Objections raised against US Airways lease proposal


Aug 20, 2002
Objections raised against US Airways lease proposal
Friday September 20, 3:37 pm ET
By Julie MacIntosh
NEW YORK, Sept 20 (Reuters) - A group of banks, aircraft leasing firms and trustees have
voiced a resounding objection to US Airways Group''s (Other OTC:UAWGQ.PK - News)
request that a bankruptcy court let it reject leases on some of its airplanes and abandon
others to cut costs.
Arlington, Virginia-based US Airways,
which filed for Chapter 11 bankruptcy
protection in August, already has
permission to turn back leases on 67
airplanes and their engines to save
hundreds of millions of dollars and
trim unneeded passenger capacity.
US Airways asked the Bankruptcy
Court for the Eastern District of
Virginia earlier this month to let it
make further cuts to its costly
airplane lease obligations.
But the airline did not specify which
leases out of a potential pool of 150
could be affected, or when the moves
could take place, omissions that have
irked its creditors.
If US Airways won permission to reject leases on the equipment, it could whittle down its
current fleet of about 280 large aircraft and save the embattled carrier a chunk of cash.
But the move would also cut jobs for pilots and flight attendants at the airline, and leave
creditors in the lurch, with little chance of passing the abandoned planes off to other
customers during the industry''s deep downturn.
Cuts in capacity by the nation''s major airlines have rendered hundreds of airplanes useless.
More than 550 aircraft sat parked in the deserts of the Western U.S. during August, just less
than 10 percent of the entire available fleet, Lehman Brothers analyst Gary Chase estimated.
The list of firms objecting to US Airways'' request late this week included General Electric Co.
(NYSE:GE - News), which said in a court filing that it may be financially at risk as a
guarantor if US Airways fails to pay rent on its leased planes or abandons other lease
The manufacturing and services conglomerate, which also provides various types of financing,
said in the filing that it has a stake in transactions with US Airways involving 13 different
Boeing 737-400 aircraft.
An attorney for GE said she was not aware that any monetary value for GE''s exposure to the
leases had been determined. A spokesman for GE was not available for further comment.
Creditors also objected to the vagueness of US Airways'' request, and said the airline''s motion
made no mention of whether or when any specific aircraft would be returned.
US Airways'' restructuring agreement currently allows it to cut its fleet size to 245 during its
A spokesman at US Airways could not be reached for comment.