US Airways has survived its most recent crisis, gaining backing from its two main sponsors until the arrival of the high season helps cash flow resume, but many challenges remain to exit bankruptcy successfully.
The airline faces a deadline of 30 June to be ready to leave bankruptcy protection even as low-cost competitors make increasing inroads on its East Coast markets, as flyers grow increasingly wary of its prospects and as one militant union threatens action.
By May, Southwest Airlines, whose entry last year into its Philadelphia hub helped precipitate US Airways' September filing for bankruptcy, will have begun service at Pittsburgh, moving into yet another US Airways stronghold. Meanwhile, fare cuts introduced by Delta Air Lines, which cap many economy fares at about $500 one-way, are hurting US Airways more than other legacy carriers, Calyon USA Securities analyst Ray Neidl says.
Nevertheless, its two main backers have expressed enough confidence in the airline that they will continue backing it. The Air Transportation Stabilisation Board, which arranged a $1 billion loan for US Airways during its 2002-3 bankruptcy reorganisation, says the carrier could continue using cash generated by the federal funds, and GE's leasing giant GECAS says that the carrier had met the deadline for showing it a cost-savings plan.
GECAS owns 150 US Airways aircraft while GE also maintains almost all of its engines. GE says the airline had demonstrated that it had $100 million in new cost savings and liquidity. GE has become the carrier's main private-sector banker and restructuring partner, and has arranged for resumption of deliveries of 70- and 90-seat jet regional jets, deliveries that had been suspended after the September bankruptcy filing.
US Airways chief executive Bruce Lakefield says passengers could count on the airline's continuing existence. In a message to employees, he says: "I'm upbeat. We have a lot of work to do, but things are getting done." One thing the airline will have to do is some serious fence-mending: it lost much goodwill at its Philadelphia hub over the Christmas rush when an unauthorised industrial action created days of chaos and thousands of lost bags went astray for days.
The airline received immeasurable amounts of the worst possible publicity, leading some Philadelphia passengers to vow never to fly US Airways again, according to Business Travel Coalition chairman Kevin Mitchell, whose advocacy group is based near Philadelphia.
The disruptions may have cost the carrier as much as $100 million. In a bid to regain public favour, the airline brought in hundreds of volunteers to staff the Philadelphia airport the week after Christmas, but travel agents say that flyers are not booking US Airways flights more than a few weeks in advance. That reflects the Christmas crisis and continuing doubts about the airline's survival, says Mitchell.
Even though most of its unions have agreed to the carrier's most recent request for concessions, its International Association of Machinists union is voting on authorising a strike at the same time as it is voting on a $270 million concessions package.
If the union does attempt to strike, US Airways could find itself writing labour law because legal authorities are divided over the legality of industrial action against a carrier that is in bankruptcy protection.
In December, a bankruptcy judge had given the airline the right to cut wages unilaterally. That is a first in recent airline history, although US Airways is trying to negotiate cost cuts instead of imposing them. In any event, its continued survival against rising odds is itself a new chapter in airline history, with optimists saying it reflects tenacity and determination, while others, such as Teal Group analyst Richard Aboulafia, say that US Airways demonstrates how hard it is for an airline to die when so many parties - government, equipment owners, airports, employees, management - have a stake in keeping it alive.
DAVID FIELD WASHINGTON
Source: Airline Business
