January 13, 2005
Embattled US Airways has passed another milepost as it seeks to navigate the tricky approach through bankruptcy while avoiding liquidation.
The company says it has reached agreement with the Air Transportation Stabilization Board (ATSB) to extend the airline's use of cash proceeds from its federally guaranteed loan through June 30, 2005. That should allow the airline to continue operations while it completes its restructuring and planned emergence from Chapter 11 this summer.
The company has been operating with the use of ATSB cash collateral since its Chapter 11 filing on Sept. 12, 2004. An initial agreement was extended until Jan. 15, 2005.
"This long-term extension is a huge boost for our customers, employees and business partners, as we work to complete our transformation into a low-cost airline," said Bruce R. Lakefield, president and chief executive officer of US Airways.
"Our customers should book us with confidence, knowing that we have sufficient cash to operate as well as to implement the many changes that are already under way. For our employees, this extension conveys that their sacrifices are an investment in the company's future, as we demonstrate to the ATSB and others that we are working hard to be a competitive and successful airline," Lakefield said.
Lakefield's appeal to US Air employees is noteworthy, in that an embittered workforce has emerged recently as a new threat to the airline's survival. While unions have grudgingly approved large contract give-backs, US Airways employees have demonstrated they aren't happy about it. A widespread sickout Christmas weekend caused many flight cancellations, led to lost baggage, and created a public relations and marketing nightmare for the struggling airline.
US Airways executives say details of this latest agreement will be filed with the court. The provisions are consistent with the previous agreement with the ATSB as well as the company's agreement with the General Electric Capital Aviation Services (GECAS), that it maintain minimum weekly cash balances and sufficient liquidity.
US Airways says achieving these cash requirements is dependent on the company securing the cost savings in the proposals made by the company to the International Association of Machinists (IAM), either through ratification of the proposals by IAM members or by implementing the Bankruptcy Court's Jan. 6, 2005, decision that rejected the IAM labor contracts. Ratification for the three separate IAM workgroups is to conclude on Jan. 21, 2005.
"We have worked very closely with the ATSB to provide them with solid information and assurances about the progress we have made in our restructuring. Securing the GECAS agreement on aircraft financing and labor cost reductions were significant milestones," said Lakefield.
Lakefield says there is much left to do, but that he thinks the airline's most difficult period is behind it.
