US Airways Group holding talks with ATSB about loan compliance, continuing restructuring

By Jeff Pines

Washington, Feb. 6 - US Airways Group, Inc. is holding discussions with the Air Transportation Stabilization Board about its compliance with its ATSB-guaranteed loans - although the company is currently meeting the terms, executives told analysts in an earnings report conference call.

In addition, the company is analyzing its structure to see where it can cut costs.

US Airways will do what it takes to remain in compliance with the terms of the ATSB loan, said David Seigel, the Arlington, Va.-based airline's president and chief executive officer.

Executives would not divulge the content of the discussions, but Neal Cohen, US Airways' executive vice president and chief financial officer, responded that given the size of the loan US Airways and the ATSB do remain in close contact.

When the company emerged from bankruptcy last March, the ATSB guaranteed a $900 million loan for the company.

Last month the company took delivery on seven regional jets financed by General Electric. It ordered the jets around the time it emerged from bankruptcy. The agreement contains a covenant requiring US Airways to maintain at least a B- or B3 rating on its debt.

In January, Standard & Poor's notified the company it was downgrading some of its debt to B-.

About a month ago the company retained Morgan Stanley to explore possible asset sales.

Proceeds from any sales would be used to prepay a portion of the ATSB-backed loans.

At the end of 2003, the company had total debt of $2.98 billion, including short-term, long-term and capital obligations. It had a cash balance of $1.84 billion with $1.29 billion of it unrestricted.

Management is in talks with labor leaders and believes it essential to get its workforce's support in order to shave costs to better compete with low-cost carriers. Cohen said management sees the company's labor costs as being higher than other legacy carriers.

Siegel noted the company is looking at every possible avenue, including scheduling, where the company might be able to save money to compete better with low-cost carriers.

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