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CNN Live Today

U.S. Airways Files for Bankruptcy

Aired August 12, 2002 - 11:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

DARYN KAGAN, CNN ANCHOR: Up first on CNN this morning, U.S. Airways, the nation's seventh largest airline, is flying a normal schedule this morning, despite having filed for bankruptcy.
Our Tim O'Brien is at Reagan National. That's just outside of Washington, a primary hub for U.S. Airways.

Tim, good morning to you, but not such a good morning for U.S. Airways.

TIM O'BRIEN, CNN CORRESPONDENT: That's right. It is a sad day for U.S. Airways, but Not unexpected. The company Been losing money bigtime. It has $8 billion in debt. It lost $2 billion last year alone, doing better this year, down $248 million dollars the second quarter of this year, reported that loss last month.

A lot of this is due to the recession. The airlines have all been hit hard, but U.S. Airways was hit particularly hard by 9/11. As you know, this is a major hub, and the airline -- the airport was shut down for three months following 9/11. As we speak, lawyers for U.S. Airways are meeting with a federal bankruptcy judge a few miles down the road from the airport, trying to lay out a plan for reorganization. They hope it will be swift, and that the airline will emerge stronger and more competitive than ever.

Here's the way a senior vice president put it, talking to reporters last night.

(BEGIN VIDEO CLIP)

CHRIS CHIAMES, U.S. AIRWAYS: We feel that we're in a good position, this will make us a stronger airline. We will be able to clean up our financial status with regard to balance sheets and aircraft that are too expensive to fly, and emerge as stronger more viable competitor on the East Coast, where most of our flights operate.

(END VIDEO CLIP)

O'BRIEN: U.S. airways does serve 200 cities around the United States and many others around the world, and those flights are operating normally today.

In fact, I found it interesting that as the airline was announcing it would file for chapter 11 bankruptcy, it was posting on its Web site last night new discount promotional fairs to the Caribbean and to Europe. The trick is you have to have faith in the company, because you have to purchase those nonrefundable tickets by next Tuesday.

Now the airline does have $500 million in loans from a coalition of banks and investors to keep the planes in the air to and pay the employees, although as it emerges from reorganization, they may have to sell some planes, may have to discontinue some routes, and of course that -- as the airline shrinks, that could mean some further layoffs.

Right now, however, it appears that the traveling public will not be so much affected as the investors in U.S. Airways stock. The stock closed at $2.45 on Friday, and it's probably on a non-stop trip south today -- Daryn.

KAGAN: Let's get back to this consumer angle, Tim, and talk about the routes and flights that could be affected. It seems when this happened, the first people to get hurt are the ones in the little towns and the smaller hubs.

Any indication from U.S. Air which routes and flights will be cut back?

O'BRIEN: Much too soon to make a prediction about that. But in all likelihood, the airline will be relying more on its big hub cities, such as Charlotte, Pittsburgh, Philadelphia, and to a lesser extent, Washington. There could be some confusion down the road as they discontinue some flights. More non-stop flights could wind of being connections, but all tickets will be honored.

KAGAN: And you mentioned a possible layoffs. This is kind of like a thanks for nothing to it seems like labor. There's already been major labor concessions from pilots, from attendants. You give up something and you still might lose job.

O'BRIEN: That is exactly right, and the airline says it's going to try to avoid that. Hopefully, it can continue with its current personnel and not have to let anybody go. And first avenue of relief will be buyouts, at least that's what the airline would like to do. Offer employees buyouts. They could leave voluntarily. And if that doesn't work, there could possibly have to be layoffs.

Incidentally, we should point out that the frequent flier programs, they are continuing as ever, and could even be expanded in the deal for United, scheduled for later this fall.

KAGAN: All right, Tim O'Brien, at Reagan National, thank you so much.

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