US Airways and ATSB Restructure Loan

13th Mar 2004

  US Airways Group Inc.,
has reached an agreement with the Air Transportation
Stabilization Board (ATSB) to revise the terms of the $1 billion loan that was
made to US Airways Inc., upon its emergence from Chapter 11 on March 31, 2003.
Under the agreement, US Airways prepaid $250 million, causing the
remaining outstanding loan balance to be reduced to $726 million.  The
prepayment has been made to the lenders on a prorated basis to both the ATSB
guaranteed (90 percent) and non-guaranteed (10 percent) portions of the loan.
The ATSB’s exposure therefore was reduced by $225 million, and Bank of America
and Retirement Systems of Alabama received $6.25 million and $18.75 million,
  In exchange for this prepayment, the financial covenants contained in the
loan were modified through 2005.  The revised covenants require that US
Airways significantly narrow its losses in 2004 and return to profitability in
2005.  The company and the ATSB also agreed to modify other terms and
provisions, including lifting certain restrictions on the company’s ability to
pursue asset sales.
  The amended loan agreement was completed along with US Airways filing its
Form 10-K with the U.S. Securities and Exchange Commission (SEC) for the
fiscal year ended Dec. 31, 2003, which includes the independent auditors’
(KPMG LLP) report to shareholders.  The auditors report indicates that “the
company’s significant recurring losses and other matters regarding, among
other things, the company’s ability to maintain compliance with covenants
contained in various financing agreements, as well as its ability to finance
and operate regional jet aircraft and reduce its operating costs in order to
successfully compete with low-cost airlines, raises substantial doubt about
its ability to continue as a going concern.”
  The auditors’ report for 2002, issued while the company was in bankruptcy,
also contained a similar explanatory paragraph discussing the company’s
ability to continue as a going concern.
  “It is essential for US Airways to significantly reduce its costs and
return to sustained profitability by 2005 to secure continued availability of
the ATSB loan,” said US Airways Executive Vice President - Finance and Chief
Financial Officer Neal S. Cohen.  “This agreement provides US Airways the
opportunity to continue its restructuring efforts, while reducing the
government’s exposure and providing additional loan protections to the ATSB.”
  After this payment, the company’s unrestricted cash balance is
approximately $925 million.
  US Airways Chairman David G. Bronner said that these developments have
been discussed with the board of the company and labor leadership.  “This
agreement gives us a narrow window for management and labor to continue to
work together to make the changes necessary to get this company back to
  US Airways also agreed to a loan covenant that its minimum unrestricted
cash balance would not fall below the lower of $700 million and the
outstanding balance of the loan at each month until its “going concern
paragraph” is removed, at which point the unrestricted cash covenant will be
reduced to $500 million.
  “We fully recognize and appreciate the enormous sacrifices that our
employees have already made.  We share their frustration that we all have more
to do to turn US Airways around,” said US Airways President and Chief
Executive Officer David N. Siegel.  “We are talking with all of our employees
and other key stakeholders on how to respond to the new marketplace reality
that only low-cost carriers are making money.  We need to make changes now in
order to demonstrate that US Airways will remain an important player in the
airline industry,” said Siegel.


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