US Airways Declares Bankruptcy
The nation’s sixth-largest carrier, US Airways said bankruptcy protection would allow it to restructure without disrupting flights, although it warned it might scale back or cut some of its routes. The company lost nearly $2 billion last year.
US Airways was among the carriers most damaged by the Sept. 11 attacks because its flights primarily run along the East Coast and cater to business travelers. The government’s three-week shutdown of the Ronald Reagan Washington National Airport outside Washington D.C., where US Airways is a major carrier, also hurt the company’s finances.
On Monday, lawyers for US Airways asked a bankruptcy judge to approve $500 million of debtor-in-possession financing from a group of lenders, led by Credit Suisse First Boston and Bank of America Corp., to keep its flights running.
The company’s filing papers list some $7.81 billion in assets and $7.83 billion in liabilities. Officials said the company hoped to move out of bankruptcy in the early part of 2003.
“Ultimately, this effort is about our customers, employees and the communities we serve, as we seek to fix the airline’s finances and return to profitability,” David N. Siegel, the chief executive and president, said in a prepared statement.
“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.”
The Arlington, Virginia-based airline’s decision comes after it secured preliminary approval July 10 for a $900 million federal loan guarantee on a $1 billion loan — part of a $10 billion loan guarantee program administered by the Air Transportation Stabilization Board, set up by the federal government after Sept. 11.
US Airways must first receive concessions from its labor unions, vendors and certain creditors before the loan is granted. The company and its labor unions have been negotiating concessions since last month, when executives asked labor leaders for cuts to save some $950 million a year.
The airline industry, already suffering from the overall economic slowdown last year, has struggled to recover from post-Sept. 11 business and leisure travel cutbacks, reporting losses of $11 billion last year and $1.4 billion last quarter.
Vanguard Airlines, a smaller carrier, declared bankruptcy last month and Midway Airlines, based in Raleigh, N.C., halted service after filing for bankruptcy protection a year ago.