US Airways Files Chapter 11

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 ◆ US Airways Files Chapter 11

US Airways Group Inc. sought Chapter 11 bankruptcy protection on Sunday, in the first bankruptcy filing by a major air carrier since the Sept. 11 attacks triggered a financial crisis in the airline industry. The sixth-largest US airline, which is desperately trying to win labor and other cost concessions to obtain a federal loan guarantee, said the filing would allow it to complete restructuring and continue flights without interruption. The Arlington, Virginia-based carrier filed in US Bankruptcy Court for the Eastern District of Virginia, listing assets of US$7.81 billion and liabilities of US$7.83 billion. It said it aimed to emerge from bankruptcy in the first quarter of 2003. "US Airways will continue to operate while we complete our financial restructuring, and our customers should be confident that we will continue service to the more than 200 communities in our network," said David Siegel, US Airways president and chief executive officer. The airline has reached deals on wage cuts and other concessions with its pilots and flight attendants, and submitted a give-back proposal to mechanics on Sunday. US Airways has secured commitments for US$500 million in debtor-in-possession financing from a group led by Credit Suisse First Boston and Bank of America Corp. Texas Turnaround Group Texas Pacific Group has entered into a memorandum of understanding to provide a US$200 million investment in return for 38 percent of equity in the airline once it emerges from Chapter 11. Texas Pacific is an investment firm comprised of the partners who stunned Wall Street in 1993 when they helped recapitalize Continental Airlines, which was mired in its second bankruptcy amid a massive industry slump. The investment fund, based in Fort Worth, Texas, turned the flagging airline into a profitable operation, and ultimately cashed out for a profit 10 times its initial investment. In 1994, Texas Pacific helped bring America West out of bankruptcy, but hasn't made an major airline investment since then. By the time it emerges from bankruptcy, US Airways said it hopes to have US$1 billion in additional financing backed by a US$900 million loan guarantee from the federal government. The government board overseeing the loan guarantee program, which was set up after Sept. 11 to help struggling airlines, said the conditional approval it has already granted US Airways remains in effect. "The (Air Transportation Stabilization Board) will review the reorganization plan when presented and will determine whether it meets the conditions for issuance of a guarantee," a statement from the three-member board said. Last Resort US Airways was arguably the hardest hit domestic carrier after Sept. 11, having been hampered by the prolonged closure of Washington's Ronald Reagan National Airport and plummeting business travel, especially at its East Coast hubs. UAL Corp.'s United Airlines is also in deep financial trouble and is seeking US$1.8 billion in government credit guarantees. US Airways said on Friday a move for bankruptcy protection would occur if it could not win needed concessions from labor groups, vendors and lenders. With the highest cost structure of any American carrier, it posted in July a second-quarter loss of US$248 million -- 10 times its year-ago loss and the second-biggest loss by a US carrier this earnings season. US Airways met with some of its bondholders on Thursday to talk over its plan to restructure outside of bankruptcy, but an analyst said it may have reached an impasse in talks with lenders, or with one of the labor groups that have not ratified wage cut packages. "They certainly did not hit a wall with us," said Joseph Tiberi, a spokesman for US Airways machinists. Tiberi said the group will have reviewed the carrier's proposals by Wednesday. "We don't know how bad this is, but it is definitely choosing between the lesser of two evils," he said. Shares of US Airways rose 5 cents on Friday to close at US$2.45 on the New York Stock Exchange, far off the 52-week high of US$18.32 and close to the 52-week low of US$2.05.