Following today’s US Airways news release, here are some key points:
• The Eastshore/Air Wisconsin and Wexford Capital/ Republic deal could add up to $360 million in new financing. The Eastshore agreement provides $125 million in DIP financing that can be converted to new equity.
• The Wexford Capital deal provides US Airways with $125 in exit financing and US Airways can also tap another $110 million by selling 28 EMB-170s and 137 East Coast DCA and LGA commuter slots. The 113 slots at DCA and 24 slots at LGA sold to Chautauqua are commuter slots and will not effect mainline operations, but will be used by Chautauqua for US Airways Express service.
• The money from Wexford Capital is contingent on US Airways' ability to raise another $100 million in additional financing, which could give the Arlington-based company a total of $460 million from the two commuter operators.
• In a statement US Airways said, “The Republic/Wexford investment agreement is contingent on our securing at least $100 million more in equity financing, and we continue to talk to "a number" of interested parties. We have every reason to believe that we will raise at least $350 million of emergence equity financing, along with added liquidity from certain financing transactions to supplement our existing cash that remains from the ATSB loan.â€
• When US Airways adds $100 million in more financing, coupled with up to $460 million from Wexford Capital/Republic, the Arlington-based airline could add $560 million to its balance sheet. This is a very important development since both American and Delta Air lines have said they have no access to the capital markets, which is probably the same problem for United Airlines.
• US Airways said, “Should the sale of aircraft be completed, Republic has agreed to honor all existing agreements US Airways has with regard to MidAtlantic. Consequently, Republic expects to have jobs for many of the current MidAtlantic employees.â€
• Chautauqua is the only affiliate carrier to have its “fee for service†contract affirmed, albeit with a 3% reduction. The new agreement provides for cost plus 5% on the existing 35 ERJ-145 fleet effective upon court approval of the agreement; a one-time option for US Airways to remove 5 ERJ-145 aircraft from the existing Chautauqua JSA; under certain specific conditions, a one time right to remove an additional 10 ERJ-145 aircraft from the existing Chautauqua JSA; and a term extension of one year, from March 2012 to March 2013.
• Question: If Chautauqua and Republic – as well Air Wisconsin – are all going to get more flying from US Airways Express, does that mean that other US Airways Express carriers will see their flying reduced? US Airways answered, “While there is a limit to the level of 50-seat regional jet flying that can be supported in the US Airways network, we continue to work with our partners on options for 70- and 90-seat aircraft. We cannot predict the final outcome of our negotiations with our regional partners.â€
• Do not be surprised if PSA and Piedmont are sold too, and Mesa and/or TSA do not have their RJ "fee for service" agreements affirmed. Could Brian Bedford have trumped Jonathon Ornstein or even forced the other two affiliate RJ operators to provide US Airways with an even greater concession? Could Mesa or TSA lose about one-third of their revenue, unless they pony up their checkbook to help US Airways?
I believe the Air Wisconsin and Republic/Chautauqua deals will permit US Airways to lower their “fee for service†contracts, make the affiliate carriers more responsible since their existence will now be tied to US airways’ success, and help keep the mainline fleet as large as possible.
US Airways has said that one A319 would be removed from service from February through August and three in September. Pilot Bid 05-02a says 11 B737s are being removed from service on the June pilot permanent bid, therefore, the current plan is to have 260 mainline aircraft at the end of the year.
Moreover, the GE deal removes 15 B737 aircraft in 2006 and 2007, which could reduce the mainline fleet to 245 aircraft by the end of 2007.
US Airways has a new affirmed agreement with Airbus to take delivery of 29 new jets in 2008 through 2010, which include 10 A330-200s, 13 A321s, and 6 A320s.
Regards,
