Bankruptcy Coming?

USA320Pilot

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May 18, 2003
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On May 7 US Airways articulated to the SEC in a regulatory filing the "transformation plan", which would boost East Coast flying, reduce its Pittsburgh presence and bring its CASM in line with the LCCs, notably America West and JetBlue.

The company tied the plan's midyear implementation to contractual changes in employee wages, benefits, work rules, scope, and seniority (which is really TOS). Without union cooperation, the company said it will be forced to "re-examine" options, including the potential sale of assets or a "judicial restructuring".

Then it became public knowledge this week the company has hired John Lutz, of the Seabury Group, and FTI Consulting to apparently work on a pre-packaged bankruptcy plan focusing on lease renegotiations, which would include EETCs, municipal bonds, and other debt instruments.

However, in a switch the airline replaced its long time law firm of Skadden & Arps and bankruptcy attorney Jack Butler with Arnold and Porter, the company's new legal advisors.

Moreover, earlier today Business Travel News reported, "Of course, a primary element of the carrier's restructuring is lower labor costs to be negotiated with employee union leadership. There is mounting speculation that US Airways' newest efforts to transform into a more competitive, lower-cost airline and regain financial footing won't progress quickly enough to prevent a fresh bankruptcy filing."

Also noteworthy, apparently Dave Siegel has joined TPG as a consultant and there are fresh reports the airline is looking at M&A scenarios, which could occur inside or outside of bankruptcy.

US Airways has a very short timeline to get labor onboard to quickly lower its unit costs or it will be off to bankruptcy court again before Thanksgiving. Why? The company must comply with the ATSB loan guarantee financial covenants and without labor support, the airline will not.

According to the company, in a column by President and CEO Bruce Lakefield entitled "Fundamental Changes Needed To Transform Legacy Carriers" was published in yesterday’s edition of Aviation Daily. In the column, Lakefield commented on the new competitive industry landscape in which "there is no longer a low-cost threat, only the low-cost reality." This new environment, he said, is forcing "major structural shifts" in the industry, particularly for legacy carriers who must quickly make "deep, fundamental changes" in their business models and cost structures. Permanent changes to legacy carriers’ business models must be made if the industry is to return to – and sustain – profitability, Lakefield wrote.

More specifically for US Airways, Lakefield said that the company’s plan includes new strategies for returning to profitability and lowering annual costs by $1.5 billion. "An airline cannot pin its woes on labor costs alone. That is certainly not our strategy," he said. Lakefield noted that about half of the necessary savings must come from labor with the other half by "playing a volume game through a combination of lower fares and higher aircraft utilization, smarter scheduling, better distribution, and competitive costs."

Thus, the company has three alternatives: reach labor accords with all its unions and implement the "Transformation Plan", reach labor accords with some of its unions and execute a "judicial restructuring", or enter bankruptcy and liquidate or fragment.

So far, only ALPA has entered into negotiations with the company. AFA said it has not reached a decision on whether to engage in a third round of concessionary negotiations with the airline. That decision has been deferred while the unions outside financial advisors analyze US Airways' financial documents and transition plan.

In my opinion, ALPA, AFA, TWU-FCTI, TWU-SIM, TWU-DIS, IAM-Trainers, and possibly the IAM-FSA will obtain new accords and S.1113 protection. I am much less certain about the CWA and IAM-M, which could clearly be the company's target in a formal reorganization. If true, I suspect the company will aim its double barrel shotgun at the CWA, IAM, and any other union who fails to participate in the new business plan with a S.1113 motion. Therefore, it' up to every union to decide their poison, but due to further deteriorating fundamentals I believe every union is playing cards with half a deck.

The question is, will the company come out of bankruptcy intact or will its structure change?

It's unclear at this point what will be the end game, but US Airways has made it clear that the company is looking at M&A activity as the end game. How will it proceed? That's unknown and will likely be determined by a number of factors.

On May 14 the the USA Today reported that Federal officials have been lobbied more quietly on another sensitive topic: airline consolidation. Faced with the possibility of financial failure, US Airways has been building a case in Washington that an airline merger wouldn't be a bad thing. "We've been very frank with regulators and legislators that consolidation is the inevitable next step," says US Airways executive Chris Chiames.

US Airways is in far worse shape than it was three years ago when Justice nixed its deal with United, citing the likelihood of higher fares and reduced competition. The airline hasn't made money since leaving bankruptcy protection last year. Its CEO and chief financial officer recently resigned, and the airline suggested in a securities filing this month that it might be headed back into Chapter 11. In the case of US Airways, a prospective buyer could use the "failing firm" argument to win Justice's approval. That means the company being acquired can't survive on its own, and letting it disappear from the marketplace would be worse for consumers than a merger, the newspaper said.

Moreover, earlier this week I understand PlaneBusiness reported, “As those of you who are familiar with TPG know, the company only moves when it is convinced it has the best possible deal in hand. It just might have that opportunity here -- and sooner than expected. Has this apparent rapid move towards another bankruptcy filing by the airline re-ignited the rumors of a possible move by TPG to "cherry-pick" the assets of US Airways, and eventually try and combine these with a struggling United Airlines at some point in time? Now, what do you think? Yet another reason I remain hesitant to say the demise of US Airways is a foregone conclusion. Maybe as we know it now the airline is a goner -- but maybe not as a very different animal, the column reported.

