US Airways' reorganization plan depends on a loan guarantee

The US Airways CEO remains optimistic despite the airline's uncertain future.
ARLINGTON, Va. (AP) -- US Airways Group has filed a proposed reorganization plan that hinges on the airline's securing a $1 billion federal loan guarantee, a $240 million investment from the Alabama state pension fund and pay givebacks by the airline's employees.
The plan was filed in federal bankruptcy court after two more labor unions accepted cost-cutting measures Friday.
Hit hard by slumping travel after the Sept. 11 terrorist attacks, US Airways became in August the first airline to declare bankruptcy after the attacks that had put the industry in a tailspin.
The airline lost $2.1 billion in 2001 and said it needed to cut costs by $1.6 billion to remain a viable company.
US Airways reiterated that it must receive $1 billion in loan guarantees by the Air Transportation Stabilization Board, a reduction in its Alabama pension fund liabilities estimated at $3.1 billion over the next seven years, and ratification of all the pay giveback agreements it negotiated with its unions to emerge from bankruptcy.
Additional provision
Another provision in its reorganization plan calls for cancellation of its common stock and a $240 million investment from the Alabama retirement system, which will retain ownership of 36.6 percent of new stock.
"Needless to say, many sacrifices have been made," US Airways President and Chief Executive David Siegel said. "Despite having to work to get more cost savings than originally anticipated because of the industry's prolonged downturn, I am actually more optimistic than ever about our proposal."
A new, 15-member board of directors will include eight nominees from the Alabama pension system, four representatives of the labor unions, Siegel and two independent directors to be named by the company "in consultation" with the airline's unsecured creditors.
Left unresolved is how much the company will pay on the $61 billion in claims filed by its creditors. The company said it expects to pay $2.1 billion to $2.2 billion for secured claims and $2.5 billion to $3.1 billion for unsecured claims; general unsecured creditors would receive about 2 cents on the dollar.