=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2004/12/09/f= inancial1835EST0360.DTL --------------------------------------------------------------------- Thursday, December 9, 2004 (AP) Bankrupt US Airways hopes for by 2007 MATTHEW BARAKAT, AP Business Writer (12-09) 15:35 PST ALEXANDRIA, VA. (AP) -- US Airways Group Inc. does not expect to turn a profit until 2007, even = if it achieves all the steep pay cuts from its workers that it is seeking through the bankruptcy process, the company's former chief financial officer testified Thursday. The bleak financial outlook, which would worsen if the airline can't terminate its remaining pension plans and impose pay cuts of up to 30 percent, illustrates the difficulty the airline faces in attracting investors to provide the cash US Airways needs to emerge from bankruptcy. Dave Davis, who until last month was CFO, told the bankruptcy court it's doubtful the company can attract a new investor even if the judge grants the airline's request to cancel its collective bargaining agreements with its unions and imposes new terms that would save the airline $1 billion a year. "It's going to be very challenging to attract equity with the returns projected in (the airline's most recent transformation plan)," Davis said. "It sort of gives the company a fighting chance, but it's not really something you could go to the market with" and attract new investment. Davis said the airline estimates that it will still lose $200 million in 2005 and $25 million in 2006, even if it receives all of its requested cuts. A small profit of $35 million is projected in 2007, with higher profits in 2008 and beyond. Those projections are merely estimates. In the company's first bankruptcy reorganization, it underestimated fuel costs by about $200 million a year and underestimated its revenue by about $860 million a year. Once the company does turn a profit, the workers who are taking such severe pay cuts now would be eligible for profit sharing that Davis said is the best in the industry. Employees would get 10 percent of all profits on a profit margin of up to 5 percent, and 25 percent of all profits on a margin greater than 5 percent. But Davis said the airline's best projected profit margin in its transformation plan is slightly higher than 3 percent, well below the average for those airlines that actually turn a profit. US Airways, bankrupt for the second time in two years, is seeking to transform itself into a low-cost carrier in the mold of America West Holdings Corp. or JetBlue Airways Corp. The airline says it needs to drastically cut worker pay, change work rules, terminate its remaining pension plans and eliminate most medical benefits for retirees to become competitive with such airlines. It is asking a judge to cancel the labor contracts of unions that do not agree to new deals, and has warned that it will have to begin liquidating assets by mid-January if it does not receive the requested relief. Chris Chiames, the airline's senior vice president for corporate affairs, agreed with Davis' assessment. He said the company is still looking for ways to either decrease costs or improve its revenue outlook. He ruled no options out, but said the most likely strategy would be to find better ways to utilize the airline's fleet of 280 jets rather than seek deeper cuts from labor. "This is a dynamic process and we still have more work to do," Chiames said. ---------------------------------------------------------------------- Copyright 2004 AP