US Airways Files Reorganization Plan
US Airways Group said Saturday it had filed a proposed reorganization plan that hinges on the airline obtaining a $1-billion federal loan guarantee, a $240-million investment from the Alabama state pension fund and pay givebacks from its employees.
The plan was filed in federal Bankruptcy Court after two more labor unions accepted cost-cutting measures Friday.
US Airways in August became the first airline to declare bankruptcy following last year’s terrorist attacks that put the industry in a tailspin. The airline lost $2.1 billion in 2001 and said it needs to cut costs by $1.6 billion to remain viable.
The company reiterated Saturday that it must receive $1 billion in loan guarantees from the Air Transportation Stabilization Board, a reduction in its pension fund liabilities estimated at $3.1 billion over the next seven years, and ratification of all the pay giveback agreements it negotiated with its unions to emerge from bankruptcy.
Another reorganization provision calls for canceling its existing common stock and a $240-million investment from the Alabama retirement system, which will own 36.6% of new stock.
“We’ve worked very closely with our creditors and with our equity partner, the Retirement System of Alabama, and although they haven’t endorsed it yet we think the plan meets their concerns,” said Chris Chiames, the airline’s senior vice president of corporate affairs.
The $25-billion Alabama fund handles pensions for about 300,000 public employees. It was the sole bidder in a September sale of part of the bankrupt airline and purchased the nearly 37% share for $240 million.
“Needless to say, many sacrifices have been made,” US Airways President and Chief Executive David Siegel said. “Despite having to work to get more cost savings than originally anticipated because of the industry’s prolonged downturn, I am actually more optimistic than ever about our proposal.”
A new, 15-member board of directors will have eight nominees from the Alabama pension system, four representatives of the labor unions, Siegel and two independent directors to be named by the company.
