CAL 757-300

I haven't posted any US articles in a while, but I find this one interesting. I had heard a while back that Siegel would be willing to take US into the tank if he couldn't get concessions. Now it seems to be a reality.

I'd love to hear from Gearboy, the Doc, and Bill on this one. You guys had some interesting observations last time.


US Airways to Seek Loans, May Reorganize

By David Bailey

CHICAGO (Reuters) - US Airways Group (NYSE:U - News) said on Friday it will seek federal loan guarantees following huge losses since the Sept. 11 attacks and will consider a bankruptcy filing if it cannot reach agreement with employees, suppliers and lenders to cut costs.
ADVERTISEMENT



Shares of US Airways plunged 27 percent as the Arlington, Virginia-based company, the No. 6 U.S. carrier, raised for the first time the possibility of filing for bankruptcy protection from creditors. The carrier had said in a first-quarter earnings conference call that it would seek loan guarantees.

"The company has said for a while that the current rate of losses are unsustainable and something has to be done," Goldman Sachs airline analyst Glenn Engel said.

However, the possibility of filing for protection, and proposals to eliminate the loan guarantee program that were defeated this week, may have added concerns, Engel said.

At the end of the first quarter, the carrier had cash reserves of $561 million and was burning about $3.5 million per day. US Airways shares fell $1.35 to $3.60 on Friday and the stocks of most major U.S. carriers also fell.

"The preferred path is a consensual agreement with our employees and our stake holders to reach an agreement and to file (a loan) application," airline spokesman Dave Castelveter said.

MAY FOLLOW LEAD OF AMERICA WEST

US Airways would become the second major U.S. carrier to apply for loan guarantees under the $15 billion federal airline bailout approved following the attacks last year. America West Airlines was the first.

Under David Siegel, named chief executive in March, the carrier secured a deal with pilots to use more regional jets.

"At a time of crisis like this, (labor and suppliers) will come together," said Michael Boyd, an industry consultant. "I trust Siegel, Siegel can turn it around."

In a quarterly filing with the U.S. Securities and Exchange Commission on Friday, US Airways said it is working on a restructuring plan with employees, suppliers and lenders to cut costs and increase the use of regional jets.

"However, because there is no assurance that this will occur, the company also recognizes that in order to successfully restructure the company, alternative restructuring scenarios in the context of a judicial reorganization also must be considered," US Airways said.

There is no timetable to complete a restructuring plan, but the deadline for carriers to seek loan guarantees is June 28. US Airways has started discussions with stakeholders and wants to unveil a first draft in a few weeks, Castelveter added.

"So far, labor has had no input into whatever restructuring plan they are coming up with," said Roy Freundlich, the US Airways pilots representative at the Air Line Pilots Association. "All we have had is financial presentations."

The carrier is expected to release restructuring details to the union on May 16 and to the public later, Freundlich said.

LOSSES ONGOING

US Airways has reported more than $2 billion in net losses in the last three quarters, hurt by the closure and slow resumption of flights at Reagan National Airport and fierce competition along the East Coast that has kept fares low.

Difficulties are expected to continue in the second quarter as unit revenue is seen falling sharply from a year ago while unit costs rise, the carrier said in its quarterly filing.

"The government put them in this position with the shutdown at Reagan National, a huge chunk of their business," Boyd said.

Former CEO Rakesh Gangwal had announced plans to shrink US Airways last August, before the attacks threw the industry into chaos that sparked about $9 billion in 2001 losses. That plan was greeted with skepticism by veteran airline analysts and Gangwal has since left the company.

America West (NYSE:AWA - News), the No. 8 U.S. carrier, received loan guarantees covering $380 million in January after teetering on the brink of filing for bankruptcy protection. A handful of smaller carriers have also sought loan guarantees.

In return for agreeing to repay the private sector loans in case of default, America West gave the government the option to take up to a one-third equity stake in the airline

Wingman

Like I said before, just another MBA who wants to play the numbers game. Do not trust anyone with a background in finance, investing or accounting. I know what numbers they look at before anything else.

Anyone out there still think this guy is going to be US's savior?

Romania is #1

I hope US Airways avios bankruptucy. I heard that UAL isheading toward bankruptcy?

Bill G

I have started a reply to this article three times and then had to delete it as I know Clip would have because of it's content.
As a US Airways employee, I'm not surprised about this situation, I'm just more than a little ticked as it could have been avoided if we had had leadership who wanted to run OUR airline instead of concentrating soley on an ill-fated merger.
I could rant all day, but it will be of no use. I don't want to have to take a pay-cut but I don't want to be unemployed either.
Seriously I'd better just stop here as the blood pressure is rising again.

