2004-9-23
This is Gwen Outen with the VOA Special English Economics Report.
A business receives legal protection from its creditors when it
declares bankruptcy. But what happens when a company declares
bankruptcy twice in just two years?
US Airways declared bankruptcy in August of two thousand two. The
company, like most airlines, suffered after the terrorist attacks
the year before. The company wanted to reorganize its debt and
reduce costs.
US Airways received help from the Air Transportation
Stabilization Board. The government established this agency to aid
airlines after the attacks of September eleventh, two thousand one.
The board agreed to guarantee nine hundred million dollars in
loans for US Airways. The company received the largest loan
guarantee of any airline. The guarantee made it easier for US
Airways to find creditors.
In return, US Airways agreed to repay the loan or release much of
its property to the agency and the creditors.
While in bankruptcy, US Airways cut costs. It asked labor unions
to agree to a plan to reduce pay and other employment costs by one
thousand nine hundred million dollars. The company told its workers
that the cuts were necessary for the airline to remain competitive.
The unions agreed.
US Airways came out of bankruptcy protection in April of two
thousand three. It had cut about two thousand million dollars in
costs. But that still was not enough. US Airways could not make a
profit.
The company then tried to get workers to agree to new pay cuts
worth about eight hundred million dollars. This time, the unions
rejected the proposal.
The company declared bankruptcy again earlier this month in
Alexandria, Virginia. The announcement came days before the airline
would have had to pay more than one hundred million dollars into
employee retirement plans.
The government board has agreed to permit US Airways to continue
its business under bankruptcy protection. But the agency has
restricted the amount of money the company can spend.
Some experts say US Airways may be liquidated. This would mean
the end of the company and the sale of all its property.
US Airways says it will present a new financial plan by the end
of the year.
Listen next week for another report about changes in the airline
industry. This VOA Special English Economics Report was written by
Mario Ritter. This is Gwen Outen.