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chipmunn
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[P align=center][STRONG][/STRONG][FONT face=Times New Roman size=3][STRONG]The Current State of US Airways[/STRONG][/FONT][BR][BR][BR]
[P align=justify][FONT face=Times New Roman size=3]Last month US Airways management told its creditors at the S.341 meeting, investors in a regulatory filing, and its unions in individual meetings the company was not reaching its revenue targets, which jeopardizes the loan guarantee that is critical to the company's restructuring plans.[BR][/FONT][FONT face=Times New Roman size=3][BR]Management has provided each of its unions a confidential power point presentation on US Airways financial status, revenue performance and projections, passenger bookings, and the status of the ATSB loan guarantee. Union leaders cannot comment on this information to its rank-and-file members because of confidentiality agreements and SEC regulations.[BR][/FONT][FONT face=Times New Roman size=3][BR]Reports indicate the company does not meet the 7 percent profit margin required to obtain the loan guarantee due to dramatic industry-wide revenue shortfalls. On November 7 the Pittsburgh Post-Gazette reported US Airways' attempt to secure $900 million in federal loan guarantees, crucial to the airline's survival, could be in jeopardy unless the bankrupt carrier is able to coax more concessions from employees, aircraft lessors and creditors.[BR][/FONT][FONT face=Times New Roman size=3][BR]Moreover, the Post-Gazette reported With its revenue flat or declining, the airline recently said it would need up to $1.6 billion in annual cuts, or $400 million more than originally projected, to qualify for the federal loan guarantee.[BR][/FONT][FONT face=Times New Roman size=3][BR]US Airways has begun initial discussions with its unions regarding additional savings through further pay, productivity, and retirements cuts, as well as laying off additional employees, to further cut labor expense. [BR][/FONT][FONT face=Times New Roman size=3][BR]At the November 7 Omnibus Bankruptcy hearing the court gave final approval for the Retirement Systems of Alabama (RSA) to provide US Airways with $500 million in debtor-in-possession (DIP) financing. US Airways has drawn $300 million of the $500 million credit facility. Under the terms of the agreement, the remaining $200 million can be accessed, subject to certain conditions, including that US Airways meets all the conditions of the ATSB loan guarantee. [BR][/FONT][FONT face=Times New Roman size=3][BR]This ruling threatens US Airways liquidity/restructuring because the final $200 million DIP payment cannot be credited to the airline’s treasury until it meets all of the ATSB conditions, of which one is for the company to emerge from bankruptcy.[BR][/FONT][FONT face=Times New Roman size=3][BR]On November 7 the Pittsburgh Tribune Review reported It's a big step to get over, but we still have another half-mile more to go, said David Bronner, head of Alabama's pension system by telephone from Montgomery yesterday. Progress has been good so far, he said. But we're heading into a war with Iraq, and we still have problems our CEO has to work through with the unions to make sure we have a mousetrap that works. [BR][/FONT][FONT face=Times New Roman size=3][BR]To meet the ATSB requirements, the company is not only slashing costs, but is trying to boost revenue with additional regional jet (RJ) expansion, which is required per the business plan submitted to the board. According to the Air Line Pilots Association (ALPA): [BR][FONT face=Times New Roman size=3][BR]1. 20 regional jets are scheduled to be introduced at affiliate carriers throughout December, January, February and March.[/FONT] [BR][FONT face=Times New Roman size=3][BR]2. Midway Airlines should begin operations in the first quarter 2003 and the company has entered into discussions Chautauqua Airlines about RJ expansion.[/FONT] [BR][BR][FONT face=Times New Roman size=3]3. It is likely that additional 70-seat small jets would be placed at Freedom Air. [BR][/FONT][FONT face=Times New Roman size=3][BR]4. Management restated its commitment to starting operations at MidAtlantic Airways, now believed to begin flying in late 2003 or early 2004.[/FONT] [BR][FONT face=Times New Roman size=3][BR]The [/FONT][/FONT][FONT face=Times New Roman size=3]pilots union authorized its Negotiating Committee to begin negotiations on an expedited basis to resolve differences on the Freedom Air issue because an accord would be beneficial in generating more revenue for US Airways and to assure job opportunities for US Airways pilots.[BR][/FONT][FONT face=Times New Roman size=3][BR]One of US Airways’ challenges is that it cannot obtain RJ funding during bankruptcy and the only way it can add regional jet flying, which is required to obtain the loan guarantee, is with affiliate carriers. Sources believe there will be an acceptable Freedom Air agreement announced shortly between Mesa, Mesa ALPA, US Airways, and US Airways ALPA.[BR][/FONT][FONT face=Times New Roman size=3][BR]Meanwhile, the court did approve US Airways' request for Mesa to increase its US Airways Express flying from 32 to 52 RJ aircraft.[BR][/FONT][FONT face=Times New Roman size=3][BR]Also noteworthy, RSA is the Equity Plan Sponsor (EPS) and the pension fund is expected to invest $240 million to acquire a 37.5 percent stake in the airline when it emerges from bankruptcy. With the court permitting the Alabama pension system to proceed as the EPS, it still could be outbid by others. The bankruptcy court extended the 50-day period for other potential bidders to submit offers to be the equity investor by four days until November 15.