US Airways files for Chapter 11 protection

The good news/bad news pendulum has swung to "bad" again for US Airways as the airline has filed for Chapter 11 bankruptcy protection for the second time in two years. Operations should not be affected, the airline says.

"Since we still lack the new labor agreements that are needed for the transformation plan to succeed, we must preserve the company's cash resources that are required to implement the plan," says US Airways president and CEO Bruce Lakefield.

The potential for defaults with some creditors were likely by September 30, given the expiration of finance agreements with General Electric Co., Bombardier and Embraer.

The U.S. airline industry as a whole faces $4.3 billion in losses in 2004, according to Robert Ashcroft, analyst for UBS. Ashcroft blames the high price of oil. Excluding oil, Ashcroft estimates third-quarter performance would have been about average in terms of operating margin. Merrill Lynch analyst Michael Linenberg estimates industry losses will reach $770 million for third quarter.

Delta Air Lines, which analysts also expect to file for Chapter 11 protection, was unable to obtain the consent of bond holders to buy back some of the airline's debt. The airline will continue to seek solutions that will allow an out-of-court restructuring.

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