Bill G

__________________
Ozark Flies Your Way

FEES DON'T FLY AT SOUTHWEST

Clip

Bill,

I hear ya. My brother has been on edge too. Feel free to vent here anytime. I doubt anything you write would ever warrant deletion.

Best,
Gabby

__________________
Jet Delta's Big Flies

Scott

Hey Bill, hang in there. I strongly believe Wolf is still the master puppeteer regardless of title and surounding entourage. Remember his playbook is to maximize shareholder value. This might be realized by engineering a survival plan with the assistance of labor, concocting a merger (with whom?) or selling routes and/or hubs. Your best defense is to remain knowledgeable and maintain solidarity.

__________________
Fly the Friendly Skies of United

uniTED takes wing Feb 12, 2004

CAL 757-300

Sorry to get your blood boiling Bill. I know things are pretty tense at U right now, but I sincerely hope things get resolved in a manner that ensures the long-term viability of the company.

From an outsider's perspective (mine), there has to be some serious belt-tightening at U. This does not mean heap the load of cost cuts on the unions and let management raise the stock price and sell the carrier. However, since labor does account for over 40% of operating costs, it can't be ignored either.

IMHO, the writing is on the wall for U and it's time to face the facts that:

1) It cannot compete as a full service, international carrier.

2) Its competition is quickly becoming dominated by low-cost carriers (Air Tran, Jet Blue, Southwest) that charges bargain basement fares and turns a profit while U bleeds profusely at the same fare levels.

3) Labor - management relations are not strong enough to make the tough financial decisions without serious strife.

How can this be resolved? There's the $1 billion question. The RJ agreement is a step in the right direction, but it's not the panacea. U should focus on their core operations (N-S East Coast and Caribbean flying) and exploit their market dominance in these regions. At the same time, all employees have to give up the notion that they can be a Rolls-Royce carrier competing against Hondas. It just doesn't work. Get the costs in check, offer the same product level as the competition, and get things going again.

Bill, you voiced your concerns about pay cuts, but you're a wise man and realize it's either that or unemployment, as you stated. I'm a big fan of the Southwest compensation model. Yes, pilot and other work group base salaries are lower (and maybe the lowest) than the rest of the industry, but they get huge bonuses during times of prosperity, sometimes reaching 25% of salary. This doesn't allow management to get fat, it allows the company to shrink costs painlessly during economic down times, prevent ugly furloughs, and maintain profitability. Wingman might call this MBA number manipulation, but the system works. In the 25+ years of Southwest, when was the last time they reported a quarterly loss? Not in 25+ years. They also have the lowest employee turnover in the industry, so the the employees must feel that the pay system is fair and it's a good company to work for.

I don't think Siegel is a bad person or ineffective leader. I think he sees the writing on the wall and is concerned that if U cannot reduce costs in all areas in a cooperative manner then he'll have to take the company into Chapter 11 and cut costs the old fashion way, or should I say the Lorenzo way?

Don't be surprised if UA finally wakes up to the same realization and follows suit.

b737gearboy

Hello all,
I have been away from the computer for almost a month while in training for my new job. It's sad to see my former employer on the brink of bankruptcy. With that said the employees don't have much of a choice at this point in regards to paycuts. Paycuts have yet to save an airline, however it might help with a solid business plan coupled with good management. There's no doubt that with U's current cash position that bankruptcy looms without immediate restructuring. I do think that paycuts should not be given away for nothing in return, at a minimum a profit sharing or stock option plan is in order. This would not strain U's balance sheet and would tie compensation with the company's financial health as you discussed earlier Phil. I would be willing to bet that the IAM will be the stumbling block in attaining concessions, as they usually are. I hate to look back, but what eats at my craw is the 2 billion in cash Wolfe waisted to buy back stock. I know some will say it's water under under the bridge but it was nothing short of criminal to throw all that cash away to prop up the stock price a few bucks. Oh well, what could have been...............

__________________
GO BUCKEYES!!!! NATIONAL CHAMPS!! O----H----I----O

Steven T De Lisser

Bill, my cousin Betsi has worked for USAirways / USAir out of Boston for over twenty years. Because of her seniority she was finally doing a lot of the European routes, which she obviously prefered over the high frequency trunk routes in the US. However, because she wasnt willing to relocate to Philadelphia or commute there each morning to begin her day, they (USAirways), in effect, demoted her and she is doing less appealing stuff.

Steven

Bill G

Steven

Is she a flight attendant? I'm based in Philly on the interntional division. I wonder if she is a flight attendant if I know her.

Take Care
Bill

__________________
Ozark Flies Your Way

FEES DON'T FLY AT SOUTHWEST