Could this be why Siegel is at TPG?

In my opinion, for any union and its memberss who want to participate in the company's future, whether its at US Airways or another business enterprise, I would strongly encourage that work group to reach a new accord with the company that has the best fragmentation and bankruptcy (S.1113 motion) protection language possible, in case US Airways is merged into another carrier(s) and is not the surviving business entity.

Finally, every union and its members have a choice in this restructuring, but one thing David Bronner has made perfectly clear is the plan will move forward "with or without" employees, which clearly puts the ball in labors court.

Respectfully,

USA320Pilot
 
USA320Pilot said:
Then it became public knowledge this week the company has hired John Lutz, of the Seabury Group, and FTI Consulting to apparently work on a pre-packaged bankruptcy plan focusing on lease renegotiations, which would include EETCs, municipal bonds, and other debt instruments.

However, in a switch the airline replaced its long time law firm of Skadden & Arps and bankruptcy attorney Jack Butler with Arnold and Porter, the company's new legal advisors.
Respectfully,
USA320Pilot
Prove it!
 
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Just one more point...

I have said my piece on this topic and I'm not going to enter into the normal bantering that goes on in these type of discussions. Therefore, if somebody asks me a question -- please do not take offense if I do not answer.

I recognize there are some people that have a single focus on the restructuring and I do not want to continue message board sparring.

Respectfully,

USA320Pilot
 
USA320Pilot said:
Just one more point...

I have said my piece on this topic and I'm not going to enter into the normal bantering that goes on in these type of discussions. Therefore, if somebody asks me a question -- please do not take offense if I do not answer.

I recognize there are some people that have a single focus on the restructuring and I do not want to continue message board sparring.

Respectfully,

USA320Pilot
I guess that is what happens when you cant prove what you post!
 
USA320Pilot said:
Just one more point...

I have said my piece on this topic and I'm not going to enter into the normal bantering that goes on in these type of discussions. Therefore, if somebody asks me a question -- please do not take offense if I do not answer.

I recognize there are some people that have a single focus on the restructuring and I do not want to continue message board sparring.

Respectfully,

USA320Pilot
Huh? Give it up already. :huh:
 
Well if you believe the rumor mill, the company wants all aspects of maintenance (including utility & stores) except line maintenance. That would leave about 800 mechanics on the property, so if you are not among that magic 800 or so what choice does a person have?
 
I am much less certain about the CWA and IAM-M, which could clearly be the company's target in a formal reorganization. If true, I suspect the company will aim its double barrel shotgun at the CWA, IAM, and any other union who fails to participate in the new business plan with a S.1113 motion.

This guy is unbelievable! If the company aims it's "double barrel shotgun" at me, I'll just give it my "double barrell middle finger." :up:

PS - Why don't you just take out an ad in the USAToday for "Vote Yes", and everything will be ok! I think you get more exposure for your agenda! :shock:
 
USA320Pilot said:
I have said my piece on this topic
Yes, and you keep on saying it in thread after thread after thread...

Nothing ever changes, management says something and you parrot it over and over like it is carved in stone gospel.

"Baaaawk... America West type contracts"

"Baaaawk... Painful clause"

"Baaaawk... S1113 letter"

"Baaaawk... Outsourcing"

"Baaaawk...M&A activity"


(unamed pilot) wanna cracker? :blink:


"Baaawk"
 
USA320Pilot said:
I have said my piece on this topic and I'm not going to enter into the normal bantering





some people that have a single focus
Then by all means stop posting your fantasies, which is all they are, captain. You are a real trip, a case study at least!


Single focus! Single focus! WOW you are the one stuck in your weird thought process and when you are called to task about it you start spouting denial on the other parties part. :lol: :lol:
 
Does anyone have anything original of their own to say other than they disagree with what USA320Pilot says? Why be so bitter?

Pathetic!
 
Does anyone have anything original of their own to say other than they disagree with what USA320Pilot says? Why be so bitter?

...not to feed a kibbitzer...but; Does A320Pilot have anything original to say? Why so condescending?
 
Question?

U needs 800 mil from employees and 700mil from other cuts in the company.

Why wait for unions to step up?

Why not make other cuts NOW?

Show some leadership!

What about mangament and non contract employees?

If BK is so near and if cash is so low make cuts now?

FACT IS THERE IS MORE THAN MEETS THE EYE> I AM SURE THERE IS A MAN BEHIND THE CURTAIN!

Question is "What the hell is he up too"!!
 
High Iron said:
...but; Does A320Pilot have anything original to say? Why so condescending?
Yes he does. And I think a good portion of it is complete bunk and I think some of it is true. Regardless, why take his perceived tone as condecending? Agree, disagree, discuss, have a dialouge... whatever! But for goodness sake, get rid of all the immature and worthless bickering.
 

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