PHILADELPHIA - US Airways Group Inc. received court approval yesterday to extend a crucial agreement with the federal government that helps provide the financing the airline needs to reorganize and emerge from Chapter 11 bankruptcy this summer.
The agreement with the federal Air Transportation Stabilization Board lets the airline use the cash it has on hand through June 30.
US Airways expects to find $100 million in additional financing or cost savings by next week to get through the winter, when business is slowest.
"This long-term agreement is a huge boost for our customers," Chief Executive Officer Bruce R. Lakefield said in a statement. "Our customers should book us with confidence, knowing that we have sufficient cash to operate as well as implement the many changes that are under way."
US Airways shares rose 13 cents, or 12 percent, to $1.21 in over-the-counter trading yesterday.
The agreement with the federal board, approved by U.S. Bankruptcy Court Judge Stephen S. Mitchell in Alexandria, Va., is dependent on US Airways' maintaining weekly minimum cash balances.
The board, created by Congress after the Sept. 11, 2001, attacks to help the industry recover, guaranteed a $1 billion loan that US Airways received in March 2003 when it emerged from its first bankruptcy.
The board says US Airways still owes $718 million on the loan, $645 million of which the board guaranteed. US Airways said it had $823 million in cash and $1.5 billion in total current assets as of Nov. 30 - its most recent financial report to the bankruptcy court.
The extension comes after the airline extracted $950 million in annual savings from its labor unions.
Last week, Mitchell imposed an estimated $263 million in concessions on the Machinists union, which represents the airline's mechanics and baggage handlers. The cuts were imposed after the union failed to reach tentative agreements covering all its members.
Voting this week
Machinists union members are voting this week and next on the company's last contract offer.
Analysts said the agreement with the loan board would help assure some travel agents and customers that US Airways will be around in coming months.
But the airline's service recently - and particularly the plethora of canceled flights and lost bags that Philadelphia passengers experienced over the Christmas weekend - has hurt the company badly.
"US Airways is making good progress in achieving cost reductions and reaching agreement with key stakeholders," said Philip Baggaley, Standard & Poor's Corp.'s airline credit analyst.