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. Last Updated: 07/27/2016

US Airways Files for Bankruptcy

WASHINGTON -- US Airways Group Inc. sought Chapter 11 bankruptcy protection Sunday, the first such filing by a major carrier since the Sept. 11 attacks triggered a financial crisis in the airline industry.

The sixth-largest U.S. airline is desperately trying to win labor and other cost concessions to obtain a federal government guarantee for private sector loans. It said the filing, which was not unexpected, would allow it to complete restructuring and continue flights without interruption.

"US Airways will continue to operate while we complete our financial restructuring, and our customers should be confident that we will continue service to the more than 200 communities in our network," said David Siegel, US Airways president and chief executive.

Arlington, Virginia-based US Airways, which has 35,000 employees, filed in U.S. Bankruptcy Court for the Eastern District of Virginia in Alexandria, listing assets of $7.81 billion and liabilities of $7.83 billion. It said it aimed to emerge from bankruptcy in the first quarter of 2003.

Its first bankruptcy hearing is scheduled for Monday.

Along with most other top domestic airlines, US Airways has lost staggering amounts of money in the aftermath of the attacks on Washington and New York, which exacerbated an ailing travel market already weakened by recession.

Soon after Sept. 11, high-cost airlines saw expenses far outrun revenues. Industry losses for 2001 topped $7 billion for the eight largest airlines. Those carriers have lost more than half that amount in the first half of 2002.

With the highest cost structure of any American airline, US Airways has lost more than $500 million so far this year.

UAL Corp.'s United Airlines is also in financial trouble and seeking $1.8 billion in government credit guarantees.

US Airways was arguably the hardest hit domestic carrier after Sept. 11, having been hampered by the prolonged closure of Washington's National Airport for security reasons and plummeting business travel, especially at its East Coast hubs.

The company said Friday it would file for bankruptcy protection if it could not win needed concessions from labor groups, vendors and lenders in its bid for a $900 million loan guarantee to back $1 billion in private financing.

The airline has reached deals on wage cuts and other concessions with its pilots and flight attendants, and submitted a giveback proposal to mechanics Sunday.

As part of its restructuring plan, US Airways hopes to have the loan guarantee in place when it emerges from Chapter 11.

The government board overseeing the loan guarantee program, which was set up by Congress after Sept. 11 to help struggling airlines, said Sunday conditional approval it has already granted US Airways remains in effect.

Another cornerstone of the restructuring is commitments for $500 million of debtor-in-possession financing from a group led by Credit Suisse First Boston and Bank of America Corp., who will be paid back first among creditors.

Also, the filing said Texas Pacific Group had agreed to provide a $200 million investment in return for 38 percent of equity in the airline once it emerges from Chapter 11.

Texas Pacific stunned Wall Street in 1993 when it helped recapitalize Continental Airlines, which was mired in its second bankruptcy amid a massive industry slump.

US Airways met with bondholders on Thursday to discuss its plan to restructure outside of bankruptcy, but an analyst said it may have reached an impasse in talks with lenders, or with one of the labor groups that have not ratified concessions.

"They certainly did not hit a wall with us," said Joseph Tiberi, a spokesman for US Airways machinists union.

He said the group will review the carrier's proposals by Wednesday.

Shares of US Airways rose 5 cents on Friday to close at $2.45 on the New York Stock Exchange, far off the 52-week high of $18.32 and close to the 52-week low of $2.05.