US Airways seeks OK of memorandum of understanding in connection with merger

By Caroline Salls

Pittsburgh, June 14 - US Airways, Inc. requested court approval of a memorandum of understanding in connection with its merger agreement with America West Holdings Corp., according to a Monday filing with the U.S. Bankruptcy Court for the Eastern District of Virginia.

The memorandum of understanding was negotiated between US Airways, America West and General Electric Capital Corp.

The memorandum agreements include:

*The early return to GECC of some mainline aircraft from US Airways' fleet;

*The accelerated implementation of reduced rental rates for Boeing SIL aircraft leases and the assumption of the leases;

*The restructuring of the timing of rental payments under US Airways regional jet aircraft leases;

*The modification of some regional jet aircraft financing agreements; and

*The modification of US Airways' engine maintenance agreements with a GECC unit and its affiliates.

In the motion, US Airways said the implementation of the memorandum of understanding will provide it with significant cost savings and liquidity and will facilitate US Airways' fleet rationalization efforts, "all of which is critical to [US Airways'] successful emergence from these Chapter 11 proceedings."

Conditions of the memorandum include that US Airways must file a plan of reorganization acceptable to GECC by June 30 and consummate the merger by Oct. 31.

Failure to meet either condition will result in a merger event of default under the memorandum.

US Airways, an Arlington, Va.-based airline, filed for bankruptcy on Sept. 12, 2004. Its Chapter 11 case number is 04-13819.

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