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America West Airlines Files for Chapter 11 Protection

June 28, 1991

PHOENIX (AP) _ America West Airlines filed Thursday night for Chapter 11 bankruptcy protection from its creditors, joining three other major airlines who have fallen on hard times since the Persian Gulf War.

The airline will continue to operate as usual and the filing will have no immediate impact on employees or passengers, airline officials said.

The filing in U.S. Bankrupty Court followed months of extreme financial difficulty by the debt-ridden, expansion-minded carrier.

″We have explored many alternatives in the last few months to arrange financing to see us through the most difficult time in the airline industry’s history,″ Chairman Edward Beauvais said in a statement. ″Unfortunately these endeavors have not been successful thus far.″

The airline had offered half-price ticket sales last winter in an effort to raise cash from leisure travelers. Last month it announced fare cuts aimed at business travelers.

The 8-year-old carrier joins Continental, Pan Am and Midway in bankruptcy court. All four are seeking to reorganize their business while the court protects them from creditors.

The combination of higher fuel prices and fewer passengers during the Gulf War and recession cut deeply into airline profits.

″This does not mean that America West is going out of business,″ Beauvais said. ″It means that America West will have the time to realign its routes and revise its organization structure to meet the challenges that face our industry today.″

America West serves 56 cities with 735 flights and employs 15,000 people, including approximately 9,500 in the Phoenix area.

On June 17, America West announced it would skip a $6 million interest payment due July 1 on $100 million in corporate bonds. That news followed the company’s June 6 announcement that it was suspending aircraft lease payments. America West leases 80 of its 115 airplanes, mostly Boeing jets.

When it announced the bond development, America West said it was legally precluded from paying the interest because it had to pay the aircraft suppliers first.

America West reported losses of $50 million in 1991′s first quarter and $75 million for all of last year 1990. The company cited the war and recession for its problems.

The company said last week it was considering a variety of cost-cutting measures, including service cutbacks, layoffs and pay cuts.

Australia-based Ansett Airlines owns 20 percent of America West, and company officials said earlier this month they were negotiating with other foriegn carriers for marketing links and, more tentatively, another minority owner.

Trans World Airlines has avoided joining the others in bankruptcy court by trying to buy its way out of debt. The airline has offered to pay bondholders a fraction of the face amount of their bonds and extended the deadline to July 5.

But at least one court ruling in New York and a separate bondholder’s lawsuit in Chicago present hurdles to the plan.

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