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CHICAGO (Reuters) - US Airways Group Inc. on Friday said it hopes to begin implementing much-needed cost cuts by mid-year but that it could consider another bankruptcy filing if it is unable to do so.
The No. 7 U.S. airline, which emerged from bankruptcy a year ago, is seeking cost cuts of at least 25 percent and has turned to labor groups for more givebacks.
Failure to achieve the cost cuts "will force the company to re-examine its strategic options, including but not limited to asset sales or a judicial restructuring," US Airways said in a filing with the U.S. Securities and Exchange Commission.
The company has said it is considering the sale of some of its assets, including its East Coast shuttle.
"With real doubts about the feasibility of its strategic plan, US Airways needs to accelerate the timetable to lower costs," said Joe Schwieterman, transportation expert at DePaul University. "The entry of Southwest into Philadelphia, the need to downsize the Pittsburgh hub, and a further softening of business travel makes a second bankruptcy a real possibility."
US Airways has previously hinted at another bankruptcy filing, but Friday's statement signals that the carrier's new management team is racing against time and has elevated bankruptcy as a realistic option, along with potential asset sales.
Bruce Lakefield took over as chief executive last month after the abrupt resignation of David Siegel, and Dave Davis was named chief financial officer after Neal Cohen resigned this week.
"The new management feels they've been given an opportunity to make the big changes everyone knows have to be made," said Alan Sbarra, transportation management consultant at Unisys R2A. "The workers were so angry at Dave Siegel that it didn't matter whether Siegel's new plan was the right one or not."
BRACING FOR SOUTHWEST
In addition to its financial woes, US Airways is bracing for the arrival of Southwest Airlines in Philadelphia this weekend and has reduced fares to take on the onslaught of low-fare competition.
"They have a very difficult road," Sbarra said. "Southwest going into Philly is really just a stake through the heart for them."
Joe Tiberi, a spokesman for the International Association of Machinists, said the union is still committed to helping US Airways cut costs, although not through revising its labor contract.
"The airline can be saved. It does not need to go into bankruptcy," Tiberi said. "But it needs to take a strong look at the way it operates."
US Airways also said it could be required to pay up to $90 million this year and $21 million in 2005 if it is unable to obtain financing for regional jets scheduled to be delivered this year and next. The carrier is in talks with General Electric Capital Aviation Services to amend an agreement on jet financing after a downgrade in US Airways' corporate credit rating this week put the financing deal in jeopardy.
US Airways' original order was for 170 jets worth an estimated $4.3 billion, with Embraer and Bombardier also providing financing.
US Airways said it does not have alternative sources of financing for the planes and would be unable to execute its regional jet plan -- a key to its overall business plan -- if it cannot get financing.
"If GE in fact pulls out of the deal, that's a huge vote of no confidence," Sbarra said. "That's really going to set the financial markets in motion to start thinking that the worst is happening."
US Airways shares closed 4 cents higher at $2.12 on the Nasdaq after trading on either side of unchanged throughout the session.
The No. 7 U.S. airline, which emerged from bankruptcy a year ago, is seeking cost cuts of at least 25 percent and has turned to labor groups for more givebacks.
Failure to achieve the cost cuts "will force the company to re-examine its strategic options, including but not limited to asset sales or a judicial restructuring," US Airways said in a filing with the U.S. Securities and Exchange Commission.
The company has said it is considering the sale of some of its assets, including its East Coast shuttle.
"With real doubts about the feasibility of its strategic plan, US Airways needs to accelerate the timetable to lower costs," said Joe Schwieterman, transportation expert at DePaul University. "The entry of Southwest into Philadelphia, the need to downsize the Pittsburgh hub, and a further softening of business travel makes a second bankruptcy a real possibility."
US Airways has previously hinted at another bankruptcy filing, but Friday's statement signals that the carrier's new management team is racing against time and has elevated bankruptcy as a realistic option, along with potential asset sales.
Bruce Lakefield took over as chief executive last month after the abrupt resignation of David Siegel, and Dave Davis was named chief financial officer after Neal Cohen resigned this week.
"The new management feels they've been given an opportunity to make the big changes everyone knows have to be made," said Alan Sbarra, transportation management consultant at Unisys R2A. "The workers were so angry at Dave Siegel that it didn't matter whether Siegel's new plan was the right one or not."
BRACING FOR SOUTHWEST
In addition to its financial woes, US Airways is bracing for the arrival of Southwest Airlines in Philadelphia this weekend and has reduced fares to take on the onslaught of low-fare competition.
"They have a very difficult road," Sbarra said. "Southwest going into Philly is really just a stake through the heart for them."
Joe Tiberi, a spokesman for the International Association of Machinists, said the union is still committed to helping US Airways cut costs, although not through revising its labor contract.
"The airline can be saved. It does not need to go into bankruptcy," Tiberi said. "But it needs to take a strong look at the way it operates."
US Airways also said it could be required to pay up to $90 million this year and $21 million in 2005 if it is unable to obtain financing for regional jets scheduled to be delivered this year and next. The carrier is in talks with General Electric Capital Aviation Services to amend an agreement on jet financing after a downgrade in US Airways' corporate credit rating this week put the financing deal in jeopardy.
US Airways' original order was for 170 jets worth an estimated $4.3 billion, with Embraer and Bombardier also providing financing.
US Airways said it does not have alternative sources of financing for the planes and would be unable to execute its regional jet plan -- a key to its overall business plan -- if it cannot get financing.
"If GE in fact pulls out of the deal, that's a huge vote of no confidence," Sbarra said. "That's really going to set the financial markets in motion to start thinking that the worst is happening."
US Airways shares closed 4 cents higher at $2.12 on the Nasdaq after trading on either side of unchanged throughout the session.