[BR][/FONT][FONT face=Times New Roman size=3][BR]US Airways must have all employee, creditor, vendor, and lessor negotiations complete by December 9, which is the last day it can alter its reorganization plan currently on file with the court. The airline also could extend the filing deadline, but that is considered unlikely with the potential of war breaking out in the Middle East. [BR][/FONT][STRONG][FONT face=Times New Roman size=3][BR]During the latest bankruptcy hearing the company's Counsel said US Airways, as the debtor, hopes to have a number of deals ready for approval at its December 12 omnibus hearing.[BR][/FONT][FONT face=Times New Roman size=3][BR]US Airways challenge is that is cannot obtain additional liquidity until it emerges from bankruptcy. The airline reported it [/FONT][/STRONG][FONT face=Times New Roman size=3]ended the quarter with total restricted and unrestricted cash of $1.33 billion. The figure includes $897 million in unrestricted cash, cash equivalents, and short-term investments and $433 million in restricted cash. Goldman Sachs believes US Airways’ current average daily cash burn rate is $1.7 million per day; therefore, the company end the year with about $740 million, adjusted for forward ticket sales, and the first quarter of 2003 with $583 million, without a war. [BR][/FONT][FONT face=Times New Roman size=3][BR]Sources who spoke on the condition of anonymity said management is very concerned about war in the Middle East, its effects on revenue, and the ability for the company to qualify for the loan guarantee. Today’s U.N. Security Council resolution Weapons Inspectors must report back to the Security Council by February 21 gives US Airways about 3.5 months to emerge.[BR][/FONT][FONT face=Times New Roman size=3][BR]The company is expected to accelerate discussions with all stakeholders to reach final accords to cut costs and quickly deploy more 37, 50, and 70 seat RJs, so it can access essential liquidity. Upon emergence the company will obtain the remaining $200 million credit facility, the federal loan guarantee of $900 million of a $1 billion loan, and the $240 million RSA equity investment. The DIP financing must be repaid out of the loan guarantee; therefore, the company would have access to $940 million upon emergence, which management believes must occur before an invasion of Iraq, if the company intends to successfully reorganize. Without emergence before war breaks out, the company could end up liquidating due to a dangerously low cash position.[BR][/FONT][FONT face=Times New Roman size=3][BR]However, with appropriate new agreements with its unions and final restructuring accords with other stakeholders, sources believe the company can keep its fast track reorganization on schedule, gain access to additional liquidity, and successfully emerge in the fist quarter of 2003. [BR][/FONT][FONT face=Times New Roman size=3][BR]Chip[/FONT] [/P]
[P align=justify][FONT face=Times New Roman size=3]Last month US Airways management told its creditors at the S.341 meeting, investors in a regulatory filing, and its unions in individual meetings the company was not reaching its revenue targets, which jeopardizes the loan guarantee that is critical to the company's restructuring plans.[BR][/FONT][FONT face=Times New Roman size=3][BR]Management has provided each of its unions a confidential power point presentation on US Airways financial status, revenue performance and projections, passenger bookings, and the status of the ATSB loan guarantee. Union leaders cannot comment on this information to its rank-and-file members because of confidentiality agreements and SEC regulations.[BR][/FONT][FONT face=Times New Roman size=3][BR]Reports indicate the company does not meet the 7 percent profit margin required to obtain the loan guarantee due to dramatic industry-wide revenue shortfalls. On November 7 the Pittsburgh Post-Gazette reported US Airways' attempt to secure $900 million in federal loan guarantees, crucial to the airline's survival, could be in jeopardy unless the bankrupt carrier is able to coax more concessions from employees, aircraft lessors and creditors.[BR][/FONT][FONT face=Times New Roman size=3][BR]Moreover, the Post-Gazette reported With its revenue flat or declining, the airline recently said it would need up to $1.6 billion in annual cuts, or $400 million more than originally projected, to qualify for the federal loan guarantee.[BR][/FONT][FONT face=Times New Roman size=3][BR]US Airways has begun initial discussions with its unions regarding additional savings through further pay, productivity, and retirements cuts, as well as laying off additional employees, to further cut labor expense. [BR][/FONT][FONT face=Times New Roman size=3][BR]At the November 7 Omnibus Bankruptcy hearing the court gave final approval for the Retirement Systems of Alabama (RSA) to provide US Airways with $500 million in debtor-in-possession (DIP) financing. US Airways has drawn $300 million of the $500 million credit facility. Under the terms of the agreement, the remaining $200 million can be accessed, subject to certain conditions, including that US Airways meets all the conditions of the ATSB loan guarantee. [BR][/FONT][FONT face=Times New Roman size=3][BR]This ruling threatens US Airways liquidity/restructuring because the final $200 million DIP payment cannot be credited to the airline’s treasury until it meets all of the ATSB conditions, of which one is for the company to emerge from bankruptcy.