US Airways on the verge of collapse

[nystate]

By Jon Bonné
MSNBC
Updated: 2:36 p.m. ET Jan. 15, 2004

With Wall Street ready to cut its losses, with CEO David Siegel hinting to his 28,700 employees at "strategic alternatives" to remain in business, these are grim times for US Airways.

There was much talk in the wake of Sept. 11 that a major U.S. airline would vanish, and industry watchers now wonder if US Airways is the one.

After all, the airline hired Morgan Stanley to evaluate its assets and look for buyers. Spokesman David Castelveter noted the investment firm will conduct "an exploratory process" that will "identify where the assets are in the company."

Employees and creditors are still awaiting solid details as to how, after bankruptcy and facing a $1 billion debt obligation this summer, the Arlington, Va.-based carrier can keep itself in the air.

"I think it's doubtful that they can survive," said Helane Becker, who tracks airlines for The Benchmark Company in New York.

It would not be the first time the airline faced liquidation. In December 2002, while bargaining with labor unions, chairman David Bronner suggested it might happen. But many new hints of impending fiscal doom have surfaced recently:

Bronner has indicated the company is likely to sell assets, though Castelveter said "it hasn’t made any decision" on any sale. A sell-off could slim the airline to a profitable size, but the loss of valuable pieces -- such as the airline's East Coast shuttle service -- would take big chunks out of revenues and leave large gaps in the route network.
The airline faces a June 30 deadline on its loan obligations, $900 million of which are guaranteed by the Air Transportation Stabilization Board. Though the ATSB might provide some leeway, investors aren't optimistic about US Airways' ability to meet the deadline. Standard & Poor's dropped its ratings for the airline even deeper into junk status last Friday. Analyst Philip Baggeley cited "rising competition" from low-cost carriers and the possibility of default. The airline put up some of its most lucrative gate slots to secure the financing.
Its Pittsburgh hub apparently is shrinking, down from 50 gates on long-term leases to just 10. At the same time, its Philadelphia hub is about to come under attack from low-cost competitor Southwest, which begins service there in May.
It owns just three of nine operators that form its US Airways Express regional service. It announced Wednesday it would merge two of the three -- Allegheny and Piedmont Airlines -- into a single turboprop operation. Even if it sells those holdings, routes to many of the 143 towns and cities in its regional network have little value unless mainline service continues from all three of its hubs.
To that end, Mesa Air CEO Jonathan Ornstein -- whose planes fly many US Airways Express routes -- said this week he might buy up some pieces. He told Dow Jones Newswires he wanted US Airways to stay in business, but his move spoke volumes. Mesa could move US Airways regional aircraft and crews into its own regional networks throughout the United States.
Labor relations hit a new low in the past month. Unions accepted restructuring deals during the airline's bankruptcy, but now feel the terms aren't being honored. The head of the US Airways' pilots union called for Siegel's resignation last month. Flight attendants sued the airline over its plans to furlough 552 workers and won in arbitration Wednesday.
Four of its vice presidents announced their resignations Thursday, all headed for other companies. Their duties are being taken on by three VPs currently with the airline. It was unclear whether they were asked to leave or sought out new jobs.
'We haven't seen any plan'
CEO Siegel sought to quash speculation about the airline's future last week, but he also left the door open for major changes. "If there are some ways to improve our balance sheet, we must consider those options," he said in a letter to employees Friday. "If there are some strategic partnerships that would enhance our financial standing, we must consider those as well."

Those comments -- and a postponement of employee meetings to discuss the airline's revamping -- heightened workers' concerns that, with major financial decisions coming, they are being kept in a holding pattern.

The airline has no plans to reschedule the meetings, Castelveter said, though it is willing to hold employee talks about cost-cutting: "Mr. Siegel's been open to having those discussions all along." But the airline wants to meet with the unions first, he said.

But Capt. Jack Stephan, spokesman for the pilots union, said the airline has not yet asked for new talks. His members have asked for reorganization details since last April, when the airline emerged from bankruptcy, but have to see a strategy on paper, he said.

"We've heard a lot of talk and a lot of rumors, but we haven't seen any plan," he said. "One day, David Siegel's got to wake up and he's got to go to work."

Few good options
The airline has a number of restructuring options, all with potential drawbacks. It could revamp or trim its route structure; the Pittsburgh changes and the new market pressure in Philadelphia might prompt that anyway. Its regional operations, which serve dozens of small East Coast markets like Massena, N.Y., and Beckley, W.V., currently require significant overhead. But with nine regional partners, any big changes beyond the turboprop consolidation will be difficult to implement.

Continued... http://www.msnbc.msn.com/id/3950109/

[rainstorm]

non competitve businesses go out of business all the time. i hope they dont get a bail out with taxpayer money

[Rainband]

Very sad. Thats the only airline I fly I guess they will have to get another one to fly into Williamsport/Lycoming airport I feel really bad for all the people who will lose their jobs. Hopefully they can save it

[Rainband]

If not maybe all the Usairways employees can get a job on the Airline that will fly us to the moon and mars

[Stephanie]

It employs alot of people from around the Philadelphia area. I had heard earlier on the news that (perhaps a week ago) that they may close some gates at the Philadelphia International Airport.

[nystate]

i hope they dont get a bail out with taxpayer money

I hope that they do; and they might. Bush doesn't need another 30,000 jobs lost in an election year If they don't, though, the economy will take a major hit, and many professionals who usually earn six-figure salaries will be unemployed.

[rainstorm]

bad idea. a poorly run business should go under. ultimately it is better for the economy. another airline that is better run(like southwest) will take its place. should the taxpayer bail out every business that fails? nope.

[streetsoldier]

It wassn't all that long ago that St. Louis got hit (and HARD) by the Boeing/McDonnell-Douglas merger...today, I heard that the biggest "loser" due to the 9-11 aftermath by a major air hub is Lambert Field (STL International Airport).

However, the market economy sets the rules, NOT "Babylon-on-the-Potomac".

[nystate]

It wassn't all that long ago that St. Louis got hit (and HARD) by the Boeing/McDonnell-Douglas merger...today, I heard that the biggest "loser" due to the 9-11 aftermath by a major air hub is Lambert Field (STL International Airport).

Yep, that place is just about dead now. If (or when) US Airways goes under, look for the same thing to happen in Pittsburgh and Charlotte. Rainstorm was right, however. The taxpayer should not have to bail out every failing business; I just hate the thought of my local airport losing its only airline. It would prove to be a disaster for our local economy.

[Rainband]

bad idea. a poorly run business should go under. ultimately it is better for the economy. another airline that is better run(like southwest) will take its place. should the taxpayer bail out every business that fails? nope.

That is one of the best air carriers i have ever flown on. I think they are victims and nothing more..Helen your logic is scary

[nystate]

Besides 9/11, I blame the media for the economic problems that the airlines have to deal with. For example, tonight on MSNBC there was a story about all of the different ways we could shoot down an airliner over DC. Now who wants to fly after hearing that??