The article below from NYTimes.com has been sent to you by psa188@xxxxxxxxx At least this article mentions PSA. psa188@xxxxxxxx /--------- E-mail Sponsored by Fox Searchlight ------------\ I HEART HUCKABEES - OPENING IN SELECT CITIES OCTOBER 1 From David O. Russell, writer and director of THREE KINGS and FLIRTING WITH DISASTER comes an existential comedy starring Dustin Hoffman, Isabelle Hupert, Jude Law, Jason Schwartzman, Lily Tomlin, Mark Wahlberg and Naomi Watts. Watch the trailer now at: http://www.foxsearchlight.com/huckabees/index_nyt.html \----------------------------------------------------------/ US Airways Tries to Reorganize for a 2nd Time September 13, 2004 By MICHELINE MAYNARD US Airways filed for bankruptcy protection yesterday for a second time after workers refused to grant $800 million in cuts it had sought to reduce its costs to the level of low-fare airlines. Nothing will change for US Airways customers right away, but few airlines have survived a second trip into bankruptcy court. The airline expressed confidence yesterday that it could reorganize under Chapter 11, but it is hobbled by limitations on its ability to find financing. Over time US Airways may be forced to end service to some of the nearly three dozen cities where it is the only carrier. And if it fails to cut costs adequately, especially by winning concessions from workers, it may not survive, analysts said. The filing yesterday means two of the nation's biggest airlines are in bankruptcy court. United Airlines, the second-largest carrier after American, sought protection in December 2002 and has yet to emerge. Delta Air Lines, which is pressing its pilots to grant $1 billion in wage and benefit cuts, has warned that it could also seek bankruptcy protection by the end of the month. US Airways, the nation's seventh-largest airline and part of the US Airways Group, does not plan to spend much time in bankruptcy court. It said in a statement that it would present a reorganization plan by the end of the year. Philip A. Baggaley, an airline industry analyst with Standard & Poor's, said there was little chance that US Airways would survive intact. The S.& P. put US Airways' credit rating into default yesterday. Mr. Baggaley said the airline could be forced to sell routes, planes and other assets to raise money; he noted that it was entering court protection at a time of year when passenger loads are lightest, save for the holidays, and fare sales abound. "I think they had no choice" but to seek court protection, he said, "but the odds are against them." The turmoil, he said, reflected the final vestiges of airline deregulation, which was pushed through by President Jimmy Carter in 1978 in a bid to bring down fares and stimulate competition. Since then, traditional airlines have seen their share of business shrink, as discount airlines have sprung up to take 25 percent of passenger traffic in the United States. In an interview, the chief executive of US Airways, Bruce R. Lakefield, said he agreed with Mr. Baggaley. "This is basically old versus new," Mr. Lakefield said. "I don't like the whole state of the industry here, but it is what it is." Mr. Lakefield expressed confidence that the airline would be able to fix its problems and emerge as a strong competitor, although he stressed, "We have to move quickly." Only Continental Airlines, which filed for reorganization in 1986 and 1990, successfully emerged from two rounds under court protection. TWA filed for two rounds and was acquired by American in 2000 under the terms of its third filing. Bankruptcy filings in the 1980's and 1990's also led to the demise of Braniff, Eastern and Pan Am. Last month, the chairman of US Airways, David G. Bronner, warned that a second filing could lead to a liquidation if new investors did not come forward with financing so that the airline could repay its government-backed loans. Despite that, Mr. Lakefield said yesterday that the company would move ahead with its transformation plan. The plan calls for US Airways to drop its traditional emphasis on service to towns as small as Presque Isle, Me., and as big as London, and become an airline focused on direct flights from major cities, with much cheaper fares. Given workers' refusals to accept concessions, and the need to make a $110 million payment to its pension plan on Wednesday, the only step was reorganization, which will allow the airline to preserve its cash and, more important, to reach new labor agreements. Its board made the decision to file in a telephone meeting, according to a person who was briefed on the deliberations. The chairman of US Airways' pilots union, Bill Pollock, said he was very disappointed by the company's action. Last week, Mr. Pollock said that pilots should have had the chance to vote on the airline's last offer, and warned that the workers' fates would be left to the mercy of the courts. In a statement yesterday, Mr. Pollock said he expected negotiations with management on concessions to continue. Under bankruptcy proceedings, management is given 120 days to draft a restructuring plan. After that, outside bids for the airline can be considered. The airline listed assets of $8.8 billion, including $2.5 billion in good will, reflecting the value of the brand, and liabilities of $8.7 billion. The airline could not obtain debtor-in-possession financing, a feature of most filings, because its assets are pledged as collateral to a federal loan board to secure a loan guarantee package granted upon its emergence from protection in April 2004. US Airways originally received $900 million in guaranteed loans, a balance that is now $717 million. In return, the airline pledged assets including gates, routes and cash worth two times the value of the guarantees. The government received a 10 percent stake in the airline as a result. Yesterday, US Airways said that it had reached an agreement with the federal Air Transportation Stabilization Board to tap into $750 million in cash for working capital, out of available capital of $1.45 billion. US Airways, based in Arlington, Va., filed yesterday in the United States Bankruptcy Court for Eastern Virginia in nearby Alexandria, the same place it sought court protection in 2002. It said details of the agreement would be presented to the court at a hearing this morning. The loan board met on Friday to discuss the airline's situation and signed off on an agreement to keep it in the air. In a statement, the board said it "understands the circumstances" surrounding the filing. To stave off the filing, US Airways had asked its workers for further concessions on top of $1.9 billion in cuts, granted under the airline's first bankruptcy, which it sought on Aug. 