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US Airways Gets OK to Tap Loan for Operations

The airline will use the federal money to continue a normal flight schedule while in bankruptcy protection.

September 14, 2004|From Times Wire Services

A U.S. Bankruptcy Court gave US Airways Group Inc. permission Monday to tap a government loan to fund daily operations, a move expected to allow the airline to continue its normal flight schedule while searching for additional financing.

Bankruptcy Judge Stephen Mitchell also gave the airline permission to continue its frequent-flier program and its alliances with other airlines. US Airways sought to assure travelers that it had no intention of going out of business -- even as it asked to skip required payments to employee pension funds.

US Airways, the nation's seventh-largest airline, Sunday filed for Chapter 11 protection at Bankruptcy Court in Alexandria, Va., the second time in two years. It made the move after it was unable to obtain $800 million in annual concessions from unions.

The US Airways bankruptcy hearing came the same day that Delta Air Lines Inc., struggling to avoid a bankruptcy filing of its own, said it might reach an agreement this week with pilots on early retirements.

Delta, the nation's third-largest carrier, also said it was meeting with bankruptcy lawyers in case it had to file for Chapter 11 protection.

US Airways, meanwhile, will continue to seek labor concessions while in bankruptcy. Bruce Lakefield, the airline's chief executive, said Monday that US Airways was reevaluating its financial targets, opening the possibility that even greater worker concessions would be sought.

"We're looking at everything now," Lakefield said, adding that he still believed employees would voluntarily negotiate new labor agreements.

If not, the airline can ask the court to cancel the existing labor contracts.

US Airways asked for permission to avoid payment on several of its retirement plans. That includes a $110-million pension payment to the plans for its machinists and flight attendants due Wednesday, and about $19 million in contributions to the pilots' 401(k)-style retirement plan.

The plan to skip those payments raised concerns from the Air Line Pilots Assn. and the federal Pension Benefit Guaranty Corp., which wants to ensure the pension plans' solvency.

Susan Birenbaum, a lawyer with the pension agency, said pension contributions "are mandated by federal law" and stressed "the importance of continuing to fund the plan while in bankruptcy." Mitchell scheduled a hearing on the issue for Oct. 7.

Mitchell also approved a motion that allows the airline to use cash from a $718-million federally guaranteed loan package to fund its daily operations while in bankruptcy.

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