KAREN WALKER / WASHINGTON DC

Greater reliance on regional jets and deeper cost cuts form the basis of US Airways' plan to emerge from Chapter 11 bankruptcy protection early in 2003.

The carrier, which filed for Chapter 11 in August, submitted its reorganisation plan to a Virginia court on 20 December, saying it intends to emerge from bankruptcy as early as March 2003. Its plan - subject to court approval - hinges on annual cost cuts of $1.8 billion, more than previously committed, and finding a way to address a $3.1 pension fund billion shortfall within seven years.

US Airways says it will address those issues so it can gain final approval for a $1 billion US federal loan guarantee - another critical element of the plan. The US government will get a 10% stake in US Airways in return for the loan guarantee. Other stakeholders in the reorganised carrier will include Alabama state pension fund RSA, which will be the lead investor with a 36.6% stake, labour groups, unsecured creditors, management and General Electric. Although the airline gives no details of its post-bankruptcy operational structure, it says it will maintain its fleet of mainline aircraft, but also increase revenues through greater use of regional jets.

A court hearing to approve the plan will be held in mid-January.

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United Airlines, which filed for Chapter 11 in December, says it will seek court approval to nullify its current labour contracts and impose its own lower pay scales unless the unions grant it the $2.4 billion in annual savings it wants. United attorneys say they prefer "consensual" agreements, but they reserved the right to invoke the contract rejection clause the day after Christmas. Union leaders say that the size of the concessions United is demanding - about twice that of its earlier goals - is stunning. The airline says it has also begun negotiations with its regional feeders to save it about $70 million a year in fees and may ask two unnamed regional airlines to apply to become feeders.

Source: Flight International