Tue, Sep 14, 2004
Troubled Airline May Face Liquidation
Once-again bankrupt US Airways is
reportedly subsisting on day-to-day passenger receipts and cash on
hand. The airline, which declared bankruptcy for the second time
Sunday, is a prime candidate for liquidation unless it can find the
cash to clear bankruptcy court.
"This management team isn't here to preside over a liquidation,"
US Airways bankruptcy lawyer Brian Leitch from Arnold & Porter
told the judge. "We have every intention to have a successful
reorganization." He was quoted by Bloomberg.
US Bankruptcy Judge Stephen Mitchell okayed the airline's
request to use some of its $750 million in cash as operating
capital. But the line between what US Airways has and what it owes
is terribly thin. In bankruptcy documents, it listed $8.8 billion
in assets -- and $8.7 billion in debts.
Most of US Airways assets along with most of its cash, has been
promised to the Air Transportation Stabilization Board and General
Electric, which loaned the company enough money to exit its first
bankruptcy.
Blaming The LCCs
US Airways Chairman David Bonner
makes no bones about it. Low-cost carriers like Southwest and
JetBlue have "turned the industry on its head in the past year."
And yet, becoming what he loathes may be the only way out for
Bonner and his airline. But the company faces pilots and flight
attendants unwilling to give up more for their airline. While US
Airways wants another $800 million in concessions on its way to cut
$1.5 billion out of its annual budget, the unions have just said
no. Loudly.
The company now has $1.73 billion cash-on-hand. It's spending
about $3.3 million a day on operations.
And, in light of United Airlines' attempts to kill its
contributions to union pension plans, US Airways says it can't meet
its pension obligations. It's proposed to the bankruptcy court that
it be allowed to "freeze or terminate" the plans or face
dissolution.
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