US Airways optimistic despite bankruptcy

Monday, Aug. 12, 2002 | 11:05 a.m.

SUN STAFF AND WIRE REPORTS

ARLINGTON, Va. -- US Airways has become the first major airline to declare bankruptcy since last year's terrorist hijackings, a move that came 11 months to the day after the industry was rocked by the attacks.

US Airways, the nation's seventh-largest carrier, said flights will continue normally, and the company expressed optimism that it will emerge from bankruptcy early next year.

In its Chapter 11 bankruptcy filing Sunday, the company listed assets of $7.81 billion and liabilities of $7.83 billion and said its cash flow was relatively stable. But Chris Chiames, US Airways' vice president for corporate affairs, said that would not last with the peak summer travel season about to end.

"You do not want to enter bankruptcy in a poor cash position," Chiames said at a brief news conference.

Chapter 11 allows a company to continue operating and hold its creditors at bay while it puts its finances in order. A hearing in U.S. Bankruptcy Court in Alexandria was scheduled today to discuss the filing.

While US Airways holds dominant positions at East Coast airports, it is a relatively small player at McCarran International Airport, with eight scheduled round-trip flights a day.

The airline has three daily nonstop flights each to Pittsburgh and Philadelphia and two to Charlotte, N.C.

US Airways competes with National and America West airlines on the Philadelphia route, but is the only carrier with nonstop flights to and from Pittsburgh and Charlotte.

The airline's eight flights represent 1,270 seats a day for the market, about a 2 percent share at McCarran, making it the 10th largest carrier by capacity in Las Vegas. So far this year, it has brought 320,363 passengers to Las Vegas, ranking it 10th in that category at McCarran.

US Airways had been struggling well before Sept. 11. In July of 2001, the airline suffered a blow when federal regulators balked at a proposed purchase by United Airlines that would have given US Airways investors $60 a share.

After the attacks, no airline was harmed financially more than US Airways. The Arlington-based carrier is the largest airline at Reagan Washington National Airport, which remained closed for weeks after the attacks.

In addition, Chiames said, the airline suffered disproportionately when many travelers opted to drive or take the train instead of making short-haul flights up and down the East Coast -- US Airways' strength.

"Clearly US Airways was impacted more than any other carrier after Sept. 11," Chiames said.

Last month, the federal government agreed to guarantee $900 million of a $1 billion loan package the airline had hoped would allow them to stave off bankruptcy. But US Airways executives had always warned that bankruptcy was a possibility even if they obtained the federal loan guarantee.

Chiames said the bankruptcy will not affect the company's long-term restructuring plan, which calls for cutting costs by $1.2 billion a year.

The company also said it expects to generate an additional $200 million a year through a recently announced "code-share" agreement with United that allows the two airlines to sell tickets on each other's flights. The partnership combines US Airways' strength on the East Coast with United's strength on east-west routes.

United has lost more than $850 million this year, and the Chicago-based carrier retained a bankruptcy lawyer shortly after the Sept. 11 attacks. United Airlines is also seeking $1.8 billion in government guarantees.

Shares of US Airways were unchanged at $2.45 this morning on the New York Stock Exchange.

US Airways has had the industry's highest labor costs, but they have been cut back significantly through a series of deals with its labor unions. US Airways has been trying to get $950 million in annual savings from its employees.