US Airways Files for Chapter 11
%mlink(STRY:; PHOTO:NY118-081102; AUDIO:141%)
ALEXANDRIA, Va. (AP) _ US Airways, hard hit by slumping travel after the Sept. 11 terrorist attacks, filed for Chapter 11 bankruptcy protection Sunday, the company said.
The first major carrier to declare bankruptcy since the attacks, US Airways said all of its flights are expected to continue without interruption. It had mentioned bankruptcy as a possibility after it lost $2.1 billion during 2001.
Although US Airways didn’t lose any planes Sept. 11, its business was severely hurt when Reagan National Airport, the airline’s main hub, was shut down for three weeks and then reopened with only a limited schedule.
The Arlington, Va.-based airline said it has received $500 million in private financing to keep operating while it reorganizes.
``US Airways will continue to operate while we complete our financial restructuring, and our customers should be confident that we will continue service to the more than 200 communities in our network,″ said US Airways president and chief executive David Siegel. He said the airline will seek a return to profitability and could emerge from bankruptcy by the first quarter of 2003.
The airline, the nation’s seventh-largest and the 14th largest in the world, listed $7.81 billion in assets and $7.83 billion in liabilities in its petition, filed with the U.S. Bankruptcy Court for the Eastern District of Virginia. The court scheduled a hearing for Monday.
US Airways has been trying to wring $950 million in cost cuts from its 40,000 employees as part of a restructuring plan that was designed to stave off bankruptcy. Last week, it reached agreements with unions representing its pilots and flight attendants that called for wage and benefits cuts in order to keep the airline operating.
The airline said its interim financing will come from a group led by Credit Suisse First Boston and Bank of America Corp., with participation from Texas Pacific Group, which has agreed to provide $200 million in equity when the carrier emerges from bankruptcy.
Richard P. Schifter, a partner with Texas Pacific Group, said the financiers were impressed with US Airways’ restructuring plan.
``Given the progress made to date, the time required in Chapter 11 to complete the restructuring should be relatively brief,″ Schifter said.
The federal government has also agreed to guarantee $900 million of a conditional $1 billion loan as a part of a major bailout by the federal Air Transport Stabilization Board, which US Airways will receive when it emerges from bankruptcy.
US Airways Group Inc., which owns 340 jets, last year carried 56 million passengers to 200 destinations in the United States, Canada, Mexico, The Caribbean and Europe.
The much smaller Vanguard Airlines filed for bankruptcy last month, citing similar problems after Sept. 11. The federal Air Transportation Stabilization Board also rejected the airline’s request for an $8 million loan guarantee.
On the Net: