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US Airways Loses Loans For 100 Jets

Planes Were Integral To Restructuring Plan

By Keith L. Alexander
Washington Post Staff Writer
Saturday, September 18, 2004; Page E01

US Airways has lost financing for nearly 100 regional jets that were to be a key component in its restructuring plan.

With the carrier in Chapter 11 bankruptcy protection, its aircraft manufacturers Bombardier and Embraer decided to terminate their financing contracts on the jets.

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US Airways had built part of its transformation plan around the use of the 50- to 70-seat aircraft during its previous restructuring in 2002. The carrier hoped to deploy the jets on many of its shorter or less popular routes and use them to expand service to short-haul destinations.

Meanwhile, UAL Corp.'s United Airlines, which has been operating under Chapter 11 for nearly two years, said yesterday that it would have to cut an additional $500 million in annual costs as part of its effort to emerge from bankruptcy. Additional jobs will be lost, the company said. United has already cut about $5 billion, with about half coming from cuts in employee pay and benefits.

A bankruptcy judge yesterday approved United's bid for a 30-day extension to develop a business plan without the threat of a competing proposal from creditors or private investors.

US Airways' unsecured creditors are scheduled to meet Monday in Arlington to form a creditors committee.

US Airways' loss of its regional plane orders was a major blow to the carrier's restructuring efforts. Besides aiding expansion plans, the smaller planes burn less fuel than jets, a feature that would have helped the carrier reduce its fuel costs.

"This is one of the many reasons we advised our labor leaders that it would be much worse for the company if it had to file Chapter 11," said US Airways spokesman David Castelveter. "We'll have to adjust our plan accordingly, but our ability to grow will be limited."

Merrill Lynch analyst Michael Linenberg said the airline would now be forced to "retool" its fall schedule since the planes were going to be used on several medium-size business routes, such as those from Charlotte to Minneapolis and Dallas and Philadelphia to Minneapolis.

US Airways filed for Chapter 11 protection Sunday after its labor groups rejected $800 million in annual pay and benefit cuts as part of its overall effort to trim $1.5 billion a year in costs.


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