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.

FMI: www.usairways.com