US Airways agrees cash lifeline!

US Airways agrees cash lifeline

US Airways must complete its restructuring by next June
Troubled airline US Airways has agreed a financial package that will give it access to much needed cash as it seeks to restructure its operations.
The carrier has struck a deal with its biggest creditor, General Electric, to get a cash lifeline and to defer debts.

In return, the carrier must cut costs and emerge from Chapter 11 bankruptcy protection by next June.

However, flight attendants at the carrier are considering strike action in protest at the proposed cuts.

The market responded positively to the news, sending the carrier’s shares up 23% to $1.09.

New aircraft

The US’ seventh largest carrier sought bankruptcy protection in September.

We still have a lot of work to do

Bruce Lakefield, US Airways

Its business has suffered from the popularity of low-cost rivals and rising oil prices while the airline was unable to reach agreement with unions over cost-cutting plans.

The agreement, reached with two General Electric subsidiaries, will give US Airways access to $140m in cash through a short term bridging loan.

Debt and lease payments will be deferred for six months and the airline will be able to lease up to 31 new aircraft over the next three years.

US Airways said the deal would enable it to keep the “vast majority” of its fleet of 281 mainline aircraft operating.

“We still have a lot of work to do beginning with the completion of labour negotiations with those remaining unions that still do not have cost-savings agreements in place,” said chief executive Bruce Lakefield.

Concessions sought

The agreement, which must be sanctioned by a federal bankruptcy court, stipulates that US Airways must make unspecified cost reductions by 14 January.

Flight attendants will not sit passively by while their employers manipulate the courts to destroy our livelihoods

Patricia Freud, Association of Flight Attendants

The airline is seeking about $600m in wage and benefit concessions from its unionised staff including flight attendants, reservation workers and mechanics.

In September, the carrier asked a federal court to sanction wage cuts amounting to $38m a month.

The Association of Flight Attendants warned on Friday that it could ballot US Airways staff on strike action should the court strike out existing employment agreements.

“Flight attendants will not sit passively by while their employers manipulate the courts to destroy our livelihoods,” said Patricia Freud, president of the union.

Fiscal timebomb

Earlier this year, the airline’s senior management agreed a 20% pay cut and accepted about 370 job losses at managerial level.

The airline is still expected to make a loss of about $600m this year.

A US bankruptcy judge warned last month that US airlines were facing a “fiscal timebomb”.

United Airlines is currently in Chapter 11 protection while Delta Airlines has warned that it could suffer a similar fate unless it carries out swingeing cuts in jobs and employee benefits.

http://news.bbc.co.uk/1/hi/business/4045689.stm