Charlotte Observer
Posted on Sat, Jan. 10, 2004
Chairman: US Airways may avoid asset sales
Union leaders say they're willing to talk about plans for recovery
TED REED
Staff Writer
Despite hiring an investment bank to gauge interest in US Airways' assets, the airline's chairman says it may not have to sell any assets if it can get costs in line.
"If changes can help get our costs down, then obviously that's where you want to be," said David Bronner, chief executive of Retirement Systems of Alabama, principal owner of US Airways, said in an interview Friday. "If you can get into a profitable situation, then the whole game changes."
Meanwhile, leaders of the airline's principal unions say they are willing to talk with the airline about its new recovery plan. Combined with Bronner's assertion that he, too, wants to talk, the union leaders' positions appear to clear the way for a new round of labor talks at the airline.
The union leaders insist they have no interest in more concessions, but some would talk about scheduling changes or union-proposed cost-saving measures. The airline has said it prefers work-rule improvements rather than salary cuts.
No talks had been scheduled as of late Friday. Bronner said he needs to know what cost-cutting measure are available, from the union and the airline, before a February board meeting. There he intends to lay out options ranging from cost reduction to asset sales. The airline would not disclose the meeting's date.
The potential reopening of talks comes as US Airways enters a critical year just nine months after emerging from bankruptcy court protection. It faces mounting low-fare competition and a need to meet covenants associated with a $900 million government loan.
Sources say US Airways has engaged Morgan Stanley to explore the sale of assets, including the shuttle between New York, Boston and Washington, as well gate leases at its hub airports.
US Airways, which has its largest hub in Charlotte, has lost $4.5 billion since 2001. Its problems will worsen May 9 when low-fare king Southwest Airlines begins service to its Philadelphia hub.
Bronner said he wants to prepare for that event.
"I'm not going to sit here and bleed to death," he said. "I'm not going into the spring knowing I have a war on my hands, and already dripping blood. With Southwest or Jet Blue or any other low-cost carrier, you want to be able to have money in the bank and hold your position."
Bronner said he is concerned about meeting covenants associated with a $900 million loan in 2002 from the Air Transportation Stabilization Board, established by Congress to assist troubled airlines after the Sept. 11 attacks. Among the covenants required as of June 30, according to a report released Friday by Standard & Poor's are these:
• The airline must have a minimum cash level of $1 billion.
• Cash flow must be equivalent to fixed charges, indicating break-even operation.
• The ratio of debt to cash flow must be at least 7.5, far above the level that would support a loan from a commercial bank...........................................
Posted on Sat, Jan. 10, 2004
Chairman: US Airways may avoid asset sales
Union leaders say they're willing to talk about plans for recovery
TED REED
Staff Writer
Despite hiring an investment bank to gauge interest in US Airways' assets, the airline's chairman says it may not have to sell any assets if it can get costs in line.
"If changes can help get our costs down, then obviously that's where you want to be," said David Bronner, chief executive of Retirement Systems of Alabama, principal owner of US Airways, said in an interview Friday. "If you can get into a profitable situation, then the whole game changes."
Meanwhile, leaders of the airline's principal unions say they are willing to talk with the airline about its new recovery plan. Combined with Bronner's assertion that he, too, wants to talk, the union leaders' positions appear to clear the way for a new round of labor talks at the airline.
The union leaders insist they have no interest in more concessions, but some would talk about scheduling changes or union-proposed cost-saving measures. The airline has said it prefers work-rule improvements rather than salary cuts.
No talks had been scheduled as of late Friday. Bronner said he needs to know what cost-cutting measure are available, from the union and the airline, before a February board meeting. There he intends to lay out options ranging from cost reduction to asset sales. The airline would not disclose the meeting's date.
The potential reopening of talks comes as US Airways enters a critical year just nine months after emerging from bankruptcy court protection. It faces mounting low-fare competition and a need to meet covenants associated with a $900 million government loan.
Sources say US Airways has engaged Morgan Stanley to explore the sale of assets, including the shuttle between New York, Boston and Washington, as well gate leases at its hub airports.
US Airways, which has its largest hub in Charlotte, has lost $4.5 billion since 2001. Its problems will worsen May 9 when low-fare king Southwest Airlines begins service to its Philadelphia hub.
Bronner said he wants to prepare for that event.
"I'm not going to sit here and bleed to death," he said. "I'm not going into the spring knowing I have a war on my hands, and already dripping blood. With Southwest or Jet Blue or any other low-cost carrier, you want to be able to have money in the bank and hold your position."
Bronner said he is concerned about meeting covenants associated with a $900 million loan in 2002 from the Air Transportation Stabilization Board, established by Congress to assist troubled airlines after the Sept. 11 attacks. Among the covenants required as of June 30, according to a report released Friday by Standard & Poor's are these:
• The airline must have a minimum cash level of $1 billion.
• Cash flow must be equivalent to fixed charges, indicating break-even operation.
• The ratio of debt to cash flow must be at least 7.5, far above the level that would support a loan from a commercial bank...........................................
