US bails out America West airline

The Bush administration has conditionally approved a $380m £262m) loan guarantee aimed at saving America West from bankruptcy and securing the future for most of the low-cost airline's 13,000 staff.

With the approval of the loan guarantees, competition is preserved and the viability of America West is assured well into the future

Douglas Parker
America West

The airline is thus set to become the first beneficiary of an approved $15bn rescue package for the aviation industry, agreed by President George W Bush and the US Congress.

America West is one of many airlines in the United States which have struggled to stay in business since passenger numbers fell drastically after the 11 September attacks on New York and Washington.

In the European Union, state aid to bail out bankruptcy threatened airlines has generally been deemed illegal by the European Commission, resulting in some carriers going bust.

Rescue package

The US government backing will enable America West to raise $445m in fresh loans.

In addition, it should now be able to arrange for an additional cash injection of $600 million "in concessions, financing and financial assistance", the airline said.

"With the approval of the loan guarantees, competition is preserved and the viability of America West is assured well into the future," said the airline's chairman, president and chief executive; Douglas Parker.

The federal loan guarantee was granted under the Air Transportation Safety and Stabilisation Act, subject to the resolution of two conditions, America West said.

Final approval of the guarantees will depend on the airline's commitment to rein in rising labour costs and will be linked to payments by the airline to the government in the future.