Pilots' Pension Still $800 Million Behind

On Tuesday, US Airways got a major go-ahead in the airline's plan to emerge from Chapter 11 bankruptcy on March 31, a date they announced a long time ago.

A company press release said, "Following a strong vote of approval by the company’s creditors, the U.S. Bankruptcy Court today confirmed US Airways’ plan of reorganization, allowing the company to continue on its path to a March 31, 2003, emergence from Chapter 11.

"Judge Stephen S. Mitchell of the U.S. Bankruptcy Court of the Eastern District of Virginia for Alexandria ruled that all necessary requirements have been met to implement its reorganization. Yesterday, the company reported that all necessary creditor classes of all eight debtors in the Chapter 11 cases had voted to accept the reorganization plan. The acceptance rate by claim holders voting was 80.77 percent and by claim amount voting was 81.18 percent, well above the required vote needed for approval.

"With the nation on the verge of war and the economy impacted by geopolitical uncertainties, the court’s approval today is absolutely critical to our efforts to complete our restructuring by March 31," said US Airways President and Chief Executive Officer David N. Siegel. "Only upon emergence from Chapter 11 protection can we access the $1 billion loan from the Air Transportation Stabilization Board (ATSB) and the new equity investment of $240 million from the Retirement Systems of Alabama (RSA). This new injection of capital is essential so that we can ride out the impact of war and economic turbulence, and implement our new business plan."

Siegel said that the company’s full attention will focus on completing the remaining tasks of its restructuring prior to emerging from Chapter 11, including:

• Resolve all remaining issues with the Air Line Pilots Association on the pilot pension plan and secure approval from the Pension Benefit Guaranty Corporation (PBGC) and the bankruptcy court;
• Finalize a new agreement with one of the banks that has expressed interest in processing the company’s credit card transactions;
• Close on the ATSB loan and the new equity investment from RSA.
• Siegel expressed his ongoing appreciation to the airline’s employees, customers and business partners for supporting the company’s restructuring, allowing it to complete its Chapter 11 reorganization in less than seven months.

The pilots' union must still come to grips with its own figures, that say the pension fund will be underfunded by about $800 million by 2010.

Unsecured creditors, who are owed over $60 billion by the bankrupt carrier, will get less than 2¢ on the dollar -- and even then, they'll be paid in the "new" airline's stock, not cash. The creditors and their current and future customers must absorb the $58.5 billion, plus lost interest, that the law lets US Airways not pay.

Management stands to do OK...

Airline management will get an 8% share of the "new" airline's stock. Existing shareholders get nothing.

FMI: 8-K report