ATSB Approves US Airways Loan Application

US Airways today received an important vote of confidence for its recovery plan that alliance partner United Airlines could not secure: a federally backed loan guarantee.

The Air Transportation Stabilization Board's unanimous decision to guarantee $900 million of US Airways' proposed $1 billion financing package is a clear positive for the bankrupt airline, but it will come at a cost. "The board considers the warrants for 10 percent of the applicant's reorganized equity, which is offered to the government in the application, to represent sufficient participation in the applicant's potential future gains," said ATSB executive director Daniel Montgomery in today's letter to US Airways CEO David Siegel. America West Airlines, which in January 2002 became the first carrier to gain ATSB approval for loan guarantees, agreed to give the federal government 33 percent of its non-voting common stock.

Other conditions imposed by ATSB require US Airways to complete concession-laden agreements with employees spelled out in the carrier's revised business plan, gain bankruptcy court approval of its reorganization plan and sufficiently resolve pilot pension issues. ATSB left open the door for future arrangements as US Airways works to emerge from Chapter 11 protection.

In conditionally approving US Airways' application, Montgomery told Siegel that carrier management "has pursued a disciplined approach to executing its restructuring plan and reacting to changing economic conditions in the airline industry."

In response, Siegel issued a statement saying, "We are on track to emerge from Chapter 11 protection by March 31, and while there is still much work to be done, today's vote of support from the ATSB is another momentum-building achievement in that effort."