Space Wrangler
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US Airways to learn of pay cut plan’s fate
By Caroline Daniel in Chicago Oct 12 2004 18:05
US Airways, one of the troubled US carriers, could on Wednesday find out if it will get approval from a bankruptcy judge for its request to impose interim pay cuts of 23 per cent, in an effort to shore up its liquidity.
In an omnibus hearing on Wednesday, the airline will also seek court approval for an extension to its ability to continue to access the cash collateral owned by the Airline Transportation Stabilisation Board, the federal body that oversees loan guarantees. The previous order runs out on October 15.
In a filing with the bankruptcy court in Virginia, the ATSB - which is owed $717.6m - said it had agreed to allow the airline to access the cash until January 14. This will allow more time to negotiate permanent labour contracts.
However, they have to meet new conditions. The airline has $745m in unrestricted cash, which must not fall below $754m at October 22, $648m at the end of December and $550m by January 14.
A report justifying the extension said lack of access to the cash "would immediately and irreparably harm the debtors, their estates and their creditors".
The airline is also prohibited from using the cash to buy aircraft, cannot spend more than $25m on capital expenditure by the end of the year, must use any net cash from asset sales to pay down the ATSB loan and must also hit certain rolling earnings targets.
The terms reinforce the need for approval for the interim wage cuts, which the airline said could save $38m per month. Without this relief it could face liquidation by February.
US Airways' labour costs - accounting for about a third of its costs - are the second highest in the industry.
The US taxpayer is well protected by non-cash assets, such as engines, airport slots and flight stimulators. "The fair market value of the appraised assets alone exceeds the outstanding principal amount of the ATSB loan by over $100m," the filing said. Although the assets are valued at about $883m, if the airline continues to operate as an ongoing concern, they would fall to about $586m in the event of a distressed termination.
By Caroline Daniel in Chicago Oct 12 2004 18:05
US Airways, one of the troubled US carriers, could on Wednesday find out if it will get approval from a bankruptcy judge for its request to impose interim pay cuts of 23 per cent, in an effort to shore up its liquidity.
In an omnibus hearing on Wednesday, the airline will also seek court approval for an extension to its ability to continue to access the cash collateral owned by the Airline Transportation Stabilisation Board, the federal body that oversees loan guarantees. The previous order runs out on October 15.
In a filing with the bankruptcy court in Virginia, the ATSB - which is owed $717.6m - said it had agreed to allow the airline to access the cash until January 14. This will allow more time to negotiate permanent labour contracts.
However, they have to meet new conditions. The airline has $745m in unrestricted cash, which must not fall below $754m at October 22, $648m at the end of December and $550m by January 14.
A report justifying the extension said lack of access to the cash "would immediately and irreparably harm the debtors, their estates and their creditors".
The airline is also prohibited from using the cash to buy aircraft, cannot spend more than $25m on capital expenditure by the end of the year, must use any net cash from asset sales to pay down the ATSB loan and must also hit certain rolling earnings targets.
The terms reinforce the need for approval for the interim wage cuts, which the airline said could save $38m per month. Without this relief it could face liquidation by February.
US Airways' labour costs - accounting for about a third of its costs - are the second highest in the industry.
The US taxpayer is well protected by non-cash assets, such as engines, airport slots and flight stimulators. "The fair market value of the appraised assets alone exceeds the outstanding principal amount of the ATSB loan by over $100m," the filing said. Although the assets are valued at about $883m, if the airline continues to operate as an ongoing concern, they would fall to about $586m in the event of a distressed termination.
