Carrier: "On Track" To Emerge From Bankruptcy

US Airways announced it has made payments on its 2000-1 and 2000-3 pass through trust related to Airbus aircraft. These payments, totaling $64.2 million, were due on Feb. 20, 2003, and March 3, 2003, respectively, and were made prior to the end of the applicable cure periods.

In addition, US Airways announced that, in connection with the Airbus aircraft payments, it had drawn down $69 million of the Retirement Systems of Alabama's (RSA) debtor-in-possession financing facility (DIP). The remaining $131 million of the RSA DIP continues to be subject to the applicable closing conditions.

Hurdles Ahead 

Although US Airways says it is on track to emerge from Chapter 11 on March 31, 2003, it first must resolve several remaining issues, each of which is critical to the company, including:

• Successful resolution of its pilot pension obligations.  The company has begun formal negotiations with the Air Line Pilots Association (ALPA) following the U.S. Bankruptcy Court's approval to terminate the existing pension plan.
• The U.S. Bankruptcy Court must confirm the company's proposed Plan of Reorganization.  Balloting on the plan by the company's creditors closes on March 10, 2003, and a confirmation hearing is scheduled for March 18-20, 2003.
• Defer or make payment on 2001-1 pass through trust certificates related to additional Airbus aircraft, due on March 20, 2003.  Total value is $27 million.
• Reach agreement on a replacement credit card processor.

US Airways was granted authorization on Jan. 17, 2003, by Judge Stephen S. Mitchell of the U.S. Bankruptcy Court of the Eastern District of Virginia, to solicit approval from its creditors on its plan of reorganization that provides for the airline's emergence from Chapter 11 protection in March 2003.

Following a four-day hearing, on March 1, 2003, Judge Mitchell rendered a decision stating that US Airways had met the financial standards for a distress termination of the defined benefit pension plan for its pilots. The court's finding was required for the Pension Benefit Guaranty Corporation (PBGC) to begin consideration of its separate approval process to formally terminate the existing pilot pension plan by March 31, 2003, in conjunction with US Airways' planned emergence from bankruptcy protection set for that same day. Judge Mitchell also authorized US Airways to implement a defined contribution pension plan on terms to be worked out between the company and ALPA.

US Airways has received proposals from and is in negotiations with potential credit card processors for Visa and MasterCard transactions, once US Airways emerges from Chapter 11 bankruptcy protection and transitions its current relationship with National Processing Corp. (NPC), a division of National City Bank of Cleveland. US Airways currently has an agreement with NPC, which expires March 31, 2003, but which provides for a 45-day extension if a series of milestones are met.

US Airways also has a debt obligation payable March 20, 2003, totaling $27 million dollars for 14 Airbus aircraft. The company currently is in discussions with certain interested parties regarding these payments and anticipates reaching agreement during the five business-day cure period, allowing for the extension of this payment, if necessary.

FMI: www.usairways.com