US Airways Group Files for Reorganization

US Airways proposed in the plan that creditors with claims of $50,000 or less would receive 10 percent of their claims in cash. Other creditors would receive stock in the reorganized company.


US Airways Group Inc. filed a reorganization plan in U.S. Bankruptcy Court on Thursday that depends on successful completion of its proposed merger with America West Airlines.

Much of the plan had been disclosed previously in announcements and documents submitted to the Securities and Exchange Commission and the Bankruptcy Court in Alexandria, Va. US Airways filed for Chapter 11 protection with the court Sept. 12.

US Airways proposed in the plan that creditors with claims of $50,000 or less would receive 10 percent of their claims in cash. Other creditors would receive stock in the reorganized company.

America West announced May 19 that it was merging with US Airways in a deal valued at the time at $1.5 billion. The merged company, to be called US Airways, expects to be the fifth-largest U.S. carrier, measured by passenger miles flown.

US Airways is Philadelphia's largest airline, with about two-thirds of the traffic and 5,500 employees.

US Airways and America West Holdings Corp. warned in a regulatory filing this week that merging their operations into a single company was full of pitfalls that could undermine the optimistic outlook they presented when they unveiled the merger.

US Airways said its results could be hurt by the rising price of jet fuel, which for the last two months has cost the airline more than personnel, traditionally its largest expense category. Competition from low-cost airlines means it cannot raise fares to make up for higher fuel costs, it said.

In a separate court filing, US Airways said it had a net loss of $37.9 million and a $10.4 million operating loss in May. The airline said it spent $141.4 million on fuel and $140.1 million on labor.

In the SEC filing, US Airways said the $600 million the airlines said previously that they expected to save by combining their operations might not materialize.

"The integration of US Airways Group and America West Holdings will be costly, complex and time-consuming," the companies said.

The merger faces skepticism from financial analysts, who are concerned that the new carrier won't have enough airplanes to carry the anticipated traffic and that integrating its two highly unionized work forces will be problematic.

"This deal has more going against it than for it," analyst Roger King of CreditSights said in a report issued Thursday.

The airlines outlined to the SEC who would own the new US Airways. The filing said that 49 percent of the new company would held by outside investors and that America West shareholders would have 38 percent.

We Recommend

  • News

    US Airways Group Issues Proxy Filing

    America West shareholders and US Airways creditors who are bullish on the prospects of the airlines' proposed combination will have an opportunity to invest in the new airline at a cost of $16.50...

  • News
    Judge OKs US Airways' Chapter 11 Plan

    Judge OKs US Airways' Chapter 11 Plan

  • News

    US Airways Says it Can Profit By '07

    The airline painted a relatively rosy picture of its future, even if oil prices remain near $60 per barrel, in filings submitted to U.S. Bankruptcy Court late Monday.

  • News

    US Airways Targets Turnover

    US Airways has asked a U.S. Bankruptcy Court judge to let it spend as much as $55 million to try to keep its officers and managers from quitting while it discusses a merger with America West...