US Airways won more breathing room on Thursday to find another big investor, devise a reorganization plan and emerge from its second trip through bankruptcy.
A federal judge gave the seventh-largest domestic airline two more months, until May 31, to file a business plan without interference from creditors. It was the second extension of the airline's bankruptcy exclusivity period this year.
Judge Stephen Mitchell of the US Bankruptcy Court for the Eastern District of Virginia also did not object to the company's decision to extend the window for emerging from Chapter 11 from June 30 to August 31.
US Airways said it still could step out of court protection by the end of June. But the extension for filing a reorganization plan, based on previously missed deadlines and a very tough operating environment caused primarily by soaring fuel prices, suggests that emergence may not occur by the June time frame.
"We're making good progress. Three months ago, people were ready to write our demise," said Chris Chiames, senior vice president of corporate affairs, said outside the court.
US Airways was criticized by industry experts and some Wall Street analysts for moving too quickly through its first bankruptcy in 2002-03. United Airlines has been in bankruptcy for nearly 2-1/2 years.
Mitchell also approved a USD$125 million investment in US Airways by regional aviation partner Republic Airways Holdings and its biggest investor, Wexford Capital. The money would be available after US Airways ends its bankruptcy.
The Republic Airways agreement is the second equity package deal struck by US Airways and a regional affiliate in the past six weeks, and is contingent on US Airways finding a third investor to put up at least USD$100 million.
The initial deal, approved in February, is with Air Wisconsin's financing arm, Eastshore Aviation. Privately held Air Wisconsin has agreed to invest USD$125 million in financing that can be converted into equity.
Air Wisconsin and Republic get more guaranteed flying time as US Airways feeder carriers under their financing agreements.
Chiames did not identify any potential investors, but industry focus in recent weeks has centered on another regional partner, Mesa Air Group.
"We're talking to other interested parties," Chiames said, adding that high fuel prices meant the airline had to assure potential investors that there was a "sturdy business plan."
Also as part of the Republic deal, US Airways can sell more than two dozen regional jets and more than 120 takeoff and landing slots in Washington and New York to Republic to raise another USD$110 million, if necessary.
US Airways' current balance of available cash is severely restricted by the federal Air Transportation Stabilization Board, which guaranteed bank loans that were used to finance the airline's operations after its first bankruptcy.
The board must approve any bid by US Airways to sell major assets, which are currently held as collateral for its loan guarantee. Neither the government nor other key unsecured creditors objected to the Republic financing deal or the extra time to file a reorganization plan.
US Airways has put major elements of restructuring in place already. It has reduced labor costs by more than USD$1 billion, overhauled its schedule, cut routes, consolidated reservation and maintenance operations, and made plans to shrink its mainline fleet by nearly 5 percent.
