The Hindu : US Airways files for bankruptcy protection

Online edition of India's National Newspaper
Tuesday, Aug 13, 2002

Business

Business

US Airways files for bankruptcy protection

By Sridhar Krishnaswami

WASHINGTON AUG. 12. At a time when major and small airlines are suffering in this country, US Airways has announced that it is formally and legally seeking bankruptcy protection even while maintaining that its services will not be cut. The Arlington, Virgina, based airline company filed for Chapter 11 protection on Sunday, with the first court hearing set for this morning. The seventh largest airlines in the U.S. and the 14th worldwide with assets of nearly $8 billion lost more than $2.1 billion last year and $500 million so far this year. US Airways has also listed nearly $8 billion in liabilities. It did not have any of its planes involved in the hijacking-cum-terrorist acts of September 11, 2001; but the three week closure of the Ronald Reagan National Airport in Washington, its main hub for the Eastern sector, took a heavy financial toll. Higher costs of operations since September 11 and the general downtrend in air travel were further factors that took the toll on the airline. One estimate has been that the aviation industry has lost close to $1.5 billion in the last 18 months; and the fear is that more major air carriers could be heading the US Airways' way.

Analysts maintain that the bankruptcy filing of US Airways comes as little surprise in that at least three smaller carriers have opted for the same route recently; and major carriers were eating into US Airways' Northeastern routes. But US Airways is the first major air carrier to file for Chapter 11; and there is scepticism as to whether the airline will be able to hold on to the present service structure and timetables. Airline officials are confident that the financial restructuring that is going to take place under the bankruptcy proceedings would be sufficient to have a turnaround by the first quarter of 2003. The US Airways group owns at least 340 jets and flew some 56 million passengers to 200 destinations in the U.S. last year.

The airlines is also seeking to cut costs on the labour front and has been actively seeking to cut deals with its workforce of some 40,000.

It reached a deal with the pilots and the flight attendants last week and the International Union of Machinists and Aerospace Workers are due to vote on a restructuring plan soon.

US Airways recently announced plans for code sharing with United Airlines which is also struggling to keep its head above water in the aftermath of what happened last year.

United Airlines' losses this year is said to be around $850 million and is seeking close to $2 billion in government guarantees.

Printer friendly page
Send this article to Friends by E-Mail

Business