- The Washington Times - Tuesday, May 31, 2005

ASSOCIATED PRESS

A judge yesterday approved a road map for the merger of US Airways and America West through the bankruptcy process, limiting to 30 days any potential competing bids.

US Airways Group Inc. sought the window to “shake the tree and see if there’s any higher, better offer.” At the same time, the Arlington airline said it wanted to receive any potential bids quickly so that it can emerge from bankruptcy as soon as possible.

If no other suitors emerge, the two air carriers would exclusively negotiate a merger.

The judge was also considering a proposed retention plan to stop the exodus of US Airways’ management employees. Closing arguments on that issue are scheduled today.

US Airways, which filed for bankruptcy last year, has proposed a marriage with America West Holdings Corp., based in Tempe, Ariz., that would allow it to emerge from its second trip to bankruptcy court since 2002

Also yesterday, U.S. Bankruptcy Judge Stephen Mitchell allowed a provision that either airline receive a $15 million breakup fee if either party walks away from the deal.

The Pension Benefit Guaranty Corp., the largest US Airways creditor, had objected to that provision, saying it would stifle potential competing bids.

Judge Mitchell also struck language that would have prohibited the airline’s unions from speaking out or taking action in opposition to the merger. The unions said in court yesterday that they do not oppose the merger but simply want to preserve their rights in the future.

US Airways had said it had not intended for the specific provision to impinge on the unions’ advocacy rights.

Yesterday’s hearing was scheduled to establish a framework and timeline for approval of the proposed merger of the nation’s seventh- and eighth-largest airlines.

US Airways argued that a program is needed to stanch the massive attrition while the air carrier moves forward on a merger that likely would result in the elimination of many US Airways management jobs.

“This is a big, long, complicated process and we’re going to need to keep management and salaried employees around … ,” said Brian Leitch, an attorney representing US Airways. “If we screw up the integration, it could be a disaster. We could fail.”

But the retention plan was opposed by union officials, who noted workers’ deep concessions during the bankruptcy, and the U.S. trustee overseeing the bankruptcy case.

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