A bankruptcy judge yesterday approved plans by a second regional airline to invest $125 million in bankrupt US Airways, moving the carrier...
ALEXANDRIA, Va. — A bankruptcy judge yesterday approved plans by a second regional airline to invest $125 million in bankrupt US Airways, moving the carrier closer to obtaining the financing it needs to emerge from Chapter 11 protection.
The court also extended until May 31 a deadline for US Airways to file a reorganization plan.
Under the terms of a deal announced yesterday, Republic Airways Holding, which operates regional carriers Chautauqua and Republic airlines, would get at least a 19 percent share in the reorganized company in return for its investment.
The transaction also ensures that US Airways would use Republic for some of its regional flights under the US Airways Express banner.
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US Airways can also obtain an additional $110 million under the deal by selling some of its regional jets to Republic and by selling flight slots — 113 at Reagan National Airport near Washington, D.C., and 24 at New York’s LaGuardia Airport.
But US Airways would reserve the right to lease those slots back from Republic, and also has the option to buy them back at a later date.
US Airways reached a similar deal in February with an affiliate of regional carrier Air Wisconsin Airlines, in which US Airways received $125 million in return for a promise to use Air Wisconsin as a regional carrier.
When US Airways filed for bankruptcy last year — its second filing in a span of two years — it had estimated it would need $250 million in new financing to successfully emerge.
The company estimates it will need $350 million, and its deal with Republic is contingent on finding another investor to provide the remaining $100 million.
Higher fuel costs are the reason more money is needed. Fuel costs for 2005 will be $500 million more than budgeted, and CEO Bruce Lakefield warned a few weeks ago that fuel costs will eclipse labor costs in 2005 if prices remain high.