USAIR future ? Maybe, bankruptcy ??? Read Letter!

[mickey2001]

I wanted to take this opportunity to report to you on US Airways and our plans
for making sure the airline continues to provide you the best service possible.

Looking back to last summer, our airline faced a number of difficult, but
foreseeable financial challenges. But these difficult challenges quickly grew
with the tragic - and unforeseeable - terrorist attacks of September 11. As you
know, these attacks have changed our industry dramatically.

One effect has been to alter significantly the mindset of the traveling public.
Every traveler knows the attacks have had a substantial impact. And while all
airlines are contending with the business fallout from September 11,
economically, US Airways has been the hardest hit. The post-September 11
reluctance to fly has been most pronounced on the East Coast, where most of our
flights are concentrated. US Airways was most heavily impacted by the prolonged
closure of Reagan Washington National Airport. Additionally, we're the only
airline that has to compete not only with our airline competitors, but also with
cars and trains on many of our short-haul routes. The end result is that the
events of September 11 and the ensuing deep-rooted changes to our industry are
challenging the short and long-term financial health of US Airways.

We are moving quickly towards both a short-term and long-term solution. Today,
we filed a document with the Securities and Exchange Commission describing our
various restructuring options, including our intention to apply for financing
assistance from the Air Transportation Stabilization Board (ATSB). Clearly, our
preferred approach, which we are vigorously pursuing, is to reach an accord with
our stakeholders, including our employee groups and vendors, on a restructuring
plan and to obtain the federal assistance. As the filing with the SEC
indicates, however, if US Airways is unable to do so, alternative restructuring
scenarios in the context of a judicial reorganization also must be considered.
Simply stated, this means reorganization under the protection of the U.S.
bankruptcy laws.

Under existing federal law we will submit a loan application to the ATSB by June
28. If we were going to meet this short timetable everyone in the US Airways
family, including management, labor, and our vendors, has to sign off on a new
business plan in the coming weeks.

We expect to meet all the criteria to be eligible for the ATSB loan guarantees
and to meet the application deadline. As part of this process, we will take
steps to restructure this company, but we are committed to preserving our
existing routes, and serving our communities.

As this process moves forward, I will continue to keep you abreast of our plans.
As a frequent traveler, you are familiar with the challenges facing the airline
industry. We at US Airways are taking immediate action to ensure that we can
build on our legacy of providing outstanding service and getting you where you
want and need to go.


Sincerely,


B. Ben Baldanza
Sr. Vice President, Marketing and Planning

 

[CaliforniaDreaming]

I'll be flying US Airways a few times over the next couple months. I also received the same e-mail today. Does anyone have any idea when (I guess I should say if) they start reducing flights/grounding aircraft, when it would take place?

 

[sgtdisney]

It is hard to say when cutbacks would start, if they do. I was afraid of this however. USAir was really counting on United buying them out and when that fell through...

 

[DVC-Don]

I believe they would have been out of business already if it was not for the government bailout of the airline industry last fall. They were on the ropes last summer.

 

[JandD Mom]

I read both the letter and part of the 10-K. I read it as an ultimatum to the unions, suppliers and the government that if their conditions are not met, then bankruptcy would be the next move. By sending it to all passengers, I think it is asking for customers to put pressure on the above 3 groups to keep it in business.

I would not worry at this point about it going under. Don't forget, Continental emerged from bankruptcy over the last few years. USAir wants major concessions from the unions, and wants to start using regional jets instead of bigger jets on some routes. They need union support for that, and they need wage concessions. If they don't get it voluntarily, they will get it through bankruptcy.

 

[Obi-Wan Pinobi]

Correct me if I'm wrong, but doesn't filing for Chapter 11 basically protect a company from the creditors seizing assets while the company reorganizes to become solvent?

IMO, it's not good news, but it doesn't sound like US Airways is in danger of going under in the immediate future. What was the last really major airline to go under completely? Eastern?

US Airways has a major presence here in Richmond, so I can see some flights in and out of here being cancelled. On the plus side, maybe that will be incentive for AirTran to return or for Southwest to speed up their plans to begin service here.