- The Washington Times - Monday, August 12, 2002

US Airways filed for Chapter 11 bankruptcy yesterday after failing to revive its finances from $2.1 billion in losses last year, largely because of the September 11 attacks.
The Arlington-based airline said all of its flights will keep operating without interruption. It said it received $500 million in financing to keep operating while it reorganizes.
"The planes will continue to fly, the employees will continue to be paid," a US Airways spokesman said. "It's a restructuring, it's not a liquidation."
US Airways President and Chief Executive David Siegel said the airline will seek a return to profitability and could emerge from bankruptcy by the first quarter of 2003.
The federal bankruptcy court in Alexandria has scheduled a hearing for 10:30 a.m. today on US Airways' petition for protection from creditors.
As the summer travel season, which normally is the most profitable for airlines, draws to a close, ticket sales that were supposed to rescue troubled airlines from financial disaster have largely failed to produce adequate revenue. As a result, US Airways' problems are symptomatic of the industry.
As part of its restructuring, US Airways plans to return 110 of its largest aircraft to the companies from which it purchased them. Since September 11, they have been parked in storage in the Mojave Desert of California and Arizona.
The airline operates a fleet of approximately 313 "mainline" aircraft consisting largely of Boeing 737s and MD 80s.
The airline will need to renegotiate 15-year-old lease terms on 30 to 40 mainline aircraft, said Chris Chiames, senior vice president of corporate affairs, during a press conference at Ronald Reagan Washington National Airport last night.
"The lease terms on those are overmarket," Mr. Chiames said.
If the owners refuse to grant lower monthly lease terms, the aircraft would be returned, he said.
Mr. Chiames acknowledged that the airplane reductions potentially almost half the airline's fleet and bankruptcy would lead to "short-term shrinkage." The "shrinkage" probably would include layoffs of an undetermined number of the company's 35,857 employees, he said.
The main reason for the bankruptcy was the September 11 attacks, he said, adding, "We took the brunt of the impact."
US Airways is the largest airline at Reagan Airport, which was closed for three weeks after September 11. Its business depends heavily on shuttles along the Northeast corridor.
The bankruptcy filing came as no surprise to the airline's employees, some of whom watched the press conference in the airport terminal.
"It's been a hard process all the way around," said Alerman Lastie, a US Airways ramp worker and 18-year employee. "If things happen, you have to be prepared."
The airline, seventh largest in the nation and 14th largest in the world, listed $7.81 billion in assets and $7.83 billion in liabilities in its petition. Officials acknowledge they continue to lose more money than they are earning.
US Airways has been trying to wring $950 million in cost cuts from its employees as part of a restructuring plan that was designed to stave off bankruptcy.
The bankruptcy filing came shortly after the International Association of Machinists and Aerospace Workers announced that the union would submit the company's proposal for concessions by mechanics and other workers in the union to a vote.
"Our members will not give up on US Airways, and neither should anyone else," Robert Roach Jr., general vice president of the union said after the bankruptcy filing. "We believe US Airways can successfully restructure while it continues to serve the traveling public and provide employment for our members."
Neither side released details of the concessions the company wants from the machinists union, but US Airways said it was "comparable to the cost-savings targets set for all other labor groups."
The airline said its debtor-in-possession financing will come from a group of institutions led by Credit Suisse First Boston and Bank of America Corp., with participation from Texas Pacific Group, which has signed a memorandum of understanding to provide $200 million in equity when the carrier emerges from bankruptcy.
"In the face of an uncertain and trying time for the industry, we have been impressed by the major strides taken by US Airways' management and employees to significantly improve the competitiveness of the airline," said Richard P. Schifter, a partner with Texas Pacific Group.
Additionally, the airline has received conditional approval from the Air Transportation Stabilization Board for a $900 million federal guarantee on a $1 billion loan package. US Airways officials have said that their application to the ATSB provided for a bankruptcy filing as a contingency. The airline won't receive the federal loan until it emerges from bankruptcy.
Last month, Vanguard Airlines, citing similar problems after September 11, filed for bankruptcy. Vanguard listed $95.9 million in debts, compared with just $39.7 million in assets. The federal ATSB had rejected the airline's request for an $8 million loan guarantee.
A year ago, Midway Airlines, based in Morrisville, N.C., filed for bankruptcy protection, citing a drop in number of passengers. Midway listed assets of $318 million and debts of $232 million.
This article is based in part on wire service reports.

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