US Airways is to apply for a federally-backed loan of around $1 billion to ensure survival while it restructures, the airline said last week.
A cost-cutting exercise aimed at saving $1.2 billion will start as soon as possible, the airline told trade union representatives on 16 May, but the airline's forecast remains gloomy. It says that there are "no assurances that the company can achieve or sustain positive cash flow from operations".
US Congress, however, may soon move to restrict access to the $5 billion in grants and $10 billion in loan guarantees available to support airlines after the 11 September attacks through the Air Transport Stabilisation Board, as the 28 June deadline for applications nears.
If US Airways cannot get federal support, it warns, it would face "alternative restructuring… in the context of a judicial reorganisation" -in other words, bankruptcy protection. Higher costs and heavier debts than its rivals mean that US Airways is on much shakier ground than its troubled competitors, such as United Airlines.
US Airways' survival depends on employee relations. Almost $1 billion in savings will come from pay and benefit cuts, although there should be no redundancies, says vice president employee relations Jerry Glass.
Source: Flight International