11, 2002. Although it reduced its annual costs by $2 billion a year during its first stint in bankruptcy court, US Airways emerged in April 2003, only to find that its costs were still higher than those of its low-fare competitors and other major airlines. Another factor has been the soaring price of fuel, which has hit all the major airlines hard. But steep price competition from low-fare carriers like Southwest and JetBlue has made it nearly impossible for the big airlines to raise fares to cover their higher costs. Mr. Lakefield, who became chief executive in April after the resignation of his predecessor, David N. Siegel, said fuel costs would be $300 million higher this year than it anticipated, while the amount from ticket sales was down $450 million from its projections when it left bankruptcy protection last year. Nonetheless, its unions rejected its demands, first made in December, for a third round of cuts on top of the two granted earlier. Robert W. Mann Jr., an industry consultant in Port Washington, N.Y., said workers had become jaded after being pushed numerous times for cuts by a succession of chief executives. "Ultimately, they weren't credible, or they didn't have or couldn't articulate a credible plan," Mr. Mann said. "It wasn't as if they hadn't heard this before." Mr. Lakefield said the airline was committed to negotiating the cuts, but if that failed US Airways would seek court action. Under the bankruptcy code, US Airways can ask a bankruptcy judge to set aside its labor contracts and replace them with less-generous plans. It did not file that motion in its previous bankruptcy, although United did so last year before reaching agreement with its unions on concessions worth $2.5 billion a year. "Canceling the labor contracts is the single largest change they can make in bankruptcy," Mr. Baggaley said. People briefed on the airline's plans said yesterday that US Airways expected to give unions about a month to come to terms before making a motion to set aside labor contracts. But even if that yields the savings US Airways is seeking, Mr. Baggaley said the airline faced other significant challenges. For one, it is obligated to keep making payments on its aircraft. It has to make payments to suppliers like credit card companies, and it must pay for jet fuel, the cost of which cannot be predicted, he said. US Airways is the descendant of a company formed in 1939 to provide mail service to western Pennsylvania. Eventually known as Allegheny Airlines, it changed its name to US Air in 1979, a year after industry deregulation, and to US Airways in 1997. The airline swelled through mergers with companies like Piedmont, Mohawk, Empire and Pacific Southwest, taking a dominant position on the East Coast. The bankruptcy filing yesterday came a week after leaders of the pilots' union refused to send the company's proposal for wage and benefit cuts to members for a vote. On Friday night, the pilots' union made a last-ditch effort to reopen talks, after US Airways made new proposals to its pilots and flight attendants. No negotiations were held. The decision to seek a second bankruptcy filing in essence rested with Mr. Bronner, the airline's chairman and the chief executive of Alabama's pension fund, which became the airline's largest investor in 2002 when it emerged from its first reorganization. Mr. Bronner, an industry novice, now joins a small group of otherwise successful business leaders tripped up by the complex industry, including the chairman of Berkshire Hathaway, Warren E. Buffett, who had invested in US Airways, and Carl Icahn, who once controlled TWA. Unlike Mr. Buffett, who once declared there was "no tougher job in corporate America than running an airline," Mr. Bronner expressed no regrets. The route to a second bankruptcy filing was played out between Halloween and Labor Day, framed by the decision by Southwest to begin service to Philadelphia, arguably US Airways' most important hub, and the refusal of US Airways pilots to send the company's concessions proposal to members for a vote. Southwest announced last October that it would start service to Philadelphia in the spring. That airport was known for its high fares, like $1,100 round-trip for walk up tickets to Boston. The last time Southwest had taken on a dominant airline was in 1993 at Baltimore-Washington International, a lesser-used airport also dominated by US Airways. Ten years later, Southwest had become the airport's biggest airline. Fearful the pattern might repeat in Philadelphia, US Airways wasted little time. On Dec. 5, David N. Siegel, then chief executive at US Airways, told employees on a hotline recording that the airline had to change its business plan to compete with low-fare airlines. A month later, US Airways hired Morgan Stanley to seek buyers for a wide variety of its assets, including its East Coast shuttle, airport gates in Boston and New York LaGuardia, its US Airways Express regional carrier and its hubs in Philadelphia, Pittsburgh and Charlotte, N.C. In flush times, such opportunities might have drawn a flood of bidders. The tactic seemed like a clear threat to unions: grant concessions or the airline would begin selling itself off. But US Airways did not sell anything, nor could it persuade its unions to acquiesce. By summer, Mr. Siegel was gone, succeeded by Mr. Lakefield, a former executive at Lehman Brothers, but workers still resisted. Frustrated, Mr. Bronner warned in August that the airline was likely to file for Chapter 11 bankruptcy and that such a move could quickly put the airline in liquidation, since investors were not likely to put more money into the airline. The comments echoed Mr. Bronner's threat in December 2002 that he would "Chapter 7 it" - liquidate - if workers did not grant a second round of cuts sought by management before the airline emerged from reorganization the first time. As Mr. Bronner was warning unions last month, a financial adviser hired by the pilots' union said US Airways had to win cuts by the end of this month or risk going under. But the same threats that had pushed employees to respond with concessions before the airline's first bankruptcy did not work before its second. Mr. Lakefield said he hoped the bankruptcy filing would put the airline on a more successful path. "I think people out there deserve to have this airline survive," he said last night. "We're going to do our best to be a player and be somebody that will be in business going forward." http://www.nytimes.com/2004/09/13/business/13air.html?ex=1096101878&ei=1&en=ff8d4fde94ec835e --------------------------------- 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! 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