DAVID FIELD /WASHINGTON DC
Troubled airlines move towards codesharing, but neither has can secure the required employee concessions
United Airlines and US Airways have each requested government financial aid as they seek cost cuts from labour and suppliers.
US Airways has also postponed some aircraft lease payments and says it will ask creditors to alter contract obligations, prompting a credit downgrade. Speculation has risen that the carrier may enter bankruptcy if it does not win federal guarantees for $900 million of a planned $1 billion loan. The move came days after US Airways applied to the Air Transportation Stabilization Board, which is also considering a $1.8 billion loan guarantee request from United.
Both loan applications were widely expected, but the US Airways default threat surprised Credit Suisse First Boston analyst Jim Higgins, who says the move could trigger a series of events leading to an involuntary bankruptcy.
Fearing this, Standard & Poor's cut its credit ratings on US Airways after the deferrals. US Airways withheld payments on some of its older Boeing aircraft in storage, although the carrier says it will keep up its Airbus payments.
The board wants applicants to negotiate cost cuts from unions and suppliers and to seek new business arrangements. US Airways has also moved towards a codesharing alliance with United, which would be a major step toward expanding its market reach out of its eastern US home ground.
United, meanwhile, has achieved a cost-cutting package with its pilots to yield $520 million over three years. With almost $3 billion in liquidity, United is in a stronger position than US Airways, says New York bankruptcy attorney Bill Rochelle. With about $560 million in cash in hand, US Airways could seek bankruptcy court protection as well as the federal aid, he says.
Source: Flight International
