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American Morning
Nation's 7th Largest Airline Filing for Chapter 11
Aired August 12, 2002 - 09:23 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, CNN ANCHOR: The nation's seventh largest airline is filing for chapter 11 bankruptcy protection. U.S. Airways lost more than $2 billion last year, and it was crippled when its main hub, Reagan National Airport in Washington D.C., was shut down for three weeks following the 9/11 attacks. U.S. Airways plans to keep flying while it pays the bills, says will emerge from bankruptcy sometime next year.
To talk about the airline's action, its prospects and the effects on passengers and shareholders, aviation expert Michael Miller and president of Miller Air Group joins us this morning from Orlando, Florida.
Michael, nice is to have you with us. Welcome.
MICHAEL MILLER, PRESIDENT, MILLER AIR GROUP: Thank you, Jack.
CAFFERTY: If I'm a ticket holder, what does it mean to me? I suppose there are places to look at this, from the passenger's viewpoint, the airline's viewpoint, and perhaps the stockholders viewpoint. And let's start with the passengers.
MILLER: Exactly, the passenger really doesn't have lot to worry about. U.S. Airways has laid it out pretty clearly that this is pretty much a controlled bankruptcy. They looked at their cashflow. They knew that they were going to have to go into bankruptcy. They prepared for it, and so they keep flying 100 percent, and saying it's going to take about six months to restructure.
So I really think that the deadline for passengers is about six months from now, to really pay attention to what happens then.
CAFFERTY: What are the possibilities six months from now, or whenever they begin to emerge from this, or adopt some other course of action.
MILLER: Well, right now, that the airline has filed chapter 11, the airline is in the hands of a bankruptcy court judge. So the restructuring process will be controlled by that judge. And that judge will rule whether they're doing enough or too little, and -- but it appears, though, that the financing that they've secured that they announced last night will allow them to process the bankruptcy a little bit better than past airline bankruptcies.
CAFFERTY: What was it that precipitated the collapse of this airline versus all of the other airlines that seemed to have somehow managed muddle through. None of them are making any money, but at least they are still flying under their own rules as opposed to a judge?
MILLER: Right, this is actually the third airline to file chapter 11 since September 11th, with Vanguard Airlines shutting down and Midway Airlines shutting down as well. U.S. Airways has been weak for many, many years. They really have almost approached TWA in their weakness. So this was really expected by a lot of those in the aviation industry. Basically they have the highest cost structure. Their the Rolls Royce of the airline industry. They pay their people too much. They have too many airplanes on small routes, and so it's really their cost structure.
CAFFERTY: One thing filing chapter 11 allows them to do is address the cost, where they weren't able to do otherwise. Explain how that works.
MILLER: Right now, the airline has secured some concessions from the unions. They're also going to banks and aircraft manufacturers and others that give them the airplanes, or lease them the airlines, and so it's a multi-stage process. The airline industry is a very capital intensive business. So there's a lot of money that goes into taking that plane away from the gate and taking off the ground. They have to restructure every single part of it. Their cost structure needs radical change, and if it doesn't, six months from now, there may be have be significant layoffs and route changes, but I don't think we'll see that in the near term.
CAFFERTY: But the airline may well survive in some form. Passengers are going to be able to continue to fly on the airline, at least short term. What about the stockholders? We have 20 seconds.
MILLER: Well, I think the stockholders have to look into what precipitated this bankruptcy. The new management team that's only been in place for the past four or five months is doing a Yeomen's job. I have a lot of confidence in them. But I think these stockholders may need to look back a couple of years, at why weren't there more changes done prior to this.
CAFFERTY: Mike, we have to leave it there. I appreciate your input this morning. Thank you for joining us. Michael Miller, the president of Miller Air Group, aviation expert, joining us from Orlando, Florida.
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