Is U.S. Air Nearing a Chapter 11 Filing?

Fri Aug 13, 2004

NEW YORK (Reuters) - US Airways Group Inc. could seek bankruptcy protection by mid-September if it does not get the cost cuts it needs, investment bankers working for the airline's pilot union said in a report.

US Airways shares fell more than 9 percent on Friday, after the 26-page report by Glanzer & Co. released this week to 3,400 ALPA members, essentially confirmed the No. 7 U.S. airline's wary outlook for its future.

Bill Pollock, chairman of the Air Line Pilots Association union's group at the Arlington, Virginia-based carrier, said in a letter the union's leadership "does not disagree in principal with the conclusions" reached by the union's banker.

"The reality of our financial situation speaks for itself," the letter said.

US Airways, in response, said it will not comment on the specifics of the report. "But we do concur with the conclusion that it is in the best interests of the company and employees that we quickly reach consensual agreements with all of our labor unions so that we achieve the necessary cost reductions and can fully implement our transformation plan," the airline said.

Last month, US Airways Chief Executive Bruce Lakefield told employees that if the carrier fails to cut costs, it "could just run out of steam sometime next year."

The struggling carrier, which is looking for $1.5 billion in cost cuts by summer's end, said earlier this month it will offer its employees a sweeter profit-sharing plan to help it secure another round of labor concessions as it tries to operate more like low-cost rivals.

US Airways lowered its cost structure during its eight months in bankruptcy protection in 2002 and 2003. But soaring fuel prices and competition from low-cost carriers have made it difficult for the airline to succeed.

As part of its drive to cut costs, US Airways has said it needs about $800 million of labor concessions. This includes $295 million from pilots, $263 million from mechanics and fleet service workers, $122 million from reservation agents and passenger service and ticket counter employees, and $116 million from flight attendants.

Pilots have offered to take pay cuts of 12.5 percent and work more hours through 2008. Flight attendants have said they would discuss concessions.

The carrier on Thursday said it will discontinue nonstop service from Pittsburgh on 20 routes, but maintain service from that city to 50 markets.

US Airways shares fell 23 cents, or 9.02 percent, to $2.31 in trading on the Nasdaq. The stock began the year at $6.22.

Home Loans Articles, Mortgage Loans Articles, Financial News