- The Washington Times - Wednesday, July 17, 2002

Bankruptcy remains a possibility for US Airways, company officials said yesterday, despite the prospect of a $900 million loan guarantee from the federal government to help the carrier recover from its massive debts.

The Arlington-based airline has a deadline this week to pay creditors, but so far is only negotiating to pay the debts. It is seeking $300 million in concessions from creditors.

"The company is still working with its unions to reach an agreement on the restructuring plan, and the preferred path is not a reorganization under the bankruptcy laws," said US Airways spokesman Dave Castelveter. "But certainly, bankruptcy is something we must consider."

US Airways also would not deny that more layoffs are coming soon. The airline has about 2,400 employees in the Washington area and is the largest airline tenant at Ronald Reagan Washington National Airport, where it operates 155 daily flights.

Company officials have said they must cut costs by $1.2 billion, mostly through wage concessions. The Air Transportation Stabilization Board has made cost-cutting a condition for US Airways to receive the $900 million loan guarantee.

The loan comes from the $10 billion fund established to help airlines recover from losses related to the attacks. Sixteen airlines have applied for loans; US Airways and America West are the only two to be approved so far, and 12 airlines including United Airlines have requests pending.

Even if the company avoids bankruptcy, US Airways officials envision a voluntary restructuring that could make the nation's sixth-largest air carrier a smaller operation. The airline lost $1.97 billion last year and has shown similar losses this year.

The company reported a loss of $269 million ($3.97 per share) for the first quarter of 2002, compared with a loss of $171 million ($2.55 per share) a year earlier.

US Airways is still trying to win concessions from its machinists and communications workers unions that could be critical in determining whether the company is driven into bankruptcy.

During the weekend, US Airways won tentative concessions of $465 million from its pilots. The agreement is awaiting ratification by US Airways pilots represented by the Air Line Pilots Association.

"If that doesn't come through, the ballgame is over," said Ray Neidl, an industry consultant. "They're in a very delicate state right now."

Any long-term business prospects for US Airways require that it lower its costs, probably by refocusing its efforts on operating more low-cost regional flights, Mr. Neidl said.

Negotiations with the International Association of Machinists and the Communications Workers of America (CWA) continued yesterday.

CWA spokeswoman Candice Johnson said the union members might be willing to make concessions. However, she said, "It needs to be a fair agreement."

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