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Last Updated:  Monday, 31 March, 2003, 22:27 GMT 23:27 UK
US Airways back from the brink
US Airways Airbus
US Airways emerges leaner and fitter
US Airways has become the first big American carrier to emerge from bankruptcy in this current wave of industry-wide cut-backs and restructuring.

The airline, which was the sixth-biggest in the US before it filed for bankruptcy last August, has secured a $1.24bn loan.

The carrier has made sweeping cuts to its fleet, schedule and workforce since it was pushed into bankruptcy.

Over the past seven months, US Airways has cut 36% of its staff, 30% of its seats, 25% of its flights, and $1.9bn off its annual expenditure.

US Airways chief executive David Siegel said: "Securing the $1.24bn of added capital funds was critical to boosting our liquidity, executing our business plan, and weathering the very difficult operating environment that airlines face due to the Iraqi war and general economic weakness."

The news leaves only United and Hawaiian Airlines in bankruptcy protection, although industry number-one American Airlines is widely believed to join them soon.

United Airlines still aims to emerge from bankruptcy next month, despite collapsing revenues and persistent problems in agreeing sweeping cost cuts.

Cutting down

The secret of US Airways' rapid turnaround lies in hammering out quick agreements with trade unions, which are extremely powerful in US aviation.

While US Airways has recovered, rival American Airlines is on the verge of bankruptcy

The airline inked deals on pay and benefit reductions with most of its staff late last year, and avoided some of the confrontations that have marked other carriers' attempts to cut costs.

Before filing for bankruptcy, US Airways had the highest costs in the industry; it has now reduced them to just sixth-highest.

Not everyone is certain, however, whether that brings expenses down far enough for US Airways to ride out the current slump in the market.

US Airways was sent into bankruptcy by the collapse in travel after September 11.

Since then, the Iraqi war has triggered another drop of at least 15% in US airline traffic, and analysts reckon it may have a more long-lasting effect than previous scares.

Back to square one

For US Airways, the return to financial respectability is seen as a remarkable achievement.

But many industry-watchers argue that straight cost-reductions will at very best return the market to pre-September-11 conditions.

Even in mid-2001, US carriers were overspending and suffered from excess capacity, and were seen as vulnerable to any downturn in demand.

Since then, there has been no attempt to defray expenses by merging airlines, mainly because the US authorities have been relatively generous with emergency aid.

Some economists have even argued that US airlines should be nationalised if carriers prove reluctant to take remedial action themselves.


SEE ALSO:
Airline on verge of bankruptcy
31 Mar 03  |  Business
No cash handout for airlines
28 Mar 03  |  Business
US airlines fly towards extinction
27 Mar 03  |  Business
War forces airline cutbacks
28 Mar 03  |  Business
US Airways agrees pilot deal
11 Dec 02  |  Business


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