Us Air Wins Relief From Ge

USA320Pilot

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May 18, 2003
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US Air Wins Relief From GE But Has to Emerge by June 30

ARLINGTON (Aviation Daily) - US Airways during the U.S. Thanksgiving holiday reached crucial deal with GE Capital Aviation Services and GE Engine Services that will give the airline access to desperately needed cash in exchange for the return of 25 planes. The new agreement with the world’s largest aircraft lessor will also let the airline resume deliveries of regional jets that have been on hold since it filed for Chapter 11 bankruptcy protection in September. However, the deal is contingent on the airline’s reaching several cost cut goals and “restructuring milestones†by Jan. 14 and exiting bankruptcy by June 30, 2005, none of which is a sure thing. The agreement requires court approval by Dec. 17, and if that gets the green light, the bridge facility would close Dec. 20. If approved by the court and all conditions are met, the deal will give the airline $140 million in interim liquidity through a new bridge loan and the deferral of aircraft debt and lease payments coming due over the next six months. In total, US Airways claims the deal will save about $80 million annually in cash and aircraft ownership and engine maintenance costs.

Also as part of the deal, GECAS will lease up to 31 new 70- and 90-seat regional jets to US Airways in the next three years. The airline has not decided if the planes will come from Bombardier, Embraer or both. As of Nov. 12, US Airways had five CRJ-700s in operation, with another 28 on order, and 22 Embraer 170s flying and 63 on order, according to the Airclaims fleet database. In return for the lease deal for regional jets, US Airways would return 25 of its 281 mainline aircraft in the same three years. The airline plans to drop 10 Airbus A319s in 2005 and 15 Boeing 737-300s in 2006 and 2007. GECAS is the largest creditor of US Airways and, together with GE Engine Services, directly financed or leased 150 of the airline’s planes before the company’s Chapter 11 filing.

CEO Bruce Lakefield said the return of 10 Airbus planes next year will go on a schedule that won’t cause disruptions, and the carrier is on track with its plan to boost utilization of its remaining planes. The return of older 737-300s in the next three years while adding more RJs “will allow us to return to a path of moderate regional jet growth, enabling us to effectively serve smaller routes,†he said. Upon emergence from bankruptcy, the airline would issue GECAS a 15-year convertible note for $125 million-$216 million, depending on future lease options chosen by the airline.

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USA320Pilot
 
Can you fathom how USAirways has fallen from "The Global Carrier of Choice" under Wolf-Gangwal to returning to "a path of moderate regional jet growth, enabling us to effectively serve smaller routes" under Siegel-Lakefield-Bronner.

Whatever happened to flying to some of the fastest growing cities and economic engines like RNO-SMF-SAT-AUS-ABQ-PDX? Even though U has lower labor costs than just about every competitor, U turns its back on growth opportunities West of the Ohio River.

What Mr. Lakefield fails to add is that as a result of eliminating Mainline airframes the headcount at U continues to decline as more flying is outsourced.
 
N924PS,

I wondered how long it would take for someone else to say what a futile effort this is becoming....

The "new and improved" TP increases aircraft utilization to effectively create "27 additional airplanes".

The GE agreement results in the loss of 25 airplanes.

The net result is that mainline ASM's will stay roughly the same. This means that mainline unit cost reductions will be driven almost entirely by labor cost reductions - about 0.8 cents per ASM.

Meanwhile the RJ fleet continues to grow, exerting upward pressure on system CASM.

My prediction is that by this time next year (if we are still here) we will still be the highest cost legacy carrier with mainline CASM around 10.5 cents and system CASM around 15 cents. And that's assuming that the labor cost reductions flow to the bottom line, unlike after BK1.

Jim
 
RNO-SMF-SAT-AUS-ABQ-PDX?

We fly to all these cities; but not with US Airways planes or employees. it's called the United Code Share. Check the website.