Loan decision latest 'up' for airline
US Airways fortunes are taking off lately
Friday, January 14, 2005
By Dan Fitzpatrick, Pittsburgh Post-Gazette
Don't look now, but
US Airways may be close to pulling off a near-miraculous survival plan that many skeptics said would never happen.
Related coverageSee a graphic showing what US Airways has accomplished and what it still must do to exit bankruptcy.
The nation's seventh-largest carrier, in bankruptcy for the second time in two years, yesterday received approval to continue using day-to-day cash backed by the federal government through June 30 -- the date by which it hopes to reemerge from Chapter 11.
It marked the latest in a series of hurdles that the airline has crossed in recent months, including a bankruptcy judge's decision last week allowing US Airways to terminate pension plans covering 50,000 current and former employees and reduce health care coverage for 10,000 retirees -- saving more than $200 million a year.
Those savings come on top of more than $500 million in cost concessions wrested from four unions in recent months, aided by the hammer of potential U.S. Bankruptcy Court rulings that threatened even steeper cuts. And workers represented by the fifth and final union, the International Association of Machinists, are set to vote on a $268 million concessionary package in the next few days.
Even the recent warm weather across the Northeast has helped US Airways, giving it time to recover from a Christmas travel meltdown that stranded thousands of passengers, delayed hundreds of flights and misplaced an untold number of bags.
"While we still have much work to do, I think our most difficult period is behind us," US Airways Chief Executive Officer Bruce Lakefield said yesterday.
Analyst Bill Lauer agreed. The airline's survival, he said, "is more likely than not."
To be sure, plenty of analysts are still predicting the airline's demise, perhaps as early as next month.
One, industry consultant Terry Trippler, summed up his views when he told reporters after the baggage nightmare of Christmas that, "Stick a fork in them, folks. They're done."
Pending hurdles include a Feb. 15 deadline to file a reorganization plan with the U.S. Bankruptcy Court in Alexandria, Va., the need for an additional $250 million in financing and the emergence from bankruptcy by June 30.
Then there is the traditionally slow January-March travel period, fluctuating fuel prices, brutal fare wars touched off by Delta Air Lines' recent decision to restructure prices and, of course, increased competition from low-fare rival Southwest Airlines, which is expanding in US Airways' Philadelphia hub and launching Pittsburgh service in May.
Finally, there remains the issue of the IAM, which did not agree to the $268 million in new concessions, only to send it to the rank-and-file for a vote by Jan. 21 -- a vote that will require some members to sign off on a package that will eliminate their own jobs. The proposal pares 2,500 of 8,800 positions, including 2,000 from the unit that represents mechanics, stock clerks and cleaners and another 500 from the unit representing baggage handlers.
Because of U.S. Bankruptcy Judge Stephen Mitchell's decision last week to abrogate the union's contracts, workers realize that the company is now free to do whatever it wants if the union does not approve the cuts. Some analysts are worried that the union, out of frustration, could strike or disrupt the airline's operations.
But if that can be avoided, Bill Warlick of Fitch Ratings in Chicago, said all the company has to do is "hobble along" until March, when revenues and travel will start to pick up.
The federal government helped yesterday, when it said the airline can continue to tap into $645 million federally backed loans through June 30 -- a longer period than expected.
The airline's day-to-day financing agreement with the federal Air Transportation Stabilization Board -- formed to help airlines crippled by the 9/11 attacks to obtain private financing through federal loan guarantees -- was scheduled to expire tonight.
Today, US Airways is expected to cross another hurdle by completing a deal for $100 million in new equity necessary to keep a financing deal with General Electric, which has made $140 million in cash available to US Airways while agreeing to defer aircraft lease payments.
"We have come a tremendously long way despite tremendous odds," said US Airways pilots chairman Bill Pollock, who also serves on the airline's board.
"All these hip-pocket experts are taking shots at us at every opportunity, [but] if you think about it, this company is taking steps that are actually working. We are really close to being able to complete agreements that will position us to be competitive for the long term."
(Dan Fitzpatrick can be reached at [email protected] or 412-263-1752.)
