US Airways Tells SEC It Might Re-Enter Chapter 11
US Airways, which just
emerged from bankruptcy little more than a year ago, may be headed
back to federal court for a repeat performance. The company filed
notice with the Securities and Exchange Commission Friday, saying
it's trying to figure out how to cut costs by 25-percent, $1.5
billion a year.
"Failure to achieve the above-described competitive cost
structure will force the company to reexamine its strategic
options, including but not limited to asset sales or a judicial
restructuring," the company said in its filing, according to the
The question, of course, is: How?
With the departure of
CEO David Siegel, who left the company under pressure from the very
unions he was asking to give up more wages and benefits,
negotiations resumed on Wednesday. But so far, only the airline's
pilots have agreed to even consider further concessions.
During seven months of bankruptcy protection, US Airways cut
$1.9 billion in annual costs -- mostly by getting union members to
agree on $1.2 billion in give-backs.
Fresh from losing $177 million in the first quarter of this
year, US Airways plans to once again go to the labor well, hoping
to draw even more concessions.
"US Airways is telling labor: Either agree to the concessions
now or agree to it later in bankruptcy," Helane Becker of the
Benchmark Company told the Post.
It's happened before. Continental went bankrupt twice. TWA
filed for protection three times before finally being purchased by
American Airlines. But Becker doesn't think the market is ripe for
a repeat court performance by US Airways. "It's another disaster,"
US Airways is also negotiating with its biggest creditor -- GE
Capital Aviation Services. That company had earlier agreed to lease
US Airways 170 regional jets. But, since the airline's credit
rating has dropped so low, GE can, by contract, pull out.
On top of that -- and
the government's insistence that US Airways repay the $900 million
in financing backed by the Air Transportation Stabilization Board
last year -- US Airways faces a new threat from rival Southwest
Airlines. Over the weekend, Southwest inaugurated its service to
and from Philadelphia (PA), a bastion of US Airways' strength in
The company's new CEO, Bruce Lakefield, appears to be digging
in, pleading with unions to support US Airways with just one more
round of concessions. "This is not going to be easy. It's going to
be very tough and there are those out there betting against us
hoping we will fail," he said. "I hate to lose. I'm here to