US Airways today said it reached an agreement with the Air Transportation Stabilization Board that extends to June 30 access to cash proceeds from a federal loan guarantee. Should the bankruptcy court overseeing the carrier's restructuring approve the new agreement in a hearing scheduled for today, it would provide the airline much-needed breathing room and mark the third time ATSB modified loan terms on US Airways' behalf. In a blow to transformation efforts, however, senior vice president of marketing and planning Ben Baldanza yesterday became the latest key executive to leave the company.
Access to cash collateral backing the carrier's federally approved loan was set to expire at the end of this week. Provisions of the amended deal require US Airways to maintain minimum weekly cash balances and sufficient liquidity levels, similar to terms dictated by General Electric Capital Aviation Services in a new financing agreement signed in November
(BTN, Dec. 6, 2004).
US Airways said it must achieve labor cost savings to meet those terms and emerge from bankruptcy by the end of June, either by securing ratified agreements from unions or rejecting existing agreements, as permitted by the bankruptcy court.
"Our customers should book us with confidence, knowing that we have sufficient cash to operate as well as to implement the many changes that are already under way," said US Airways president and CEO Bruce Lakefield. "While we still have much work to do, I think our most difficult period is behind us."
Many industry observers are less optimistic. "At this point, it looks as though US Airways will continue to use the rope that ATSB gives it," said Helane Becker, analyst with The Benchmark Co. in a recent research note. "We expect US Airways to go through that cash rapidly. This just delays the inevitable liquidation date."
Recent developments that further complicate US Airways' planned emergence from bankruptcy include Delta Air Lines' compressed pricing structure that appears to be holding
(BTNonline, Jan. 7) and Southwest Airlines' planned May entry into Pittsburgh. Though US Airways already began dismantling hub operations in the market, it still flies nonstop service to 50 markets as the city's largest carrier.
A federal investigation into operational collapses over the holiday period also is expected to reflect poorly on US Airways. Management and labor unions have blamed each other for staff shortages in Philadelphia that cancelled many flights and led to massive amounts of mishandled baggage.
Meanwhile, to fill the vacancy left by Baldanza's departure, US Airways named Bruce Ashby executive vice president of marketing and planning. Previously senior vice president of alliances and president of US Airways Express, Ashby's responsibilities now include sales, distribution, alliances, reservations, scheduling, pricing, yield management and marketing. Ashby's promotion topped a list of several senior management changes announced yesterday by the carrier.
Baldanza yesterday was named president and COO of Spirit Airlines, effective Jan. 24. The Ft. Lauderdale-based low-fare carrier serves 18 cities.