US Airways Group Inc.'s hopes of emerging from bankruptcy protection this summer have run into several hurdles that are slowing the company's return to financial stability.
The Arlington-based airline, which has been in bankruptcy protection since September, is scrambling to find an investor to infuse the $100 million the company said it still needs to finalize its exit financing. But that search is complicated by rising fuel prices, which have made it difficult to get a fix on future expenses. Also, the airline is struggling with operational problems. Employee morale is down, customer complaints are up, and some of the airline's most loyal customers are beginning to rebel.
Christopher L. Chiames defends the airline's plan.
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US Airways announced last week that it now hopes to exit Chapter 11 proceedings by Aug. 31, two months later than it originally planned.
One of the chief causes of that delay is the rising price of fuel. At current prices, jet fuel is likely to cost US Airways $500 million more this year than it had budgeted when it entered into bankruptcy.
Raymond Neidl, a Calyon Securities Inc. analyst, said potential investors are closely studying whether to invest in an airline when fuel prices continue to increase.
"Fuel prices are very much a hurdle," Neidl said.
Today, the airline plans to outline some of its financing plans at a bankruptcy court hearing in Alexandria. Christopher L. Chiames, US Airways' senior vice president of corporate affairs, said that although the airline was talking to "various interested parties" about securing the remaining money it needs, it was "premature to speculate when we might come out."
If US Airways' latest schedule for exiting bankruptcy is granted by the court, the airline would first have to secure an extension agreement from General Electric Capital Corp., the airline's largest creditor. General Electric had agreed to renegotiate its aircraft leases if the airline emerged from bankruptcy reorganization by June 30. Industry analysts said it was likely General Electric would agree to an extension since it already allowed the airline to extend the deadline date to submit its reorganization plan to the bankruptcy court. The airline is now seeking to submit its reorganization plan by May 31, after having once proposed to do so by Feb. 15.
Late last year, before fuel costs rose to their current levels, US Airways said it needed a total of $250 million to emerge. In February, the airline received its first pledge of $125 million in equity financing from Air Wisconsin Airlines Corp.'s financing arm, Eastshore Aviation LLC.
Then, earlier this month, US Airways received a $125 million pledge from Indianapolis-based Republic Airways Holdings Inc., but the agreement stipulated that the airline secure an additional $100 million before exiting bankruptcy. A bankruptcy court judge will consider that agreement today.
