US Airways has become the largest carrier in the USA to seek a federally guaranteed loan, although United Airlines seems certain to file an application too.
Even assuming US Airways wins backing for the $900 million financing, it is not certain it will survive, as loan approval by an increasingly sceptical Air Transportation Stabilization Board (ATSB) is far from certain, says Morningstar stock analyst Jonathan Schrader. The board has recently turned down a similar petition from Vanguard Airlines and appears biased against airlines that were in danger of bankruptcy before the September attacks, he says.
America West Airlines, the only successful loan guarantee applicant so far, won its $364 million in loan backing last year despite a strongly dissenting vote. Unlike US Airways, America West had in place agreements with its unions and suppliers. Although US Airways has made progress in its pilot negotiations, the deals are not yet finalised. It has won $400 million so far in wage and work-rule concessions. If US Airways is unable to obtain the cost concessions and a loan guarantee which would cover $900 million of a $1 billion total loan, "it will likely file for bankruptcy," says Philip Baggaly of Standard & Poor's.
However, Jonathan Ornstein, the Mesa Air Group chief executive and a major US Airways shareholder, says Mesa might help US Airways to finance a restructuring or, even if it is forced into bankruptcy, may possibly provide debtor in-possession financing.
United chief executive John Creighton is firmly committed to seeking federal loan guarantees when it completes employee concession "shared-sacrifice" negotiations, but "whether or not loan guarantees are forthcoming, the survival of United is not in doubt," he says. United and its pilots have a deal, but its other unions have yet to agree.
The latest carrier to file a loan plea is Indianapolis-based American Trans Air. It has applied to the ATSB for a $165 million federal loan guarantee.
Source: Airline Business
