US Airways (AAA)

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US Airways history goes back to 1939 and has grown through the integration of many airlines. It all started when All American Aviation brought the first airmail service to many small western Pennsylvania and Ohio Valley communities with introduction of a unique "flying post office" service. In 1948, Piedmont Airlines began operations. In 1953, All American's route system grew and the name was changed to Allegheny Airlines, recognizing the mountains and river of the same name that lie in the heart of the airline's network. In 1972, Allegheny acquired Mohawk Airlines, a Utica, N.Y., airline with service to most cities throughout New York and New England. In 1979, Allegheny changes its name to USAir to reflect its expanding network, including post-deregulation entry into Arizona, Texas, Colorado, Florida and later, California. In 1988, PSA Airlines merged into USAir and in 1989, Piedmont was integrated into the system. Finally, in 1997, the name US Airways was put into use officially.

The past three years have been brutal for major airlines, and their employees. As bad as the past three years have been--especially post-Sept. 11, 2001--they have been especially trying for US Airways and its employees.

The airline that seemed to outgrow its financial problems of the post-merger era, and resumed the annual profits that could be assumed throughout most of the 1980s, has taken it on the chin the past three years. The Arlington, Va.-based major airline filed for Chapter 11 bankruptcy protection for the second time in two and one-half years on September 12, 2004.

Bruce Lakefield, CEO and President, said that US Airways has made tremendous strides since its emergence from Chapter 11 in March 2003, and has already reduced annual operating expenses by almost $2 billion during its 2002-2003 restructuring, but the dramatic growth of low-cost carriers, unabated fuel price increases and the public's demand for lower, simpler fares required that the company do more to achieve an even more competitive cost structure that is competitive to low-cost carriers.

The post Sept. 11 retraction leaves pilot employment at a fraction of pre-bankruptcy levels. Pilots at US Airways have been especially hard-hit. While their colleagues at other major airlines have also lost their jobs in the thousands, in many cases other airlines have furloughed pilots hired in the year or so leading up to the Sept. 11, 2001, terrorist attacks. At US Airways, the cuts have been so deep that pilots hired in the 1980s are losing their jobs and pilots who had settled into the left seat are now hundreds of seniority numbers away from a captain slot. At the end of November 2004, US Airways had more than 1,870, or nearly 33 percent, of its pilots on furlough. The airline has the largest amount of furloughs in the industry.

In October 2004, pilots at US Airways ratified a concession package that included additional pay cuts of 18 percent, a decrease in company contributions to their retirement plan and increased productivity. The deal, which is in effect until December 31, 2009, includes a profit-sharing plan for pilots as well as equity in the airline. Pilots agreed to significant givebacks in the airline's first bankruptcy and had their pension plan terminated and replaced with a less expensive one.

US Airways is trying to build on its strengths, which are the East Coast and its Caribbean destinations. The airline has successfully negotiated code-sharing agreements and added mainline service as part of its "GoCaribbean" expansion.

US Airways Group, Inc. reported a net loss of $236 million for the fourth quarter 2004, compared to a $98 million net loss for the fourth quarter 2003, ending 2004 with $611 million net loss for the year.

At year-end 2004, the company had ratified cost-savings agreements with all of its labor groups, including non-unionized employees, totaling $1.1 billion in annualized value; received ATSB extension to use cash proceeds from a federally guaranteed loan through June 30, 2005, enabling the airline to continue operations while it completes its restructuring and planned emergence from Chapter 11; and reached a comprehensive aircraft leasing and financing, and engine services agreement with GE Capital Aviation Services (GECAS) and GE Engine Services, to provide short-term liquidity, reduce debt, lower aircraft ownership costs, and enhance engine maintenance services and leases for new regional jets, while preserving the vast majority of US Airways’ mainline fleet owned by GECAS.

In February 2005, a bankruptcy judge approved an agreement for US Airways to cancel 35 Airbus aircraft the carrier has had on order since the late 1990s. Under the accord approved by U.S. Bankruptcy Judge Stephen Mitchell, US Airways also asked Airbus to delay for one year delivery of about 30 A319 and A320 aircraft. The airline will pay about $9 million it owes Toulouse, France-based Airbus as part of the agreement.

In March 2005, US Airways Group Inc.'s $125 million financing agreement with Eastshore Aviation LLC, an investment entity owned by Air Wisconsin Airlines Corp. shareholders and Air Wisconsin Airlines Corp., was approved by the U.S. Bankruptcy Court.

The $125 million facility is structured as a debtor-in-possession (DIP) term loan, to be drawn in the amount of $75 million (immediately) and two subsequent $25 million increments. This loan would be second only to the Air Transportation Stabilization Board loan with regard to the company's assets that are pledged as collateral. Upon emergence from Chapter 11 bankruptcy reorganization, the $125 million financing package would then convert to equity in the reorganized US Airways.

In light of this new equity commitment and substantial progress being made in US Airways' restructuring, General Electric's GECAS subsidiary and other affiliates have agreed to US Airways' request to extend the date by which the company will file its Plan of Reorganization until April 15, 2005.

On June 19, 2005, America West Holdings Corporation and US Airways Group, Inc. announced an agreement to merge and create the first full-service low-fare nationwide airline.

The new airline will operate under a single brand of US Airways, but its operational labor groups will be integrated over two to three years with emphasis on minimizing any dislocations within the work groups. (see America West and US Airways to merge,” FLTops TODAY archives, June 20, 2005).

While the merged airline will operate under the US Airways name, America West and US Airways will maintain separate operating certificates for about two or three years. Once the FAA approvals have been granted, the two airlines' operating certificates will be combined into one.  The merged airlines are now operating under the leadership of former America West CEO Doug Parker.

Under the terms of a transition agreement with ALPA for both carriers, America West must offer furloughed US Airways pilots any new pilot openings at America West.

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