- The Washington Times - Friday, March 29, 2002

Arlington-based US Airways notified the Securites and Exchange Commission Wednesday it is considering applying for federal loan guarantees to help relieve a financial crunch that includes losing $3 million a day.
The airline's chief executive told employees in a recorded phone message this week that meeting labor-contract obligations would be difficult "given our financial situation."
However, some Wall Street airline industry analysts say US Airways may merely be trying to leave its options open by applying for the federal loan guarantees. The deadline to apply expires at the end of June.
"My theory is that United will apply as well and maybe some other airlines, just as a backup," said Ray Neidl, an airline industry analyst for the Wall Street financial firm ABN-AMRO.
The guarantees mean the federal government will pay off loans if qualified airlines default on them. The government offered the guarantees to airlines when the number of passengers plummeted and their finances collapsed after the September 11 attack.
So far, the only airline to apply is America West. It received a government guarantee that allowed it to obtain a $429 million loan and avoid bankruptcy.
Mr. Neidl said US Airways' financial condition is not as severe as America West's condition. For one thing, America West had very little collateral that it could use as a foundation for its finances.
"US Airways does have some collateral," Mr. Neidl said. "They probably have a billion dollars in cash reserves."
US Airways' costs, particularly from labor contracts, are greater than revenue as the airline continues to recover from the September 11 attack and recession. It lost $1.97 billion last year. Nevertheless, the airline is in little danger of going out of business. US Airways stock rose 8 cents to close at $6.45 on the New York Stock Exchange.
"I don't see any immediate probability of that," Mr. Neidl said.
US Airways officials are refusing to comment on their Securities and Exchange Commission filing this week. A company official said, "The company is currently evaluating whether to apply."
However, Chief Executive David Siegel has hinted the airline will need to win wage concessions from unions to regain profitability. The labor agreements were reached while the airline was thriving a few years ago and wanted to keep peace with unions as it pursued a potential merger.
The contracts link wages for most of the 32,000 union employees to salaries of workers at the four largest airlines plus 1 percent. US Airways is the nation's sixth-largest airline. It also is the largest airline to operate out of Ronald Reagan Washington National Airport.
Reagan Airport is gradually reopening after being closed by the Federal Aviation Administration for nearly a month after September 11. It is scheduled to reopen to full capacity April 15.
"Continuing to tie our compensation plan to those of the four largest carriers does not make a lot of sense in today's airline industry environment," Mr. Siegel said in his message to employees. He has been meeting with union leaders to describe the airline's predicament since he took over as chief executive this month.
Union leaders have made no decision on wage concessions.
"The contracts are at parity with the rest of the industry," said Roy Freundlich, spokesman for the US Airways unit of the Air Line Pilots Association. "What the Air Line Pilots Association is doing right now is to take a look at the company's books to study this issue and study its needs. At that time, we'll make a judgment whether the business plan the airline comes up with merits contribution from the airline pilots."
The Air Line Pilots Association represents 5,950 US Airways pilots. Currently, 1,073 of those pilots are on furlough.
One change US Airways officials would like to make in their business plan is to fly more smaller jets. They are cheaper to operate and can compete in regional markets that the largest airlines avoid.


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