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Judge Approves Sending US Airways' Reorganization Plan to Creditors

August 10, 2005
Bolstered by more than $1 billion in contract concessions from its employees, US Airways is poised to take one of its final steps toward emerging from its second bankruptcy in two years. A judge has ruled the struggling carrier may send its reorganization plans to its creditors for a vote.

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A hearing before U.S. Bankruptcy Judge Stephen Mitchell is scheduled for September, at which time U.S. Airways’ creditors can raise objections to the plan, which includes merging the airline with America West Airways. An attorney for the airline expressed optimism the plan would be accepted, saying the company has worked over the last several months to resolve issues.

Among the issues left on the table are concerns by the airline’s unions, who have been pressured to give up negotiated benefits to keep the airline solvent. The unions say the company is trying to scale back a proposed profit-sharing plan for workers, and eliminate employee representation in the boardroom.

US Airways has struggled more than most airlines of late, getting smacked with the double whammy of skyrocketing fuel prices and intense competition from low fare carriers. In particular, two of the more successful discount carriers, Southwest Airlines and newcomer JetBlue, compete with US Airways in its most lucrative east coast markets.

Its for that reason that company executives embrace the proposed union with America West as the key to survival, since America West is not only stronger financially, but has routes in western U.S. markets not now served by US Airways. America West shareholders are scheduled to vote on the merger next month. If approved, US Airways says it expects to complete the merger sometime in October.

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