Pilots' Pension Still $800 Million Behind
On Tuesday, US Airways got a major go-ahead in the airline's
plan to emerge from Chapter 11 bankruptcy on March 31, a date they
announced a long time ago.
A company press release said, "Following a strong vote of
approval by the company’s creditors, the U.S. Bankruptcy
Court today confirmed US Airways’ plan of reorganization,
allowing the company to continue on its path to a March 31, 2003,
emergence from Chapter 11.
"Judge Stephen S. Mitchell of the U.S. Bankruptcy Court of the
Eastern District of Virginia for Alexandria ruled that all
necessary requirements have been met to implement its
reorganization. Yesterday, the company reported that all necessary
creditor classes of all eight debtors in the Chapter 11 cases had
voted to accept the reorganization plan. The acceptance rate by
claim holders voting was 80.77 percent and by claim amount voting
was 81.18 percent, well above the required vote needed for
"With the nation on the verge of war and the economy impacted by
geopolitical uncertainties, the court’s approval today is
absolutely critical to our efforts to complete our restructuring by
March 31," said US Airways President and Chief Executive Officer
David N. Siegel. "Only upon emergence from Chapter 11 protection
can we access the $1 billion loan from the Air Transportation
Stabilization Board (ATSB) and the new equity investment of $240
million from the Retirement Systems of Alabama (RSA). This new
injection of capital is essential so that we can ride out the
impact of war and economic turbulence, and implement our new
that the company’s full attention will focus on completing
the remaining tasks of its restructuring prior to emerging from
Chapter 11, including:
- Resolve all remaining issues with the Air Line Pilots
Association on the pilot pension plan and secure approval from the
Pension Benefit Guaranty Corporation (PBGC) and the bankruptcy
- Finalize a new agreement with one of the banks that has
expressed interest in processing the company’s credit card
- Close on the ATSB loan and the new equity investment from
- Siegel expressed his ongoing appreciation to the
airline’s employees, customers and business partners for
supporting the company’s restructuring, allowing it to
complete its Chapter 11 reorganization in less than seven
union must still come to grips with its own figures, that say the
pension fund will be underfunded by about $800
million by 2010.
Unsecured creditors, who are owed over $60 billion by the
bankrupt carrier, will get less than 2¢ on the
dollar -- and even then, they'll be paid in the "new"
airline's stock, not cash. The creditors and their current and
future customers must absorb the $58.5 billion, plus lost interest,
that the law lets US Airways not pay.
Management stands to do OK...
Airline management will get an 8% share of the "new" airline's
stock. Existing shareholders get nothing.
FMI: 8-K report