US Airways said yesterday it can't attract $250 million needed to avoid liquidation and exit bankruptcy under its current recovery plan, the former chief financial officer said...
US Airways said yesterday it can’t attract $250 million needed to avoid liquidation and exit bankruptcy under its current recovery plan, the former chief financial officer said.
Proposed labor cuts, cost deferrals and other measures in the plan won’t be enough to keep company losses below $200 million in 2005 and attract equity investment needed to reorganize, David Davis, US Airways’ former chief financial officer, told U.S. Bankruptcy Judge Stephen Mitchell yesterday.
Davis testified during hearings on the airline’s bid to cancel labor contracts with three unions and impose new terms. US Airways said last week it could be forced to liquidate by mid-January without $950 million in wage, job and benefit cuts to help cut $1.5 billion from annual spending and stem losses.
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US Airways’ current recovery plan “is a work in progress” that “gives the company a fighting chance,” said Davis, who left the company last week. “It’s not something you would go to the market with” trying to find an investor, he said.
US Airways sought bankruptcy protection for the second time in two years on Sept. 12. The Arlington, Va.-based company is in talks over a rescue plan with an unspecified number of potential investors, Senior Vice President Chris Chiames said during a break in the hearing in Alexandria, Va.
“There are conversations going on,” Chiames said. “What people want to see is other revenue generation, and cost reduction needs to be implemented to improve the outlook.”
The airline is reviewing “revenue generating opportunities and further efficiencies,” such as flying bigger planes on popular routes, adding flights and improving schedules in Philadelphia and Charlotte, N.C., Chiames said. “This is a dynamic process, and we still have more to do.”
General Electric, the airline’s largest creditor, agreed last month to give the airline $140 million from a loan and modified terms in its aircraft leases. The accord requires US Airways to meet its labor cost goal and exit by June 30.
US Airways sought court approval to throw out contracts with unions for flight attendants, mechanics and baggage handlers, and customer-service and reservation agents after failing to agree on concessions. Mitchell said Dec. 2 that he isn’t likely to rule on the request before January.
The union for customer-service agents agreed last week on $137 million a year in savings, and members are voting on the proposal until Dec. 23. The union will be excluded from the company’s request for court action if members ratify the cuts.
The airline has agreements with pilots and three groups represented by the Transport Workers Union on concessions.
The Communications Workers of America, representing customer-service and reservation agents, authorized leaders to call a strike if the court throws out its contract, and the Association of Flight Attendants is voting on a similar motion. US Airways has said a strike would force it to shut down.