KAREN WALKER / WASHINGTON DC
Talks progress as American Trans Air becomes latest airline to file for guarantees
US Airways could file for bankruptcy this week unless unions agree to wage cuts. The concessions are needed to back up its application for a $900 million loan guarantee from the US government.
The carrier submitted its application to the US Air Transportation Stabilization Board (ATSB) for a $900 million guarantee of a proposed $1 billion commercial loan on 10 June. It needed to file the application before the loan guarantee programme's 28 June deadline, but stresses that a "finalised" version is still being crafted.
Winning $950 million worth of cost concessions from its labour groups will be key to US Airways' chances of gaining approval. Although progress was made last week during a series of counter-proposals - notably with the Air Line Pilots Association (ALPA) - US Airways has a long way to go. ALPA agreed to cut annual costs by $400 million - two-thirds of the target.
The Association of Flight Attendants is offering to cut costs by $50 million - short of US Airways' $90 million target. Negotiations with other union groups have not even progressed that far.
Standard & Poor's last week said that it thought US Airways "would likely file for bankruptcy" if it is unable to obtain the cost concessions and loan guarantee. "It will probably run out of cash next winter and might well choose to enter Chapter 11 immediately rather than wait for its cash to drain away," says the rating agency.
Meanwhile, industry observers continue to believe that US Airways' main aim is to become a large regional-jet operator in the eastern USA. The planned scope concessions would allow it to add unlimited numbers of small jets with up to 50 seats and up to 315 70-90-seat regional jets at its new subsidiary Mid-Atlantic Airways.
New chief executive David Siegel has experience of building a large regional jet operation - he is largely credited with Continental Express's success - but turning US Airways around will be a challenge.
American Trans Air (ATA), meanwhile, has filed an application with the ATSB for a $165 million federal loan guarantee to restore liquidity. Although ATA's recovery has been stronger than that of most US airlines, the carrier says the loan guarantee would strengthen its position.
Source: Flight International
