Panel: America West must get second opinion

Wednesday, Dec. 19, 2001 | 11:01 a.m.

SUN STAFF AND WIRE REPORTS

America West Airlines, the second-busiest airline in Las Vegas, has been told to get a second opinion on a $445 million loan before a government panel will back the loan.

The Airline Stabilization Board requested that the Arizona-based company find an additional lender for its loan proposal before it considers the airline's request for a share of $10 billion in loan guarantees set up to help airlines rocked by the Sept. 11 hijackings.

It is the second time the board has made additional requests of the airline, which has Sen. Jon Kyl, R-Ariz., concerned that the panel is merely setting up obstacles so it won't have to approve the loan for the cash-strapped Tempe, Ariz., company.

"The board keeps raising the bar on them and they keep trying to respond, and I'm not sure if they can," said Kyl. "My concern is that this not be just a way of saying no without saying no."

America West spokesman James Sabourin said the airline was exploring some "additional creative financing" at the board's request, but could not elaborate.

A loan guarantee essentially makes the government a co-signer on the business' loan, agreeing to pay the debt if the company folds. In America West's case, the government would agree to repay $400 million of the $445 million loan.

On Dec. 11, America West filed an amended loan application that offered the government the option to buy 3.4 million shares -- 10 percent of the company's publicly traded stock -- at a set price.

When it submitted its application, America West chairman Douglas Parker said the company expects to lose money next year but should return to profitability in 2003 and repay the loans by 2008.

America West, the nation's ninth-largest air carrier, is generally regarded as one of the shakiest financially.

In the weeks immediately following the terrorist attacks, America West was losing about $5 million a day. For the last several weeks, the losses have been about $1 million a day.

The company lost $31.7 million in the third quarter of 2001, despite receiving $60 million in post-Sept. 11 government assistance.

Separately, America West said it won at least $550 million in concessions from aircraft makers and lessors, as part of a $700 million concession package that may help the airline company get federal loan guarantees and avoid a possible bankruptcy.

America West, which is seeking $400 million in loan guarantees, would give the aircraft makers and lessors debt securities convertible to Class B common shares and warrants to buy the shares that could result in a stake of 35 percent to 40 percent of the stock, the parent of America West Airlines said in a Securities and Exchange Commission filing.

The $700 million in concessions and a $445 million loan would be triggered by receipt of the guarantees. The plan also includes $10 million in grants, loans and deferrals from Arizona and Phoenix; $5 million a year in cost reductions from vendors; deferral of new aircraft deliveries and the early return of some leased planes; 2,000 job cuts that already have occurred; and wage freezes and concessions.