US Airways and the federal government agreed to extend a deal in which the Air Transportation Stabilization Board will provide the financing necessary for the airline to continue operations while it is in bankruptcy.
The extension comes after the airline extracted more than $800 million in annual concessions from its labor unions. Most unions reluctantly agreed to accept pay and benefit cuts, but U.S. Bankruptcy Judge Stephen Mitchell last week imposed an estimated $269 million in concessions on the International Association of Machinists when that union failed to reach a deal.
US Airways Group Inc. said it needed those savings to convince the ATSB to extend the financing agreement, announced Thursday. The current deal is set to expire Saturday, and the airline had warned it would likely have to liquidate if it could not obtain an extension.
The deal between US Airways and ATSB still needs approval from Mitchell. That may come at a bankruptcy court hearing scheduled for Thursday.
The ATSB, created after the Sept. 11 attacks to help the industry recover from a severe downturn, gave the airline a $900 million federally guaranteed loan when it emerged from its first trip into bankruptcy in March 2003.
According to court documents, US Airways still owes the ATSB about $646 million of the original $900 million loan as of year's end. The airline has been using the cash to fund basic operations while in bankruptcy.
Two other airlines that received federal loan guarantees _ ATA Airlines and Aloha Airlines _ have also subsequently filed for bankruptcy.
Wednesday, the airline announced that its senior vice president of marketing, B. Ben Baldanza, is leaving the company to join low-fare carrier Spirit Airlines. Baldanza had been responsible for route planning, scheduling and pricing as well as marketing.
He is one of several top executives to leave the airline in recent months; he will be replaced by Bruce Ashby, who had been vice president of alliances and president of US Airways Express.
Ashby, in a memo to other marketing employees Wednesday, wrote "There is much to be optimistic about. We have turned the corner with our labor groups, and we are now engaged together in the competitive fight that the company faces. We are leaner, tougher, and ready to win."
Despite the extensive labor concessions, US Airways still must find a new investor to provide hundreds of millions of dollars for it to be able to emerge from bankruptcy.
The airline projects that it will not turn a substantial profit until at least 2008 even with the reduced labor costs and has said that at best its new cost structure gives it a "fighting chance" for survival.