This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ NOMINATED FOR 7 BROADCAST FILM CRITICS AWARDS IN AMERICA has been nominated for 7 BFCA Awards including Best Picture, Best Actress Best Director, Best Writer, Best Young Actor/Actress, and Best Song. Ebert & Roeper give IN AMERICA "Two Thumbs Way Up!" Watch the trailer at: http://www.foxsearchlight.com/inamerica \----------------------------------------------------------/ US Airways Chairman Warns of Risk of Default January 9, 2004 By MICHELINE MAYNARD US Airways is at risk of defaulting on $900 million in loans backed by the federal government unless it can quickly reduce its costs, the airline's chairman said yesterday. The airline, which used the loans as the cornerstone of its restructuring plan when it emerged from bankruptcy protection last year, has retained Morgan Stanley to find possible buyers for a range of assets, the chairman, David G. Bronner, acknowledged yesterday. People close to the deliberations say US Airways may consider selling its East Coast shuttle; regional operations and gates at various airports; and one of its hubs, either Pittsburgh, Philadelphia or Charlotte, N.C. Industry analysts said the shuttle, which operates between Boston and New York and between New York and Washington, is the most attractive of those assets. Mr. Bronner, who is also US Airways' lead investor, pledged that it would meet the covenants of its loan guarantees. But he said it had only 60 to 90 days to resolve a cash crisis that was brought about by heightened competition from low-fare airlines. "What you don't want to do is have a business that dies by way of water torture or starvation,'' said Mr. Bronner, the chief executive of a big pension fund, Retirement Systems of Alabama. "You can either fix it or pay off." He spoke by telephone from his office in Montgomery, Ala. In December 2002, with US Airways then under bankruptcy protection, Mr. Bronner threatened to liquidate the airline if the unions did not agree to an additional set of concessions. Few carriers have the cash available for acquisitions because of big losses in the industry over the last decade. Moreover, any company that did buy a piece of US Airways would have to deal with its unions and with airport authorities. Indeed, US Airways' unions reacted angrily to news of Morgan Stanley's role, which apparently came as a surprise, even though union representatives sit on the airline's board. Robert Roach Jr., general vice president for transportation at the International Association of Machinists and Aerospace Workers, which represents airline mechanics, saw the action as an effort by the company to force the unions into granting more concessions, on top of two rounds agreed to in bankruptcy. "There is not a set of circumstances that would allow us to go back in and reopen the collective-bargaining agreements," Mr. Roach said yesterday in an interview. "This is not going to work." Union leaders said the airline, based in Arlington, Va., had presented them with the outline of a business plan at a December board meeting that called for cost cuts of $200 million to $300 million, in part through wage and benefit concessions. Before they could participate, the union leaders said the carrier would have to streamline its operations further. A spokesman for the Air Line Pilots Association, Jack Steffan, said further cuts would do no good unless management changed the way the airline was run. A spokesman for the Association of Flight Attendants, Jeff Zack, added that US Airways needed to revamp a wide range of practices including its schedules, the way it assigns employees and the prices it pays for fuel. "It's disingenuous of them to say they need cuts from workers to save the airline," Mr. Zack said. Mr. Steffan, whose union has called for the ouster of US Airways' chief executive, David N. Siegel, said that "if throwing money at this management would solve the problem, we would do it in a heartbeat." Mr. Bronner said the airline would prefer that the unions cooperate in its efforts to cut costs. "If that's not going to work,'' he said, "you have to put everything you can on the table and say, 'How do we maximize the assets we've got?' '' Mr. Bronner acknowledged that there appeared to be a standoff. "You have to have a buy in for everybody's survival," he continued. "Instead of management and labor working together, it's like two people that are frozen and with their fingers pointed at each other." He said the cost cuts were critical for US Airways to meet the terms of the government-backed loans. The first payments are due in June. Under terms of the loan guarantees, awarded by the Air Transportation Stabilization Board, the carrier needs to have $1 billion in cash on hand and to comply with several other requirements. It has about that much now but is burning cash at the rate of $1 million a day. A default would be the first by a major airline on a government bailout since the loan board was constituted after the attacks of September 2001. Before allowing a default, Mr. Bronner said, the airline would try to renegotiate its commitments with the Air Transportation Stabilization Board. A spokeswoman for the loan board said it had not been contacted by US Airways. Last month, Mr. Siegel said the airline was being forced to revise the business plan submitted with its federal loan application because of the threat posed by low-fare airlines like Southwest, AirTran and JetBlue. He specifically cited Southwest Airlines' decision to begin service in May from Philadelphia. Analysts have questioned why US Airways was caught off guard by the discounters, which have doubled their share of the domestic travel market, in terms of passengers carried, over the last two years. Yesterday, Mr. Bronner said that of greater concern was a raft of plane orders placed during 2003 by JetBlue Airways, as well as others. "They were a pesky mosquito and they've developed into a huge bumblebee," he said. A sale of major assets would presumably be a faster and easier way for US Airways to raise funds than to seek cuts from its unions. Carriers that might be interested in the US Airways Shuttle include American Airlines, which has long wanted such an operation, and JetBlue, which is on an aggressive expansion drive. A spokesman for JetBlue declined to comment. Al Becker, a spokesman for American, said the airline was pursuing its own growth strategy on the East Coast, where it has recently expanded flights between Washington Dulles and New York, using regional jets. Industry analysts said US Airways would have a tough time selling a hub, especially Pittsburgh, which has been heavily dependent on US Airways' business. This week, the airline renegotiated a deal for 10 gates at Pittsburgh through 2008 while retaining its remaining 49 gates there month to month. That arrangement would make it relatively simple for US Airways to hand over its gates to another carrier. But the low-fare airlines operate on a point-to-point system, rather than the hub-and-spoke model favored by the major carriers, making Pittsburgh a tough sell, said Kevin P. Mitchell, chairman of the Business Travel Coalition. "I don't think there's an airline standing that would have the resources to develop Pittsburgh if US Airways were to go out of there," Mr. Mitchell said. Andrew Ross Sorkin contributed reporting for this article. http://www.nytimes.com/2004/01/09/business/09air.html?ex=1074656471&ei=1&en=0869da8a6f8a43f8 --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! Click here: http://www.nytimes.com/ads/nytcirc/index.html 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@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company