, I know exactly what having US Air pilots flying for free would do to my carrier and career. All I have to do is go back to last year and see our CEO waving around Mesa's contract saying that all the flying will be transferred to Big Sky if we don't settle for a crap deal like that one. And soon, you will see US Air 737's and 319/320's being operated with pilots being paid a little less than that of Southwest. Just my guess. Doesn't take a rocket scientist to see where Northwest, Delta, American, etc... are going to go with this.
My point is that US Air took a bunch of taxpayers' money and now is saying "yeah sorry, we won't be able to pay you back. We foolishly squandered your money on bonuses, booze and corporate condos in the Cayman's." Even if those pilots worked for free, US Air still would not turn a profit. They couldn't make it work with the massive concessions they already had given to them from the pilots. It might have been cheaper for Uncle Sam to have told US Air "we'll give you 5 million a month, just don't operate nothing."
My point is that US Air took a bunch of taxpayers' money and now is saying "yeah sorry, we won't be able to pay you back. We foolishly squandered your money on bonuses, booze and corporate condos in the Cayman's." Even if those pilots worked for free, US Air still would not turn a profit. They couldn't make it work with the massive concessions they already had given to them from the pilots. It might have been cheaper for Uncle Sam to have told US Air "we'll give you 5 million a month, just don't operate nothing."
On Your Six
Well-known member
- Joined
- Mar 8, 2004
- Posts
- 4,507
Questionable whether USAirways will survive even with the wage concessions...
That being the case, the concern among a lot of other pilots out there should be the new LOW benchmark set. IF USAirways fails, the void in the market will be filled quickly by others - I think there will be jobs available - but now at much lower pay because of the USAirways negotiations that will hurt everyone... Watch Mesa and Virgin America come in and set even lower pay standards - it's a downward spiral. Pretty soon SWA and AirTran wages will be viewed as "excessive" and too rich for the LCC market.
Difficult times...
That being the case, the concern among a lot of other pilots out there should be the new LOW benchmark set. IF USAirways fails, the void in the market will be filled quickly by others - I think there will be jobs available - but now at much lower pay because of the USAirways negotiations that will hurt everyone... Watch Mesa and Virgin America come in and set even lower pay standards - it's a downward spiral. Pretty soon SWA and AirTran wages will be viewed as "excessive" and too rich for the LCC market.
Difficult times...
Propsync
Everybody to the limit!
- Joined
- Mar 29, 2004
- Posts
- 722
Ultimately, people need to get on the airplanes. In the General's post of the announcement, revenue was down 450 million more than forecast. Must be a weather forecaster. It will be irrelevant how much is taken from all of the stakeholders in court. That was my favorite part of the whole thing- "We couldn't secure labor agreements in time to make it work". How about running your business, fools? Start a marketing department.
How can UAir management claim they lost 2.1 billion at DCA? How can you put a price tag on that?
My buddy was at PDT a few years ago, and said after the merger with U failed, they said there was no plan B. That to me was the writing on the wall. I wish all of you guys over there the best, as I don't think UAir will make it through a second time. Good luck.
How can UAir management claim they lost 2.1 billion at DCA? How can you put a price tag on that?
My buddy was at PDT a few years ago, and said after the merger with U failed, they said there was no plan B. That to me was the writing on the wall. I wish all of you guys over there the best, as I don't think UAir will make it through a second time. Good luck.
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