US Airways, PBGC Deal on Ch. 11 Claims OK'd

ALEXANDRIA, Va. (AP) -- A federal court Friday approved a deal between US Airways Group Inc. and the Pension Benefit Guaranty Corp. that resolves the agency's nearly $2.7 billion in claims in the bankruptcy case, and ensures its support for the airline's reorganization plan.

Judge Stephen S. Mitchell of the U.S. Bankruptcy Court in Alexandra, Va., signed off on the deal, which will give the PBGC cash, a note and an ownership stake in the reorganized airline to settle its claims rising out of US Airways' termination of its pension plans earlier this year.

The deal removes a potential stumbling block to the Arlington-based air carrier's emergence from bankruptcy protection through a merger with America West Holdings Corp.

US Airways attorney Brian Leitch said the deal is ''good for the PBGC, good for the creditors and good for the estate.''

The PBGC assumed responsibility for US Airways pensions representing 51,000 employees, including flight attendants and machinists, after the bankruptcy court cleared the airline to terminate the plans in January. The pension agency had already taken on the airline's pension plan for its pilots.

The PBGC has claims totaling about $2.7 billion. The settlement gives the PBGC a $13.5 million cash payment, a $10 million note and 70 percent of the stock available to unsecured creditors under US Airways' proposed Chapter 11 plan. The pension agency pledged not to sell the shares for at least five months.

At Friday's hearing, US Airways attorney Leitch said the deal would remove uncertainty for the airline's other creditors about the total amount of the PBGC's claims in the bankruptcy case.

''All parties benefit from the clarity the deal provides,'' Leitch said.

The official committee of unsecured creditors said it ''wholeheartedly supports'' the deal.

US Airways filed for Chapter 11 bankruptcy protection for a second time in September 2004.

US Airways and America West expect to complete their merger in the fall. A hearing on US Airways' Chapter 11 reorganization plan, which is built upon the merger, is scheduled for Sept. 15.

Copyright 2005 Associated Press

Loading