Just two days after the nation's third- and fourth-largest airlines filed for Chapter 11 protection, US Airways got the go-ahead to exit bankruptcy.
US Airways received approval Friday to emerge from Chapter 11 protection, clearing the way for the nation’s seventh-largest airline to merge with America West Holdings Corp, and a judge tentatively approved United Airlines’ schedule to exit Chapter 11 bankruptcy early in 2006.
US Airways Group Inc. must wait at least 10 days before formally emerging from bankruptcy. It expects to emerge and formally close on its merger with America West, the nation’s eighth largest airline, late this month or in early October.
Meanwhile, Judge Eugene Wedoff in the Bankruptcy Court for the Northern District of Illinois approved the plan from UAL Corp., the parent of United, to hold a final confirmation hearing of its bankruptcy plan on Jan. 18-20.
But the judge said he would allow time to tweak the schedule to accommodate any complex objections to the debtor’s plan.
United, the world’s second-largest carrier (trailing only AMR Corp.’s American Airlines), filed for bankruptcy in 2002.
The US Airways ruling came just two days after Delta Air Lines Inc. and Northwest Airlines Corp. filed for bankruptcy protection.
The judge’s approval came after he ruled on the last remaining objections to the airline’s plan of reorganization. Most significantly, the airline’s unions had objected to an executive severance package that would provide $12 million in pay to 11 top executives who will not be given jobs with the merged airline.
Mitchell approved the severance package, saying it was in line with executive contracts in the airline industry.
This was US Airways’ second Chapter 11 filing since August 2002. The first filing came after federal regulators rejected a proposed merger with UAL Corp.’s United Airlines, followed by the industrywide collapse caused by the Sept. 11 attacks.
US Airways thought it had corrected its problems in the first bankruptcy, but it failed to anticipate rising fuel costs and rapidly increasing competition from low-cost carriers like Southwest Airlines, which began flying out of US Airways’ hub in Philadelphia.