US Airways' shares fall an additional 17%

Friday's bankruptcy talk again causes a sell-off

stock drops 62 cents to $2.98

May 14, 2002|By BLOOMBERG NEWS

ARLINGTON, Va. -- Shares of US Airways Group Inc. fell 17 percent yesterday, declining for a second day after the airline said Friday that it might have to file for Chapter 11 bankruptcy protection unless it gets a federal loan guarantee.

The seventh-largest U.S. airline had a first-quarter loss of $269 million on a 24 percent revenue decline because of lower air travel and fares after the terrorist attacks of Sept. 11. The company has lost money for seven straight quarters, partly because of increased low-fare competition on the East Coast.

The stock fell 62 cents to $2.98, reducing the company's stock-market value to $203 million. In earlier trading yesterday, it had dropped as much as 39 percent to $2.20.

US Airways' stock was removed yesterday from the Standard & Poor's 500 index, which has been replacing companies with the lowest values. The carrier's shares have dropped 89 percent in the past year.

The Arlington-based airline said Friday that it would apply by a June 28 deadline for a loan guarantee. Such guarantees are part of a $15 billion industry rescue package that followed the terrorist attacks of Sept. 11.

US Airways disclosed in a filing with the Securities and Exchange Commission and in messages to workers and customers its plans to apply for a loan guarantee and the possibility of filing for bankruptcy protection.

The company is seeking concessions from workers, financial backers and vendors as part of a plan to help get the guarantee, which would ensure repayment of private loans.

"We would be surprised if US Airways did not receive government assistance," Merrill Lynch analyst Michael Linenberg said in a report yesterday.

"On the other hand, one could argue that US Airways, with its inefficient cost structure, would ultimately be better off going through the bankruptcy process rather than perpetuating its problems," said Linenberg, who maintained a "neutral" rating on the airline.

US Airways, which had $561 million in cash and short-term investments at the end of the first quarter, is expected to have another loss this quarter. The average estimate in a survey of analysts by Thomson/First Call was for a $2.41-a-share loss.

The carrier's daily loss, which was between $3 million and $4 million in the first quarter, probably will narrow this quarter to between $800,000 and $1 million, Linenberg said.

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