mickey2001
Earning My Ears
- Joined
- Sep 20, 2000
- Messages
- 44
ARLINGTON, Va., May 10 US Airways warned Friday that it would consider filing for Chapter 11 bankruptcy protection if it could not obtain federally backed loans that will most likely require concessions from employees and the airlines suppliers and vendors.
SHARES OF US Air plunged more than 27 percent on the news.
The airline, which lost $2 billion last year, is only the second major carrier to announce intentions to apply for federally guaranteed loans that were approved by Congress last year as part of an industrywide bailout.
The loans have proved unattractive to many airlines because of the conditions placed on them. In most cases, its anticipated that the airline would have to give the federal government the option to purchase a large share of the company, possibly at a bargain price.
In addition, the airline has to submit a viable business plan that most expect would require employees to make pay concessions.
In a filing Friday with the Securities and Exchange Commission, the Arlington-based airline admitted for the first time that bankruptcy is an option if the airline cant develop a business plan to satisfy federal regulators who must approve any guaranteed loan.
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The Companys preferred approach ... is to reach an accord with its key stakeholders and obtain assistance under the Stabilization Act, the company said in the filing. However, because there is no assurance that this will occur, alternative restructuring scenarios in the context of a judicial reorganization also must be considered.
Judicial reorganization is lawyer-speak for ... a bankruptcy filing, airline President David Siegel said Friday in a message to employees.
He told employees that the first option is to obtain the loans. Thats going to give us the cash we need to successfully bridge this company to a permanent and successful business plan, he said.
Without the loans, the company has already warned that its cash reserves could be depleted by the end of the year.
CONTINGENCY PLAN
Siegel said its good business practice to have a contingency plan and we have to be prepared for a bankruptcy plan if we cant get there voluntarily. Either way, this airline will continue to operate ... and were going to emerge as a strong, vigorous competitor that can defend its East Coast position.
Roy Freundlich, a spokesman for the Air Line Pilots Associations US Airways unit, said the pilots would be willing to negotiate on issues like salary, but it has to be a verified, demonstrated need, rather than just what it wants. He said the company has not provided any details of its business plan.
US Airways has historically had high labor costs, and most of its union workers are paid under contracts that guarantee parity with the four largest airlines, plus 1 percent.
Siegel has said such a pay plan is unsustainable; the airline reduced its capacity by 23 percent last year and is now only the nations seventh-largest airline.
The company said it expects to get an additional $56 million this year from the federal government as part of last years congressional bailout, although it warned that pending Congressional legislation could reduce that amount. The airline and its affiliates have already received $264 million.
In trading on the New York Stock Exchange, US Air shares fell $1.35 to close at $3.60 cents.
SHARES OF US Air plunged more than 27 percent on the news.
The airline, which lost $2 billion last year, is only the second major carrier to announce intentions to apply for federally guaranteed loans that were approved by Congress last year as part of an industrywide bailout.
The loans have proved unattractive to many airlines because of the conditions placed on them. In most cases, its anticipated that the airline would have to give the federal government the option to purchase a large share of the company, possibly at a bargain price.
In addition, the airline has to submit a viable business plan that most expect would require employees to make pay concessions.
In a filing Friday with the Securities and Exchange Commission, the Arlington-based airline admitted for the first time that bankruptcy is an option if the airline cant develop a business plan to satisfy federal regulators who must approve any guaranteed loan.
Advertisement
The Companys preferred approach ... is to reach an accord with its key stakeholders and obtain assistance under the Stabilization Act, the company said in the filing. However, because there is no assurance that this will occur, alternative restructuring scenarios in the context of a judicial reorganization also must be considered.
Judicial reorganization is lawyer-speak for ... a bankruptcy filing, airline President David Siegel said Friday in a message to employees.
He told employees that the first option is to obtain the loans. Thats going to give us the cash we need to successfully bridge this company to a permanent and successful business plan, he said.
Without the loans, the company has already warned that its cash reserves could be depleted by the end of the year.
CONTINGENCY PLAN
Siegel said its good business practice to have a contingency plan and we have to be prepared for a bankruptcy plan if we cant get there voluntarily. Either way, this airline will continue to operate ... and were going to emerge as a strong, vigorous competitor that can defend its East Coast position.
Roy Freundlich, a spokesman for the Air Line Pilots Associations US Airways unit, said the pilots would be willing to negotiate on issues like salary, but it has to be a verified, demonstrated need, rather than just what it wants. He said the company has not provided any details of its business plan.
US Airways has historically had high labor costs, and most of its union workers are paid under contracts that guarantee parity with the four largest airlines, plus 1 percent.
Siegel has said such a pay plan is unsustainable; the airline reduced its capacity by 23 percent last year and is now only the nations seventh-largest airline.
The company said it expects to get an additional $56 million this year from the federal government as part of last years congressional bailout, although it warned that pending Congressional legislation could reduce that amount. The airline and its affiliates have already received $264 million.
In trading on the New York Stock Exchange, US Air shares fell $1.35 to close at $3.60 cents.
