Airlines Shares Fall After US Airways Files for Bankruptcy

WASHINGTON, August 12 (IslamOnline & News Agencies) - Shares in U.S. airlines have fallen sharply after attorneys for U.S. Airways appeared in court Monday, August 12, to seek bankruptcy protection for the troubled airline, which was among those hardest hit when skittish passengers spurned air travel following the September 11 terror attacks.

Shares in U.S. airlines have fallen sharply in the first trading since the number six carrier, US Airways, filed for bankruptcy, BBC’s online service reported.

UAL Corporation, parent company of United Airlines, saw its share price slump 25% in early trading while the S&P airlines index was down more than 5%.

Lawyers for the Arlington, Virginia-based carrier said they planned to lead it out of bankruptcy by the first quarter of 2003.

The air carrier said in a statement that “higher security costs, the economic recession, and the cutback in travel along the East Coast, all contributed significantly to the company’s financial losses.”

The seventh-largest U.S. carrier, which has about 40,000 employees, made its announcement shortly after filing its Chapter 11 petition with the U.S. Bankruptcy Court in Alexandria, Virginia, just outside the U.S. capital.

The company said it will continue to honor all of its ticket and frequent flier vouchers during its reorganization.

“U.S. 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,” U.S. Airways chief executive David Siegel said.

But the petition noted the airline’s liabilities had reached approximately 7.83 billion dollars, exceeding its assets by about 20 million dollars, which experts say could complicate its financial turnaround, AFP reported.

US Airways, which reported carrying about 56 million passengers last year, flies to 38 U.S. states, as well as Canada, Mexico, the Caribbean and Europe.

To finance its reorganization, the carrier had secured 500 million dollars in debtor-in-possession funds from a consortium of banks led by Credit Suisse, First Boston and Bank of America.

Moreover, it said it had received last month a guarantee for the prompt disbursement of 90 percent of a one-billion-dollar loan from the Air Transportation Stabilization Board, a federal body created to help U.S. airlines absorb the blow of the September 11 attacks, AFP reported.

The board has been authorized by Congress to give up to 10 billion dollars in federal financial aid and loan guarantees to the embattled industry.

The attacks resulted in a prolonged closure of Washington Reagan National Airport located on the opposite bank of the Potomac River from the capital, the main hub for U.S. Airways.

According to Siegel, participation in the reorganization scheme of top-tier financial institutions was a strong endorsement of US Airways’ restructuring plan and an indication of the overall confidence by banks in the eventual rebound of the airline sector.

But the restructuring will be anything but painless. The company said it had reached agreements or understandings with most of its unions, except the Communications Workers of America, that call for pay cuts, foregoing bonuses or some benefits.