US Airways says has steps to limit impact of war
By John Crawley
ALEXANDRIA, Va., March 18 (Reuters) - US Airways Group Inc.
said on Tuesday it has taken steps to ensure that any war with Iraq would not slow its bid to emerge from bankruptcy by the end of the month.
The No. 7 U.S. airline is confronting objections to its restructuring proposal before winning approval of the plan from Judge Stephen Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia.
War has a profound impact on the airline industry, John Butler, the airline''s chief bankruptcy attorney, told the court. We are dealing with war contingencies ... to make sure this company can get through any kind of disruption.
Butler said the company was doing all it can to stabilize itself ahead of its plan to emerge from bankruptcy by March 31 and the contingencies could include a 5 percent pay deferral for employees and a further reduction in fleet size.
U.S. President George W. Bush gave Iraqi President Saddam Hussein until late Wednesday U.S. time to leave Iraq or face an invasion to eliminate alleged weapons of mass destruction. Saddam, who denies having such weapons, rejected the ultimatum.
COST OF WAR
The leading association for the major U.S. airlines said last week an Iraq war lasting 90 days could prompt an annual industry loss of $10.7 billion, more bankruptcies, and the loss of 70,000 jobs.
Butler said US Airways has resolved most of the objections to its plan to emerge from bankruptcy but still has a few major issues to work out, including the pilots'' pension controversy.
The airline hopes to receive approval of its reorganization plan from the court by Wednesday.
Trustee W. Clarkson McDow Jr. said in a court filing on Monday that US Airways'' proposal to release current and former executives, board members and lawyers from potential liability arising from bankruptcy would violate federal and state law.
The bankruptcy court appoints the the trustee to represent the interests of the bankruptcy estate and creditors.
Also, the pilots'' union, the Air Line Pilots Association has objected to plans to pay former chief executives Rakesh Gangwal and Stephen Wolf about $15 million each.
Still the biggest obstacle is the continuing controversy over the pilots'' pension plan, which has an underfunded liability of $1.6 billion. US Airways says it can no longer afford to manage that fund.
Mitchell ruled on March 1 that the company''s finances were so bad it could terminate the plan under bankruptcy laws. But he ordered the airline to settle claims by the pilots that ending the plan and replacing it with a cheaper one would violate the union''s contract.
TRYING TO NEGOTIATE
The two sides are trying to negotiate a solution to the dispute, which could wind up in arbitration. The federal agency that must approve the company''s proposal to terminate the plan, the Pension Benefit Guarantee Corp., says it will wait until the contract dispute is settled before making a decision.
Mitchell will also want an update on the company''s efforts to secure a new credit card processor, which is critical to its survival. US Airways'' deal with current processor, National Processing Co., a unit of National Processing Inc. , expires this spring and will not be renewed.
Separately, the company said late on Monday it had accomplished another important step in securing the necessary support for its restructuring plan from creditors. More than 80 percent of those voting affirmed the plan. The results will be reviewed by Mitchell as part of his decision.
Restructuring centers around $1.8 billion in cost savings, expanded use of regional jet service, and a marketing alliance with United Airlines, which is also in bankruptcy.
US Airways'' lead investor, which has provided emergency financing and will take a 37 percent stake, is the Retirement Systems of Alabama, a state pension fund.
