US Airways [May] File for 2nd Bankruptcy

[Splert]

Reuters
US Airways File for 2nd Bankruptcy
Friday May 7, 1:26 pm ET


CHICAGO (Reuters) - US Airways Group Inc. on Friday said it hopes to begin implementing much-need cost cuts by mid-year but that it could consider another bankruptcy filing if it is unable to do so.

The No. 7 U.S. airline is seeking cost cuts of at least 25 percent and has turned to labor groups for more givebacks.

Failure to achieve the cost cuts "will force the company to re-examine its strategic options, including but not limited to asset sales or a judicial restructuring," US Airways said in a filing with the U.S. regulators.

The company has said it is considering the sale of some of its assets, including its East Coast shuttle.

US Airways has previously hinted at another bankruptcy filing, but Friday's statement signals that the carrier's new management team is racing against time and has elevated bankruptcy as a realistic option, along with potential asset sales.

Bruce Lakefield took over as chief executive officer last month after the abrupt resignation of David Siegel, who had been criticized by union leaders. Chief Financial Officer Neal Cohen, who resigned this week, was replaced by Dave Davis.

US Airways also said it could be required to pay up to $90 million this year and $21 million in 2005 if it is unable to obtain financing for regional jets scheduled to be delivered this year and next. The carrier is in talks with General Electric's (NYSE:GE - News) Capital Aviation Services on the jet financing after a downgrade in US Airways' corporate credit rating put the financing deal in jeopardy.

 

[jetflyer]

How much debt does US Airways have?

 

[On Your Six]

The saga continues... I feel sorry for all of the great USAirways people who have to ride this crazy rollercoaster. Let's hope Virgin America can accomodate a lot of them when it starts up - in addition to opportunities at SWA and Jet Blue.

 

[Publishers]

plan

Unfortunately it is very difficult to start a new marketing plan, a new culture, and simultaneously get the existing employees to take even more hits.

Everyday they get weaker and the competition stronger./

 

[jobear]

Southwest gives Philadelphia rival broth

Southwest gives Philadelphia rival brotherly shove
Friday May 7, 4:01 pm ET
By Jon Herskovitz

DALLAS, May 7 (Reuters) - The arrival of the canyon blue planes of Southwest Airlines in Philadelphia this Sunday not only ushers in low fares to an underserved market -- but also marks a direct assault on staggering US Airways (NasdaqNM:UAIR - News).

Some see the onslaught by Dallas-based Southwest as US Airways' Alamo -- except that this time the Texans are expected to win.

Southwest will begin service on Sunday in the City of Brotherly Love -- a main hub of US Airways -- with 14 daily nonstop flights to airports in Chicago; Las Vegas; Phoenix; Providence, Rhode Island; and two Florida destinations, Orlando and Tampa Bay. On July 6, the number of flights will double as Southwest will connect Philadelphia to markets such as Houston; Los Angeles; New Orleans; Raleigh/Durham, North Carolina; and two other Florida locations, Fort Lauderdale and West Palm Beach.

The potential for growth in Philadelphia can be seen in the disparity between the size of the city and the traffic at its airport. The fifth largest U.S. city ranks 17th in terms of passenger traffic, according to Philadelphia International Airport.

TOUGH LUV

The Southwest (NYSE:LUV - News) challenge to US Airways is plain. Former Chief Executive David Siegel said before his departure in April the airline could be killed by low-cost rivals if it does not quickly slash costs dramatically and revamp its business.

"Southwest is coming to Philadelphia in May ... and they're coming for one reason: they're coming to kill us," Siegel said.

US Airways, of Arlington, Virginia, has only to look at Baltimore to see what can happen when Southwest moves into one of its key markets.

Southwest started off small in 1993 with eight flights, but by 1999 it was flying about 30 percent of the domestic passengers using the airport while US Airways and affiliated US Airways Express saw their share fall from about 54.5 percent to 30 percent in the same period. Southwest is now the main domestic player in Baltimore carrying 47 percent of the airport's passengers in 2003 while US Airways and its affiliate were at 6.4 percent, the airport said.

REMEMBER THE ALAMO?

To give an indication of just how dire the situation is at US Airways, which has lost is CEO and chief financial officer in recent weeks, the No. 7 U.S. airline said on Friday it hopes to begin implementing much-needed cost cuts by mid-year, but it could consider another bankruptcy filing if it is unable to do so. It is seeking cost cuts of at least 25 percent and has turned to labor groups for more contract givebacks.

Ray Neidl, an airline analyst with Blaylock & Partners, said the start of Southwest in Philadelphia makes it imperative for US Airways to change its cost structure and the way it does business if it is to survive.

"If they can't get their cost structure down and their model reformed, this could be their Alamo," Neidl said, referring to the obliteration of the rebels fighting against Mexican rule in Texas.

Costs at US Airways are among the highest in the industry despite its bankruptcy reorganization that ended last April. Southwest has some of the lowest costs in the industry.

Last month, US Airways responded to the Southwest challenge when it said it would lower its fares through Philadelphia to as low as $29 each way as it announced a series of fare cuts that mostly matched the offerings of its low-fare rival.

Typically, when Southwest starts service in a new market, the low-fare carrier's entry causes fares to drop and the total number of people traveling through that airport to increase.

US Airways said it will adjust its schedule to spread more flights throughout the day to accommodate the expected growth in passenger volume.

Southwest has launched a major marketing campaign in Philadelphia to usher in its arrival at its largest U.S. city in more than a decade.

Analysts and Southwest executives have said there is enormous potential for the carrier to grow in Philadelphia. Southwest has hundreds of airplanes on order and after its initially small entry into major markets such as Los Angeles, Las Vegas, Chicago and Baltimore, Southwest has grown over the years to be one of the primary domestic carriers in those cities.

"Philadelphia is a classic city for Southwest to go to. It is underserved and overpriced," said Ed Stewart, a Southwest spokesman. "It didn't take us long to figure out where we needed to be." (With additional reporting by Meredith Grossman Dubner)