Bombardier, Embraer and GECAS seek to limit damage from US carrier's second Chapter 11 filing in two years
Bombardier, Embraer and GE Capital Aviation Services (GECAS) have acted quickly to stem the short-term impact of US Airways' latest bankruptcy protection filing, but admit uncertainty about its long-term effect.
The three companies face some of the greatest exposure to US Airways, which on 12 September filed its second Chapter 11 bankruptcy protection in two years. They hold billions of dollars in financing for the carrier's May 2003 firm order for 170 regional aircraft and 380 options.
Bombardier was the first to act, announcing that 16 aircraft from the 43 CRJ700s and two CRJ200s awaiting delivery would be delivered to GECAS under the original purchase agreement, while four would be reconfigured for other customers. The remaining 25 deliveries were deferred, as per a July agreement with the airline.
Embraer has suspended delivery of the 63 remaining Embraer 170s due for delivery to US Airways.
Embraer president Mauricio Botelho has reportedly told staff the suspension could affect its production targets over the next 18 months to two years. In contrast, Bombardier says its measures will ensure production levels for the rest of its financial year.
But with 37% of Bombardier's order backlog assigned to US Airways and financially ailing Delta Air Lines, analysts question its ability to restore profitability.
Bombardier says it will "manage delivery schedules and production rates proactively". Should US Airways fail to emerge from protection, its orders "could go to other customers" such as Air Canada or US regional SkyWest Airlines.
Airbus - scheduled to deliver the first of 29 new aircraft to US Airways in 2007 - remains unconcerned, noting that the A330-200s and A320 family aircraft on order "are in short supply" and there is "a lot of demand for them".
Separately, GECAS has temporarily suspended financing RJs for US Airways "and will be talking to [the airline] about if and how this might continue while they are in Chapter 11". The GE unit leases 122 aircraft to US Airways.
US Airways has listed liabilities of $8.7 billion against assets of $8.8 billion. However, the airline also owes $7.5 billion under future aircraft purchase and lease obligations alone.
With "defaults or cross-defaults looming" under agreements with Bombardier, Embraer and GECAS - as well as with the US government - US Airways "had no practical alternative but to file for Chapter 11 protection", says the airline.
MARY KIRBY / WASHINGTON DC
Source: Flight International
