This article from NYTimes.com has been sent to you by psa188@juno.com. /-------------------- advertisement -----------------------\ Enjoy new investment freedom! Get the tools you need to successfully manage your portfolio from Harrisdirect. Start with award-winning research. Then add access to round-the-clock customer service from Series-7 trained representatives. Open an account today and receive a $100 credit! http://www.nytimes.com/ads/Harrisdirect.html \----------------------------------------------------------/ US Airways Plans to Apply for a Federal Loan May 11, 2002 By EDWARD WONG US Airways said yesterday that it would apply for a loan guarantee from the federal government and that it might seek bankruptcy protection if it did not receive one. In a filing with the Securities and Exchange Commission and in a letter sent to employees, the company indicated that it would file an application with the Air Transportation Stabilization Board, which was created by Congress after the Sept. 11 attacks to help keep the airline industry afloat. The board is administering the $10 billion in loan guarantees set up for the airlines, which also received $5 billion in cash last fall. Of a half-dozen carriers that have applied, the only airline to receive a guarantee so far is America West, which received $380 million in backing last December. But US Airways is the nation's sixth-largest carrier, and it would be the biggest test case to date of how the government handles the loan guarantee process and how companies in the industry will try to use leverage from such applications to bring down labor costs. "We must move quickly toward a long-term solution," David N. Siegel, chief executive of US Airways, said in his letter to employees. "We will file an application with the A.T.S.B. for a loan guarantee since we have no other access to additional funding while we restructure the airline." Mr. Siegel also said the company would have to submit a business plan to the stabilization board that shows the carrier can turn a profit and repay the loan within seven years. The deadline for the formal application is June 28, and "if we are going to meet this short timetable everyone in the US Airways family, including management, labor and our vendors have to sign off on a new business plan in the coming weeks," Mr. Siegel said. The underlying message is that employees of the carrier, which has the highest operating costs of all the major airlines, should be prepared for cost-cutting measures. Unions are wary of the guarantee program in general because the government will almost certainly ask for a business plan that involves labor concessions or a cap on wage growth. The pilots union has said that US Airways executives have been open about asking for input on the proposed business plan. So far, none of the unions have raised serious objections. "As I have said before, it is likely that many of the details of the plan will not be easy to deal with," Mr. Siegel said in his letter yesterday. "But, I will continue to do everything in my power to be upfront with you about the challenges we face." In the S.E.C. filing, the carrier said that "in order to successfully restructure the company, alternative restructuring scenarios in the context of a judicial reorganization also must be considered," referring to the possible need to seek bankruptcy protection. In mid-April, US Airways reported a $269 million loss for the first quarter, its seventh consecutive quarterly loss. Its operating cost - 12.46 cents to fly one seat one mile - is the highest of all the major airlines. As of March 31, it had $561 million in cash and a burn rate of $3.5 million a day. Shares of US Airways plummeted $1.35, or 27 percent yesterday, to $3.60. "A lot of this is playing the game, but it's a very serious game with very serious consequences," said Kevin C. Murphy, an analyst at Morgan Stanley Dean Witter. "It's not unexpected, given the dire straits that they're in. The fact that they're being explicit enough to mention bankruptcy as an option shows how intensely they're willing to approach organized labor." The carrier's announcement came as the House Appropriations Committee is considering legislation that includes a provision that would end the loan guarantee program. Airline executives have lobbied against the measure, and members of the House Transportation and Infrastructure Committee have said they will try to remove the provision. Critics of the program say Washington should not be propping up foundering companies. That is especially true in the case of US Airways, they say, because the government blocked a market-based solution last July by scuttling the company's proposed merger with United Airlines. http://www.nytimes.com/2002/05/11/business/11FLY.html?ex=1022080089&ei=1&en=c78620c81cc407d9 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company