US Airways'' Emergency Financing in Danger


Sep 9, 2002
[P]Reuters[BR]US Airways'' Emergency Financing in Danger[BR]Tuesday December 3, 6:34 pm ET [BR]By Julie MacIntosh [/P]
[P][A href=][/A][BR][BR]NEW YORK (Reuters) - US Airways Group Inc. (OTC BB:UAWGQ.OB - News), which has been offered up to $500 million in emergency funding by an Alabama pension fund to operate during bankruptcy, may be in danger of losing that money as its revenues and cash reserves weaken, a pilots'' union said on Tuesday.[BR] [BR]Representatives of US Airways'' pilots'' union said in a bulletin to members on Tuesday that the bankrupt airline, which is grappling with slow revenue growth while trying to emerge from bankruptcy, is not meeting terms of its debtor-in-possession (DIP) financing.[/P]
[P]The Airline Pilots Association said in the bulletin that a study by their advisers showed US Airways is falling short of performance targets centering on the airline''s revenue and cash balance that were set as conditions of the financing.[/P]
[P]I would think that there are some problems right now to be addressed, David Bronner, chief executive officer of the Retirement Systems of Alabama, which provided the financing, said in an interview.[/P]
[P]Let''s just say we''re meeting with them tomorrow. We''ll see what happens, Bronner said. He added he was not sure whether the issues putting US Airways'' financing in jeopardy would be addressed.[/P]
[P]In addition to the $500 million, the Alabama fund offered Arlington, Virginia-based US Airways another $240 million for a stake in the airline after it emerges from bankruptcy.[/P]
[P]The failure to maintain this financing, combined with a continued deterioration of the company''s cash position, would prevent US Airways from emerging from bankruptcy by March 2003 and expose the Company to deeper risks in the bankruptcy process, the message to union members said. [/P]
[P align=center][FONT color=#cc0000]PILOTS EYE NEW BURDEN[/FONT][/P]
[P]Pilots'' union leaders also said a new proposal from US Airways, which calls for another $200 million in labor-related concessions, would require their members to shoulder more than half of the airline''s expense cuts.[/P]
[P]US Airways is now seeking more concessions from its labor unions, on top of $1.3 billion in cost cuts already secured, through changes in work rules and benefits.[/P]
[P]Pilots'' representatives said on Tuesday that according to the airline''s current proposals, $101 million of annual expense cuts would come from the pilots.[/P]
[P]Union leaders also said the pilots'' pension plan was at risk of being frozen or undergoing a distress termination, and that they were considering changes to the plan to help win funding deferments from the plan''s insurer.[/P]
[P]US Airways is facing a revenue shortfall, and it has raised its internal cost-cutting target to at least $1.6 billion a year to help account for the shortage.[/P]
[P]The airline has won conditional approval of an application for $900 million in federal loan guarantees, but it needs to emerge from bankruptcy by reducing costs and increasing revenue before receiving the loan guarantees outright.[/P]
[P]David Siegel, US Airways'' president and chief executive, said in late October that the already-weak industry had fallen off a cliff, and he cited weak revenue due to low ticket prices and slack demand when the company announced 2,500 worker furloughs a week ago.[/P]
[P]A US Airways spokesman said on Tuesday that the company''s restructuring plan remains on track, and the airline was confident it would be able to secure the new cost savings.[/P]
[P]As we stated last week, we intend to file our plan of reorganization by Dec. 20, the spokesman said.[/P]
[P]The pilots'' union said it would enter into talks with US Airways over new cost reductions, which could include changes in compensation, productivity, and pensions. But it said its participation depended on the involvement of all of US Airways'' labor groups, as well as its management.[/P]
[P]The air carrier''s flight attendants refused earlier on Tuesday to hold any talks on more concessions until the company finished talks with other labor groups. [/P]


Aug 22, 2002
Note the source:

"...a pilots' union said on Tuesday."

The greatest trump card in labor negotiations is the assumption that all press releases are created equal.