US Airways Group, GE Reach Financing Deal
{{#rendered}} {{/rendered}}Bankrupt US Airways Group Inc. (search) said Friday it has reached a new aircraft lease and financing deal with General Electric Co. (GE) that could extend the carrier's lifeline further into next year, if it could quickly secure new cost cuts.
The agreement between US Airways and its largest creditor proposes to save the airline $140 million during the remainder of its bankruptcy, partly by deferring potentially crippling aircraft and debt payments that were due within six months.
The deal would also revive US Airways' effort to rely more on regional jets for short-haul service, a centerpiece of its restructuring. GE would lease US Airways up to 31 regional jets over the next three years. US Airways would return 25 of its 281 mainline aircraft over the same period, including 10 Airbus A319s in 2005 and 15 older model Boeing 737s (search) in 2006-07.
{{#rendered}} {{/rendered}}US Airways said had earlier this fall that it could liquidate in early 2005 if it could not achieve nearly $1 billion in savings from labor and other sources. It has only realized part of that goal over the long term.
The deal with GE's aircraft and engine financing divisions requires US Airways to exit Chapter 11 bankruptcy protection by June 30, the first time the company has agreed to a timetable.
It is also a clear sign that GE, a major aircraft lessor, is willing to commit only so far for US Airways. GE's exposure is nearly $3 billion.
{{#rendered}} {{/rendered}}"We think this deal is helpful to US Airways in the short term and keeps our investment in check," said Eric Jones, a GE spokesman.
The agreement is heavily conditioned. It seeks court approval by Dec. 17 and new yearly savings and other restructuring milestones by Jan. 14.
Mid-January is also when an agreement with lenders and the government permitting US Airways to access its only source of ready cash is due to expire — which makes activating the GE agreement potentially crucial to the airline's survival.
{{#rendered}} {{/rendered}}The proposal puts new and substantial pressure on three big airline unions to agree now to concessions worth more than $500 million annually or risk losing their contracts.
US Airways has sought to void labor agreements after months of fruitless talks with flight attendants, machinists, and other ground workers. Pilots have already ratified long-term concessions worth $300 million annually.
More negotiations are scheduled for Monday, one day before a bankruptcy judge in Alexandria, Virginia, begins to hear the airline's case for throwing out union contracts to survive. Other than pilots, union employees at US Airways are working under a 21-percent pay cut through mid-February.
{{#rendered}} {{/rendered}}US Airways is seeking givebacks worth $116 million from employees represented by the Association of Flight Attendants (search), $298 million from the International Association of Machinists (search) and $137 million from the Communications Workers of America. US Airways also hopes to save an additional $100 million by replacing pension plans for flight attendants and machinists with cheaper retirement accounts.
The flight attendants have threatened to strike should US Airways and rival United Airlines, owned by UAL Corp. and also bankrupt, go through with threats to abrogate contracts. The AFA mailed out 5,000 strike authorization ballots to its members at US Airways on Friday.
"Flight attendants will not passively stand by while their employers manipulate the courts to destroy our livelihoods," said Patricia Friend, president of the flight attendants union.
{{#rendered}} {{/rendered}}David Castelveter, a US Airways spokesman, said the company does not believe there are legal grounds for a strike. "And we're going to continue to negotiate with AFA and other unions to reach consensual agreements," he said.