Live

Watch CBSN Live

US Airways Flying Despite Filing

Citing the drop-off in travel after Sept. 11 and pre-attack financial problems, US Airways filed for Chapter 11 bankruptcy protection Sunday.

The airline, which had mentioned bankruptcy as a possibility after it lost $2.1 billion during 2001, said all of its flights are expected to continue. The Arlington, Va.-based airline said it received $500 million in financing to keep operating while it reorganizes.

"We had a lot of older aircraft that had very high lease costs, we had labor costs that were the top of the industry, and given the competitive environment and the lingering recession, we could not be profitable," said vice president Chris Ciames.

"Washington Reagan Airport was closed for a long period," he added. "We are the largest carrier here, so we clearly took the brunt of the financial impact of Sept. 11."

With no interruption in service, passengers took the news in stride.

"I have absolute faith and hope that this will be just fine. I think it's something that's just part of the American economy," said a passenger at the Washington airport.

"For passengers flying on US Airways the next couple of weeks they won't see any difference," Christian Science Monitor travel industry reporter Alexandra Marks told CBS Radio News. "It's going to be just the same, this is a behind-the-scenes financial reorganization, but I think in the long term passengers will see a change in the public spoke system."

And it was business as usual Monday morning at the Charlotte, N.C., airport, one of US Airways' hubs, reports Marshall Adams of CBS Radio Affiliate WBT. US Airways was telling passengers there's no need to be concerned that the flights will continue and their frequent flyers will continue. Passengers were coming in and their flights were going out.

The airline said its debtor-in-possession financing will come from a group of institutions led by Credit Suisse First Boston and Bank of America Corp., with participation from Texas Pacific Group, which has signed a memorandum of understanding to provide $200 million in equity when the carrier emerges from bankruptcy.

"In the face of an uncertain and trying time for the industry, we have been impressed by the major strides taken by US Airways' management and employees to significantly improve the competitiveness of the airline," said Richard P. Schifter, a partner with Texas Pacific Group. "Given the progress made to date, the time required in Chapter 11 to complete the restructuring should be relatively brief."

The financing is in addition to the $1 billion collateralized loan that has been conditionally approved by the federal Air Transport Stabilization Board.

"Our plan is to emerge from bankruptcy in the first quarter of 2003," Chiames said. "We think this will be a short-term stay in Chapter 11 protection."