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USAir Uses the "L" Word

September 27, 2004
Consumers are flying on bankrupt USAir the same as always, as the carrier struggles to get its financial house in order. But for the first time there's an indication from the company that might not be possible.

In papers filed with the U.S. Bankruptcy Court, USAir says it faces what it calls a "high probability" of having to liquidate its assets by mid-February if it can't reduce its payroll.

The airline wants to cut employee pay by 23% across the board, saving the company an estimated $38 million a month. Without the cuts, USAir says it will be forced to implement large-scale layoffs, and then potentially liquidate.

While those statements are designed to demonstrate to the court the seriousness of USAir's financial condition, it does little to reassure consumers who fly regularly on the airline - particularly those who have spring trips planned. Obviously, USAir's survival depends on those consumers continuing to buy tickets.

To date, USAir has reached cost-cutting agreements with its flight crew training instructors and its flight dispatchers. But that covers just a little more than 200 of the airline's 28,000 employees. It still has to reach agreements with the larger unions that represent its pilots, flight attendants, mechanics, reservation agents and simulator engineers.

USAir filed for Chapter 11 bankruptcy protection after it was unable to win $800 million in concessions from the unions representing its employees, as part of the airline's $1.5 billion cost-restructuring plan. As of Friday, company officials say that $800 million package would have to be $150 million larger.

The nation's seventh largest airline said it is also concerned about the $260 million in aircraft debt and lease payments that are due in January and February. To make matters worse, USAir also said it expects reduced passenger revenue during the slower winter season, which would deprive it of much needed cash and leave it unable to operate.

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