- The Washington Times - Saturday, May 25, 2002


Tucked away in a $30 billion anti-terrorism bill is a provision that could doom US Airways' only chance to avoid bankruptcy, the airline says.

The legislation, which passed the House of Representatives at 3 a.m. yesterday, would delay until October any payments under a $10 billion loan program Congress passed last year as part of an airline-industry bailout.

US Airways might not be able to wait that long. The airline, which lost $2 billion last year, plans to seek about $1 billion in loans through the federal program as part of a restructuring plan. Without such assistance, US Airways President David Siegel has said the airline could run out of money by October and might have to file for bankruptcy protection.

The company wants $90 million in annual cost savings from flight attendants and $595 million a year from pilots, unions for the workers said.

The carrier has said it wants to reduce labor costs, the biggest expense for airlines, by an annual total of $950 million as the company makes its case for the loan guarantee.

The airline urged its employees this week to lobby their congressmen against the provision.

"Any changes that would delay the granting of a loan guarantee would have a devastating impact on our ability to restructure the company," the airline said in a memo to employees.

US Airways spokesman David Castelveter said the airline had based its restructuring plan on legislation last year, which gave airlines until June 28 to apply for the loans and did not restrict when the money would be available.

"We just feel it's unfair to change the rules midstream," Mr. Castelveter said.

Rep. James P. Moran, Virginia Democrat, whose district includes US Airways headquarters in Arlington, said the House bill jeopardizes the jobs of 36,000 US Airways employees. He accused the House Republican leadership of "budget gimmickry" by delaying the payouts until October, when they would apply to the next fiscal year.

"It is outrageous to try to save money through this kind of a budget gimmick and cause the loss of 36,000-plus jobs," Mr. Moran said.

House Republican leaders say the carrier should be able to get loans to carry it until the fall, when the federal loans will be available again.

Legislation in the Senate would also scale back the loan program.

A bill approved by a Senate committee this week would reduce to $429 million the loan amounts immediately available to the airline industry.

Once the new fiscal year starts in October, the overall amount in the loan program would be slashed from $10 billion to $4 billion.

It's not clear that US Airways would be eligible for any money under the Senate bill until October.

Matt Raymond, a spokesman for Sen. George Allen, Virginia Republican, said Mr. Allen is concerned about the damage the legislation could do to US Airways.

"US Airways is the airline that probably suffered the most after September 11, in part due to the federal government's action of shutting down Reagan National Airport," Mr. Raymond said. US Airways is the largest carrier at Ronald Reagan Washington National Airport.

The legislation has to get through a House-Senate conference committee and be signed by President Bush to take effect.

US Airways is the second major airline to announce plans to file for the federally guaranteed loans. America West Airlines has received $429 million. Many airlines have shied away from the loan program because of strict government requirements. For instance, the government is likely to insist on the opportunity to purchase a large chunk of shares in any airline that receives the loans.

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