US Airways files for bankruptcy, again

US Airways Group Inc, the nation's seventh largest airline, filed for bankruptcy protection for the second time in two years. The company's president vowed to continue restructuring the airline into a low-cost carrier during the bankruptcy process.

"We have come too far and accomplished too much to simply stop the process and not succeed," Bruce Lakefield, US Airways' president and chief executive, said Sunday. "A restructured US Airways with low costs and low fares will be a dynamic competitor."

US Airways said customers would notice no operational changes as a result of the bankruptcy and that it will seek permission to continue its frequent flyer program.

The Chapter 11 filing in US Bankruptcy Court in Alexandria came after US Airways was unable to obtain US$800 million in annual cost cuts from its workers' unions that the airline said it needed to stay afloat. Chapter 11 frees a company from the threat of creditors' lawsuits, while it reorganizes its finances.

The company's return to bankruptcy comes as several of its larger rivals also confront the need to repair weak finances. UAL Corp's United Airlines has been operating under bankruptcy for nearly two years, AMR Corp's American Airlines was on the brink of a filing 18 months ago and Delta Air Lines Inc warned that it might seek similar protection soon if it cannot trim its labor costs.

Several ago, US Airways Chairman David Bronner warned that the airline would most likely have to liquidate if it filed for bankruptcy. Lakefield subsequently backed off those comments, and on Sunday again sought to assure customers that the airline faced no immediate danger of shutting down.

"I believe that the light of day will convince our employees that sacrifices are needed to keep the airline flying," Lakefield said in a telephone interview Sunday. "When you look at the other choices, I believe our employees will make the right choice."

Last Monday, a deeply divided pilots union refused to allow its membership to vote on a company proposal that would have cut pay by 20 percent and retirement plan contributions by 50 percent.

As recently as Friday, US Airways made a last-ditch effort to reach a deal with the pilots, offering a proposal with minimum pay cuts that would have required more flight hours each month, putting more pilots at risk of furlough.

Some representatives who opposed the new deal said the pilots and other US Airways workers had made enough concessions during the company's first trip into bankruptcy in August 2002. Then, the unions collectively agreed to contract concessions of more than US$1 billion a year.

Fred Freshwater, a pilots' union representative from Pittsburgh who opposed management's latest contract offer, said he wasn't surprised the company was unable to reach deals with labor and that it sought bankruptcy.

"When you look at the behavior of management, when you look at their proposals, they were seeking the total capitulation of labor," Freshwater said.

The bankruptcy filing also could cost US taxpayers. The government loaned the airline US$900 million last year as part of a special program to assist airlines after the Sept. 11 attacks.

The airline still owes the government US$718 million, and it will ultimately be up to a bankruptcy court to determine the government's place in line among creditors.