[BR][/FONT][FONT face=Times New Roman size=3][BR]On November 7 the Pittsburgh Tribune Review reported It's a big step to get over, but we still have another half-mile more to go, said David Bronner, head of Alabama's pension system by telephone from Montgomery yesterday. Progress has been good so far, he said. But we're heading into a war with Iraq, and we still have problems our CEO has to work through with the unions to make sure we have a mousetrap that works. [BR][/FONT][FONT face=Times New Roman size=3][BR]To meet the ATSB requirements, the company is not only slashing costs, but is trying to boost revenue with additional regional jet (RJ) expansion, which is required per the business plan submitted to the board. According to the Air Line Pilots Association (ALPA): [BR][FONT face=Times New Roman size=3][BR]1. 20 regional jets are scheduled to be introduced at affiliate carriers throughout December, January, February and March.[/FONT] [BR][FONT face=Times New Roman size=3][BR]2. Midway Airlines should begin operations in the first quarter 2003 and the company has entered into discussions Chautauqua Airlines about RJ expansion.[/FONT] [BR][BR][FONT face=Times New Roman size=3]3. It is likely that additional 70-seat small jets would be placed at Freedom Air. [BR][/FONT][FONT face=Times New Roman size=3][BR]4. Management restated its commitment to starting operations at MidAtlantic Airways, now believed to begin flying in late 2003 or early 2004.[/FONT] [BR][FONT face=Times New Roman size=3][BR]The [/FONT][/FONT][FONT face=Times New Roman size=3]pilots union authorized its Negotiating Committee to begin negotiations on an expedited basis to resolve differences on the Freedom Air issue because an accord would be beneficial in generating more revenue for US Airways and to assure job opportunities for US Airways pilots.[BR][/FONT][FONT face=Times New Roman size=3][BR]One of US Airways’ challenges is that it cannot obtain RJ funding during bankruptcy and the only way it can add regional jet flying, which is required to obtain the loan guarantee, is with affiliate carriers. Sources believe there will be an acceptable Freedom Air agreement announced shortly between Mesa, Mesa ALPA, US Airways, and US Airways ALPA.[BR][/FONT][FONT face=Times New Roman size=3][BR]Meanwhile, the court did approve US Airways' request for Mesa to increase its US Airways Express flying from 32 to 52 RJ aircraft.[BR][/FONT][FONT face=Times New Roman size=3][BR]Also noteworthy, RSA is the Equity Plan Sponsor (EPS) and the pension fund is expected to invest $240 million to acquire a 37.5 percent stake in the airline when it emerges from bankruptcy. With the court permitting the Alabama pension system to proceed as the EPS, it still could be outbid by others. The bankruptcy court extended the 50-day period for other potential bidders to submit offers to be the equity investor by four days until November 15.[BR][/FONT][FONT face=Times New Roman size=3][BR]US Airways must have all employee, creditor, vendor, and lessor negotiations complete by December 9, which is the last day it can alter its reorganization plan currently on file with the court. The airline also could extend the filing deadline, but that is considered unlikely with the potential of war breaking out in the Middle East. [BR][/FONT][STRONG][FONT face=Times New Roman size=3][BR]During the latest bankruptcy hearing the company's Counsel said US Airways, as the debtor, hopes to have a number of deals ready for approval at its December 12 omnibus hearing.[BR][/FONT][FONT face=Times New Roman size=3][BR]US Airways challenge is that is cannot obtain additional liquidity until it emerges from bankruptcy. The airline reported it [/FONT][/STRONG][FONT face=Times New Roman size=3]ended the quarter with total restricted and unrestricted cash of $1.33 billion. The figure includes $897 million in unrestricted cash, cash equivalents, and short-term investments and $433 million in restricted cash. Goldman Sachs believes US Airways’ current average daily cash burn rate is $1.7 million per day; therefore, the company end the year with about $740 million, adjusted for forward ticket sales, and the first quarter of 2003 with $583 million, without a war. [BR][/FONT][FONT face=Times New Roman size=3][BR]Sources who spoke on the condition of anonymity said management is very concerned about war in the Middle East, its effects on revenue, and the ability for the company to qualify for the loan guarantee. Today’s U.N. Security Council resolution Weapons Inspectors must report back to the Security Council by February 21 gives US Airways about 3.5 months to emerge.[BR][/FONT][FONT face=Times New Roman size=3][BR]The company is expected to accelerate discussions with all stakeholders to reach final accords to cut costs and quickly deploy more 37, 50, and 70 seat RJs, so it can access essential liquidity. Upon emergence the company will obtain the remaining $200 million credit facility, the federal loan guarantee of $900 million of a $1 billion loan, and the $240 million RSA equity investment. The DIP financing must be repaid out of the loan guarantee; therefore, the company would have access to $940 million upon emergence, which management believes must occur before an invasion of Iraq, if the company intends to successfully reorganize. Without emergence before war breaks out, the company could end up liquidating due to a dangerously low cash position.[BR][/FONT][FONT face=Times New Roman size=3][BR]However, with appropriate new agreements with its unions and final restructuring accords with other stakeholders, sources believe the company can keep its fast track reorganization on schedule, gain access to additional liquidity, and successfully emerge in the fist quarter of 2003. [BR][/FONT][FONT face=Times New Roman size=3][BR]Chip[/FONT] [/P]