US Airways has stayed on course to get out of the bankruptcy courts in March as a lower-cost carrier, and when it does, federal backing is waiting for it.

The Air Transportation Stabilization Board has given formal approval to guarantee $900 million in loans for the airline after it emerges from bankruptcy and has resolved its pension issues.

The panel praised US Airways management for taking "a disciplined approach to executing its restructuring plan and reacting to changing economic conditions in the airline industry".

The unusually complimentary letter suggests that the board, which refused similar loans to United Airlines, backs the US Airways idea to turn its pilots pension plan over to the federal government.

Congress refused to grant special permission to alter its pension-fund payments schedule, creating what appears to be the last barrier to the airline's rapid reorganisation. The board says it will close on the loan guarantee as long as the bankruptcy court clears a resolution to the pensions issue.

Its Air Line Pilots Association has called the pension termination an ultimatum and has objected, but US Airways says in bankruptcy court filings that the pensions obligation would push its cash flow into the red by as much as $530 million between 2003 and 2005.

The airline would not cut other union's pensions, and pilots could lose as much as 65% of their benefits. It also objects because, it says, US Airways wants to use pensions savings to help finance the regional jet purchase that is the centrepiece of its reorganisation effort.

The airline has cut $1.9 billion in annual costs since its bankruptcy filing in August, even though it has seen traffic falter throughout its region.

US Airways said it sees revenue growing by as much as 3.4% this year. A cornerstone of that projected growth is its alliance with United, begun in January and expanded with a fourth wave of codeshared flights that added hubs such as Denver and Washington Dulles.

US Airways chief executive David Siegel told an industry conference in February that the carrier could formally join the Star Alliance as early as this spring. Siegel says membership in Star is key for US Airways to realise all the benefits of its extensive domestic codeshare alliance with United.

Source: Airline Business