New terms will help the airline lowest costs and reduce debt,
but there are strings attached
US Airways Group Inc.,
GE Capital Aviation Services, and GE Engine Services have reached a
comprehensive agreement on aircraft leasing and financing, and
engine services, which will provide the airline with short-term
liquidity, reduce debt, lower aircraft ownership costs, enhanced
engine maintenance services and leases for new regional jets, while
preserving the vast majority of US Airways’ mainline fleet
owned by GECAS.
If approved by the U.S. Bankruptcy Court and all conditions are
met, the transaction will provide US Airways with $140 million in
interim liquidity through a new bridge facility and the deferral of
aircraft debt and lease payments coming due over the next six
months. In total, US Airways expects the agreement to provide over
$80 million in annual cash savings and aircraft ownership and
engine maintenance costs. In addition, GECAS will lease up to 31
new 70- and 90-seat regional jet aircraft to US Airways over the
next three years, and US Airways would return 25 of its 281
mainline aircraft over the same time period. The agreement calls
for the return of 10 Airbus 319s in 2005, and 15 Boeing 737-300s in
2006 and 2007.
In exchange for these significant commitments by GECAS and GEES,
upon successful emergence from Chapter 11, US Airways would issue
to GECAS a 15-year convertible note for between $125 and $216
million, depending on future lease options selected by US
Airways.
The agreement was filed with the U.S. Bankruptcy Court of the
Eastern District of Virginia today and requires court approval by
December 17. In addition to court approval, the agreement requires
that by January 14, 2005, the company achieve a series of cost
reductions and restructuring milestones, and it must complete its
judicial restructuring and exit Chapter 11 by June 30, 2005.
“The fact that
GECAS remains committed to working with us is an enormous boost for
our restructuring efforts and the implementation of our
Transformation Plan,” said Bruce R. Lakefield, US Airways
president and chief executive officer. “We still have a lot
of work to do, beginning with the completion of labor negotiations
with those remaining unions that still do not have cost-savings
agreements in place.
“In the short term, we can return the 10 Airbus aircraft
in 2005 on a schedule that will not impact our customers and will
be consistent with our plans to increase aircraft utilization and
point-to-point flying next year. The gradual return of 15 older
737-300s over the next three years, coupled with the regional jet
financing agreement, will allow us to return to a path of moderate
regional jet growth, enabling us to effectively serve smaller
routes or develop new markets,” said Lakefield.
NTSB Prelim: Funk B85C
See All