How US Airways Defied the Odds

In the past week, five high-ranking current and former US Airways executives spoke with the Charlotte Observer about the airline's path in the last year and a half.

Yet he and the executives devised a strategy to tap regional airlines for money. Those airlines depend on major carriers to survive, and US Airways wanted them to pay to operate as US Airways Express.

The company landed two such deals.

At the same time, Luth encouraged Lakefield to revive previous talks about a merger with America West.

Within weeks, executives of the two airlines were meeting, in hotel meeting rooms near US Airways' headquarters that Chiames had found. The airline didn't want to be seen talking with America West CEO Doug Parker and others, for fear of sparking speculation.

In May, after a busy day of discussions, Parker, Lakefield and other executives headed to US Airways' skybox to take in a Washington Wizards NBA playoff game. Dressed in suits, they drank beers as the player introductions began.

Just then, Luth received an e-mail on his BlackBerry, confirming the final piece of the investment needed, a $75 million pledge from Air Canada. Struggling against the crowd noise and booming player introductions, Luth waved the BlackBerry and shouted the good news.

The men shook hands and congratulated each other.

The companies announced the deal the following week.

Doing the unexpected

Looking back on the ups and downs, Lakefield and the others say the company came close to extinction."I think we skirted around the edge through most of the process," Lakefield says. "You didn't need a big deviation for things to have gone terribly wrong."

He and many others worked hard, he says. He doesn't like talking about the sacrifices he's made, or how the experience has changed him.

Some labor leaders, though, don't view the company leaders through such a soft filter.

"All they did was cut our labor contracts and lower the costs," says Mike Flores, leader of the airline's flight attendants' union. "I don't think it took geniuses to do that."

Unions have protested that executives didn't share in their sacrifices, pointing out that Lakefield never cut his $425,000 salary. A judge also approved severance payments for the top leaders of up to twice their salaries. Lakefield's share is $1.7 million.

Lakefield says he dealt with the criticism and stress of the job by running on a treadmill, or by playing tennis. He'd keep his eye on the ball and hit it, hard.

"When you've got everybody refusing to quit and refusing to die," he says, "sometimes you can do the unexpected."

Tony Mecia: (704) 358-5069;

Back From the Brink

When it filed for bankruptcy protection a year ago, US Airways faced long odds of surviving.

Statistically, companies that file for bankruptcy a second time are far more likely to die than those heading in for the first time, says Lynn LoPucki, a bankruptcy professor at the University of California at Los Angeles.

A bankruptcy relapse creates low worker morale, tarnishes a company's brand name and reputation and makes vendors wary of doing business, he says.

US Airways filed for bankruptcy the first time in 2002 but emerged just eight months later, in March 2003. Executives say they probably would have stayed in longer that first time to make additional changes but that a credit-card processor pressured them to leave bankruptcy court.

Even airline industry experts were surprised that under CEO Bruce Lakefield, US Airways has been able to improve its prospects and deliver a merger with America West. The deal is scheduled to close Tuesday.

Lakefield, a retired banker, had little airline expertise. "He really did recover and deliver a great sales pitch on a combined entity," says industry consultant Robert Mann.

Now, attention will turn to other airlines battling through bankruptcy. Delta Air Lines and Northwest Airlines filed for court protection this month, joining United Airlines, which has been in bankruptcy protection for three years.

With labor talks stalled, US Airways leaders say they couldn't avoid a second bankruptcy filing. "Without it, we'd be out of business," says Executive Vice President Jerry Glass. CEO Bruce Lakefield (above) spoke outside of court in Alexandria, Va. A holiday meltdown of canceled flights and mounting luggage was a fiasco, to be sure.

We Recommend