ALEXANDRIA, Va. (AP) -- A bankruptcy judge gave US Airways Group Inc. permission Monday to tap a government loan to fund daily operations -- a move expected to allow the airline to continue its normal flight schedule while it searches for additional financing.þþU.S. Bankruptcy Judge Stephen Mitchell also gave the airline permission to continue its frequent flyer program and its alliances with other airlines. US Airways officials sought to assure customers that the airline has no intention of going out of business -- even as it asked to skip required payments to employee pension funds.þþ``This management team isn't here to preside over a liquidation,'' said Brian Leitch, the airline's lead bankruptcy attorney, adding that the plan is to transform ``into a vibrant competitor'' who can match the low fares and low costs of competitors like Southwest Airlines Inc. and JetBlue Airways Corp.þþUS Airways, the nation's seventh largest airline, filed Sunday for bankruptcy protection for the second time in two years. The airline filed after it was unable to obtain $800 million in annual cost cuts from its workers' unions that the company said it needed to stay afloat.þþThe airline will continue to seek those labor concessions while in bankruptcy. US Airways chief executive Bruce Lakefield said outside the courtroom Monday that the company is re-evaluating its financial targets, opening the possibility that the airline will seek even greater concessions from workers.þþ``We're looking at everything now,'' he said.þþLakefield said he still believes employees will voluntarily negotiate new labor agreements. If not, the airline can ask the court to cancel the existing labor contracts. Lakefield would not speculate on how long the company would continue to seek consensual agreements.þþMeanwhile, the airline asked the court for permission to avoid payment on several of its retirement plans. That includes a $110 million pension payment to the plans for its machinists and flight attendants that would have been due Wednesday, and about $19 million in contributions to the pilots' 401(k)-style retirement plan.þþThe company's plan to skip those payments raised concerns from the Air Line Pilots Association and the federal Pension Benefit Guaranty Corp., which wants to ensure the pension plans' solvency.þþ``We strongly recommend that they reconsider their plan'' to avoid retirement contributions, said Richard Seltzer, lawyer for the pilots' union. ``It's unfortunate and it's counterproductive'' as the airline continues contentious negotiations with the pilots' union.þþPBGC lawyer Susan Birenbaum said the pension contributions ``are mandated by federal law'' and stressed ``the importance of continuing to fund the plan while in bankruptcy.''þþMitchell scheduled a hearing on the issue for Oct. 7.þþWall Street was skeptical about what will happen to the value of the company's stock if the reorganization plan is approved. US Airways shares plunged 44 cents, or 30 percent, to close at $1.02 per share on the Nasdaq Stock Market. An earlier version of US Airways stock was rendered worthless after its first bankruptcy reorganization.þþMitchell approved a motion Monday that allows the airline to use cash from a $718 million federally guaranteed loan package to fund its daily operations while in bankruptcy.þþThe motion was supported by the federal government's Air Transportation Stabilization Board, which lent money to the airline when it emerged from its first trip into bankruptcy in March 2003.þþJustice Department lawyer Brendan Collins said the government is convinced that the airline retains sufficient collateral to repay the loan. The government's loan is secured, which puts the government at the front of the line for repayment among creditors.þþMitchell presided over the company's first trip into bankruptcy, which extended from August 2002 to March 2003. At the beginning of Monday's hearing, Leitch explained to Mitchell that high fuel costs and unexpectedly brisk competition from low-fare carriers doomed their first exit from bankruptcy.þþThe company had cut costs by $2 billion a year in the first bankruptcy, but overestimated its revenue by $1.4 billion a year because of price wars.þþ``The industry has really transformed since the time of our emergence'' last year, Leitch said. ``US Airways is forced to compete at (lower) prices, and lose money. If you're a low-fare airline, and not a low-cost airline, that business model doesn't sustain itself very well.''þþEric Schaffer, a bankruptcy partner with the law firm of Reed Smith who represented a US Airways creditor in the first reorganization, said he does not believe US Airways is in any danger of liquidating soon. He said he's not planning to cash in his miles as a top-tier member of the airline's frequent flyer program, and is planning to book a flight with US Airways over the Thanksgiving holiday.þþ``I think their bankruptcy shows the type of problems the whole industry is facing. US Airways has been in the vanguard for dealing with some of these problems, and unfortunately for them, they're still in the vanguard,'' he said. ``But from what I've seen, the second filing isn't a mistake. It's just that things have changed.''þþUS Airways employs 28,000 in its mainline operations and 6,000 in its subsidiaries, including Piedmont Airlines. It is the second-largest carrier east of the Mississippi, with hubs in Charlotte and Philadelphia, and served 54 million passengers last year.þþThe airline has not yet found a partner to invest in exit financing for the company. US Airways Chairman David Bronner, who runs the Retirement Systems of Alabama, which invested $240 million in the airline in the first bankruptcy, left open the possibility Monday that the pension fund would make an additional investment.þþþþ
Source: NY Times
