=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/n/a/2005/02/28/financial/= f141647S48.DTL --------------------------------------------------------------------- Monday, February 28, 2005 (AP) Court OKs US Airways Financing Deal By MATTHEW BARAKAT, AP Business Writer (02-28) 14:16 PST Alexandria, Va. (AP) -- US Airways Group Inc. received bankruptcy court approval Monday for a de= al with an affiliate regional carrier Air Wisconsin that could provide US Airways half of the money it needs to emerge from bankruptcy. U.S. Bankruptcy Judge Stephen Mitchell gave interim approval to plans by Eastshore Aviation, an affiliate of Air Wisconsin Airlines Corp., to loan $125 million to US Airways, which is seeking $250 million in new investment to fuel its planned emergence from bankruptcy protection by June 30. The $125 million loan can be converted into an equity investment by US Airways upon emergence from bankruptcy. "It's like having an investment agreement without an investment agreement," US Airways lawyer Brian Leitch explained in court. In return for the money, US Airways agreed to accept up to 70 regional jets from Air Wisconsin if needed. The Appleton, Wis.-based carrier has flown as a regional carrier for UAL Corp.'s United Airlines, but United, which is also in bankruptcy and is trying to cut costs, has put the Air Wisconsin routes up for bid. If Air Wisconsin loses the United routes, the deal with US Airways gives it another partner. Air Wisconsin spokeswoman Kelly Lanpheer said, though, that the deal with US Airways is more than a mere backup option. "Air Wisconsin sees the progress US Airways has made in its restructurin= g, and we're looking forward to the opportunity to build a new partnership with US Airways and continue one with United," she said. US Airways announced just last week that it was trimming its mainline jet fleet from 281 to 270 planes and was eliminating some flights as a result of industry overcapacity and other factors. But the airline is willing to take on new regional jets because, while in bankruptcy, it enjoys the flexibility to break leases on other regional jets, so the airline could essentially swap jets rather than taking on new ones it does not need. "While we're in bankruptcy we still have some flexibility as to how we structure our regional jet operations," said US Airways Vice President for Corporate Affairs Chris Chiames. US Airways had to carefully structure the terms of its jet agreement with Air Wisconsin to placate General Electric Co. and other aircraft lessors who are worried about a glut of regional jets on the market. If too many jets end up in the hands of a bankrupt carrier like US Airways, the lessors lose leverage to keep the leases intact. Exact details of the jet agreement between US Airways and Air Wisconsin were redacted from the public record because of the competitive issues surrounding the placement of regional jets within the marketplace. The financing deal gives US Airways immediate access to $75 million of t= he $125 million, money that the airline may need to keep its cash levels sufficient during the first week in March, when the company anticipates its weakest cash reserves. The airline must maintain minimum amounts of cash under a financing deal with the federal Air Transportation Stabilization board. US Airways said the deal gives it flexibility as it seeks the final investment needed to emerge from bankruptcy after obtaining $1 billion in annual cost savings from its employees. A new investor could match the $125 million provided by Air Wisconsin, or potentially supplant the Air Wisconsin investment if willing to provide the $250 million on more favorable terms. "It opens up a wide universe of potential investors," Leitch said. ---------------------------------------------------------------------- Copyright 2005 AP