US Airways yesterday won approval for its alterations to its pilots' pension plan from both a federal bankruptcy judge and the federal agency that oversees pension plans, clearing the way for the airline to emerge from bankruptcy protection Monday.
U.S. Bankruptcy Judge Stephen S. Mitchell approved the elimination of the airline's current plan and the creation of an alternative one. Earlier in the day, the airline also won approval from the Pension Benefit Guaranty Corp. to establish the new pension plan. US Airways sought to eliminate the plan, which was underfunded by $2 billion, to cut costs.
Approval of the new plan was required before the airline could emerge from bankruptcy court protection.
Chris Chiames, a spokesman for the Arlington-based airline, said attorneys will prepare the paperwork over the weekend to finalize the seven-month reorganization and set up the airline's emergence from bankruptcy by the close of business Monday.
"Think of it as a huge closing on a house," Chiames said. "The weekend is going to be spent executing literally hundreds of transactions."
US Airways expects to receive on Monday a $900 million federal loan guarantee, which it will use to back $1 billion in loans. The airline also expects to receive $371 million from its largest investor, Retirement Systems of Alabama. That financing was only available on completion of the airline's reorganization.
This weekend, US Airways plans to finalize a new agreement with a credit card processor to allow the airline to continue to accept credit card payments from travelers. The airline's contract with its current credit card processor, National Process Corp., expires Monday. The airline had to be out of bankruptcy to begin negotiating with a new processor.
US Airways, the nation's seventh-largest airline, filed for bankruptcy in August. Through its reorganization, the airline was able to cut its costs by $1.9 billion a year.
US Airways cleared its biggest hurdle last weekend when the leaders of its pilots union agreed to allow the carrier to terminate the pilots' pension plan.
In exchange, the airline agreed to create a new pension plan that will reduce the pilots' benefits by 25 percent to 50 percent, but will save the airline about $600 million during the next seven years.
The PBGC, which guarantees the pensions of 44 million workers, will take over the old plan and pay out reduced benefits to the pilots. Those benefits will be supplemented through the airline's less costly, direct-contribution plan, similar to 401(k) retirement plans.
"We reviewed the plan and it looked like it worked out very well," said Jim Keightley, senior counsel for the PBGC. "It's very positive that the airline will keep moving forward."