The Hindu Business Line : US Airways Group files for bankruptcy protection

UNABLE to wrest some $800 million in concessions from labour unions, US Airways Group Inc has filed for bankruptcy protection for the second time in two years.

That expected move came on Sunday afternoon at a filing in a Bankruptcy Court in Alexandria, Virginia, even as the company's top officer vowed to go through with the process of restructuring the airline into a low-cost carrier during the process. A hearing is scheduled for Monday.

"We have come too far and accomplished too much to simply stop the process and not succeed. A restructured US Airways with low costs and low fares will be a dynamic competitor,'' the President and CEO of the airline, Mr Bruce Lakefield, said.

The airlines is making the point that customers will see no difference as there will be no operational changes as a result of the filing and that permission will be sought to continue with the frequent flyer programme. But there are real worries that the airline was looking at liquidation and total shut down. It has been pointed out that a few weeks ago the US Airways Chairman, Mr David Bronner, warned that the airline would most likely have to liquidate if it filed for bankruptcy but the President and the CEO quickly played down those comments.

The nation's seventh largest airline was facing trouble — big time — as it was facing a September 30 deadline including those related to its Air Transportation Stabilisation Board (ATSB) loan and expiring financial agreements with General Electric, Bombardier and Embraer. Among other things, the US Airways had to have a plan that would lower labour costs and implement these by the end of September.

In the bankruptcy filing, the airlines is said to have listed assets worth about $8.8 billion including $2.5 billion of goodwill and liabilities worth about $8.7 billion; US Airways has said that it has about $1.45 billion in cash, cash equivalent or short term investment; and the outstanding ATSB loan is around $717 million.

When the airlines filed for its first bankruptcy petition in 2002, it had stressed the debilitating impact of the terror attacks of September 11, 2001 that virtually devastated the airline industry in the US.

The prolonged closure of the Ronald Reagan National Airport, one of the major centres of operation for US Airways, resulted in a loss of more than $2 billion. It emerged from its first bankruptcy in 2003 after making a number of changes to the then existing system.

But heading the way of Chapter 11 for the second time has been necessitated by a number of factors, it is being pointed out including high labour costs, extensive fuel costs and tough competition from low-cost carriers.