US Air plan for rebound gets OK

Exit from bankruptcy by end of month likely

Creditors to take ownership

Company's bid to end pension plan is hurdle

March 19, 2003|By BLOOMBERG NEWS

ALEXANDRIA, Va. -- US Airways Group Inc. won a federal bankruptcy judge's approval yesterday for its plan to let the airline company emerge from bankruptcy by the end of the month.

Judge Stephen Mitchell accepted a recovery plan that allows US Airways, the seventh-largest airline in the United States, to hand over ownership to its creditors and eliminates the company's more than $10 billion in debt.

The Arlington, Va.-based airline filed for bankruptcy protection in August as losses widened after the Sept. 11, 2001, terrorist attacks.

"This is a very important milestone" on the road to a March 31 deadline for getting out of bankruptcy, said Chief Executive Officer David Siegel. "We emphasized this date since the beginning of the case, and we've maintained that timeline throughout."

Among the hurdles remaining for US Airways is resolution of its bid to end a $2 billion pension plan.

The carrier wants to turn the pension obligations for 7,000 pilots over to Pension Benefit Guaranty Corp., a federal corporation.

The company also is negotiating to find a new processor to handle ticket sales made with credit cards.

The recovery plan approved yesterday gives Alabama's state pension fund 37 percent of the company, the Air Line Pilots Association 19 percent, other workers 11 percent and management 8 percent.

Bondholders and other unsecured creditors will own 11 percent of the new shares, a 2 percent recovery of their claims. Existing shareholders would get nothing.

General Electric Co.'s GE Capital Corp. unit, a top creditor, will provide financing for the carrier to buy regional jet aircraft and will receive 5 percent of the reorganized airline's new shares, according to the plan filed Dec. 21 in U.S. Bankruptcy Court in Alexandria, Va.

The U.S. Airline Transportation Stabilization Board, established to aid carriers after the Sept. 11 attacks, has conditionally approved a $900 million guarantee to help US Airways raise a $1 billion loan to finance the carrier's operations after bankruptcy.

As a result, the U.S. government stands to own 10 percent of the reorganized airline.

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