Battle continues for union concessions to get federal loan

US Airways may avoid filing for bankruptcy after it convinced the US Senate last week to preserve a federal loan guarantee programme.

But it risks running out of cash unless it secures a $1 billion loan guarantee from the programme.

Before it can apply for the guarantee - the deadline for which is 28 June - the airline must secure contract concessions from its unions, and persuade the House of Representatives to keep intact the controversial $10 billion emergency loan programme, set up after the September terrorist attacks.

After intense lobbying by the carrier and its unions, the Senate rejected a proposal to reduce the amount in the loan guarantee pool and defer awards until 1 October. The House, however, passed a similar proposal last month. "If Congress stops the government from issuing loan guarantees prior to 1 October, US Airways will run out of cash," says the Association of Flight Attendants (AFA).

US Airways has a Chapter 11 bankruptcy filing prepared in case it fails to secure a quick loan guarantee. The airline has discussed concessions with its main unions, but a wide gap remains between the $850 million in labour cost cuts sought by the carrier and what the unions are willing to provide. "We advised the carrier that the documents they had presented do not represent a legitimate proposal," says the International Association of Machinists. "They asked our membership to agree to $261 million in annual cuts without explaining how these cuts will help the company survive."

US Airways is asking the AFA to take $90 million in annual cuts, and the Air Line Pilots Association (ALPA) to accept a $595 million reduction. ALPA has agreed to cut costs by almost $300 million. US Airways has set a 15 June deadline for forging tentative agreements.

US Airways has formed subsidiary MidAtlantic Airways to operate at least half of the 70 additional regional jets it is allowed to acquire under an amended pilot-contract scope clause. Pittsburgh-based MidAtlantic will use the operating certificate of the airline's dormant Potomac Air unit, and will be the fourth wholly owned US Airways Express carrier. US Airways is talking to Bombardier and Embraer, and is to announce a regional jet order by early July. The airline has applied to reactivate the Potomac Air certificate, which it closed in October, to begin flying in the fourth quarter.

Source: Flight International