CHRIS KJELGAARD / WASHINGTON DC
Airline is close to clinching all the deals it needs for reorganising but may still choose bankruptcy protection
US Airways has obtained almost all the support it needs to restructure, but the airline refuses to dismiss the possibility of filing for Chapter 11 bankruptcy protection.
Chief executive David Siegel says he would prefer to complete the carrier's financial restructuring without a Chapter 11 reorganisation - and a tentative deal with its pilots would, if ratified, help achieve this - but US Airways warns that the bankruptcy threat is still real.
US Airways could choose to enter bankruptcy voluntarily to help obtain the medium-term financial concessions it requires from lenders, lessors, suppliers and two major employee unions that have been slow to agree pay cuts. But the carrier runs the risk that recent decisions to stop payments on certain aircraft leases and debt finance, to force creditors to begin negotiating concessions, could instead force it into involuntary bankruptcy - where the airline would have little control over its financial assets and prospects.
Because of provisions in many financing agreements, US Airways' payment stops on some aircraft will quickly put it into default on other loans and leases. If the airline continues to withhold payments, eventually a creditor will file a court petition to have the airline declared bankrupt.
Hours before US Airways learned it had conditionally been approved for a $900 million government loan guarantee, Siegel was telling union leaders the carrier was just days away from bankruptcy. Despite negotiating a pilot agreement including $465 million of annual pay concessions and relaxed scope clauses, the carrier has decided to reinforce the bankruptcy threat.
A bankruptcy filing would prevent US Airways from using its loan guarantee to secure a planned $1 billion commercial loan. US Airways would be able to use the loan guarantee only after its emergence from Chapter 11 protection, when the need for funding might be less critical.
Source: Flight International
