Late word at ANN HQ indicates that the "other shoe" has dropped in the continuing struggles of embattled US Airways. Already in bad shape before the wounding of an entire industry following 9/11, US Airways has filed for bankruptcy protection under Chapter 11 of the US Bankruptcy code.

Even with this past week's concessions by pilots and flight attendants, the airline couldn't hold on over the weekend, waiting, always waiting, for the feds to guarantee loans with taxpayer dollars. Without concrete assurances that those dollars were forthcoming, the Board decided Sunday to huddle under Chapter 11's protection.

US Airways, based in Arlington, VA, is the nation's sixth-largest US airline to complete a restructuring plan and continue to run flights without interruption. The company filed Ch. 11 protection in US Bankruptcy Court for the Eastern District of Virginia.

It lists assets of $7.81 billion and liabilities of $7.83 billion, though it claims that it expects to emerge from bankruptcy in 1Q, 2003. US Airways, obviously preparing for this step well in advance, reports that it already has "secure commitments for $500 million" in debtor-in-possession financing.

A hearing on the Company's first day motions has been scheduled for 10:30 a.m. EDT on Monday, Aug. 12, 2002, before the Honorable Robert G. Mayer in Courtroom No. 3 at the Martin Bostetter Jr. U.S. Courthouse in Alexandria.

Official Statement from US Airways: "On August 11, 2002, US Airways Group announced that to complete its restructuring initiatives and obtain cost-savings from some of our aircraft lessors and financiers as a means of ensuring the Company's return to profitability, the Company and certain of its subsidiaries, including US Airways, PSA Airlines, Allegheny Airlines, Piedmont Airlines, MidAtlantic Airways, US Airways Sales and Leasing and Material Services Company, filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code.

The Company expects that a restructuring under court supervision would be accomplished on a "fast-track" basis and have targeted emergence from Chapter 11 in the first quarter of 2003. The Company has adequate cash resources to fund our business during the restructuring period. US Airways has secured commitments for $500 million in debtor-in-possession (DIP) financing from a group of institutions led by Credit Suisse First Boston and Bank of America Corp., with participation from Texas Pacific Group, among others. These funds will ensure that we will have adequate resources to buy goods and services and fulfill all obligations to employees and customers while we restructure.

In a move to strengthen its balance sheet, US Airways announced that Texas Pacific Group has entered into a memorandum of understanding to provide a $200 million investment in the new equity of the airline upon its emergence from Chapter 11 protection, which the Company anticipates will be coupled with the $1 billion collateralized loan backed by the federal guarantee that has been conditionally approved by the Air Transportation Stabilization Board (ATSB).

It is important that our valued passengers and other constituents understand that US Airways is not going out of business. Chapter 11 gives us time to renegotiate contracts with key aircraft lessors and financiers and return aircraft no longer needed. Every ticket will be honored and accepted; refunds and exchanges will be in accordance with current US Airways' policies. Our Dividend Miles program will continue to offer millions of fliers significant award benefits throughout the restructuring period and beyond.

Since early 2002, US Airways put in place a three-part restructuring plan that involved improving liquidity, increasing revenues, and reducing costs, to allow the Company to take advantage of its competitive strengths and return to profitability. The Company's restructuring plan is predicated upon achieving binding commitments for cost-savings from employees, aircraft lessors and financiers and other parties. The majority of our employee groups and their union leadership overwhelmingly supported our business plan objectives in the form of wage reductions, revisions to benefits and some work rule changes. While US Airways was able to successfully negotiate cost-savings from most of its employee groups, the Company determined that it was unlikely to conclude consensual negotiations with certain vendors, aircraft lessors and financiers in a timeframe necessary to complete an out-of-court restructuring.

We will now focus our energies on utilizing the Chapter 11 process to return US Airways to a profitable and highly competitive company. US Airways has long been an integral member of the cities and towns in which we live and work - as an employer, customer, and a service provider. Our ability to complete our reorganization is too important to too many people and we intend to remain a viable competitor for many years to come."

FMI: www.usairways.com