US Airways Group Inc. filed a new business plan with a Virginia bankruptcy court Thursday and said it was on track to complete its merger with America West Airlines by autumn.
Many details of the plan have been disclosed in recent days in regulatory and bankruptcy court filings, including plans for a $150 million rights offering for shares of the merged carrier. America West shareholders and key unsecured creditors will be given a chance to purchase stock at $16.50.
The merged company, which would fly under the US Airways flag and be based at America West headquarters in Tempe, Arizona, would be controlled by private investors. Five groups that have committed to invest $500 million would hold 49 percent of the new airline.
The merger deal is worth upward of $1.5 billion, including equity commitments and other financing from suppliers, vendors and other parties.
During its second court restructuring in three years, US Airways has slashed annual labor costs by more than $1.5 billion, cut its fleet, reduced its workforce, shed more pension plans, and renegotiated leases with its biggest creditor, General Electric Co.
US Airways worked for nearly 10 months to position itself as a good fit for low-cost America West should a merger deal materialize.
“I think they’ve done well in coming out but the combined company will still have a lot of challenges,” said Jon Ash, a consultant with Intervistas-ga2.
Ash said US Airways “at the core” is still an East Coast North-South carrier, where fierce competition helped push it into bankruptcy. He expects the airline to look west to coordinate its eastern strength with America West, which has hubs in Phoenix and Las Vegas.
William Rochelle, a bankruptcy attorney for Fulbright & Jaworski, said US Airways has been successful so far in part because it has acted swiftly and avoided serious labor turmoil. Additionally, Rochelle said US Airways has maintained good relations with travel agents, which book more than half of US Airways flights.
Although the company has cut costs, record fuel prices continue to drive up operating expenses. In the latest filing with the bankruptcy court, US Airways lost nearly $39.7 million in May. For the second straight month, fuel costs outpaced labor expenses.
A merger agreement surfaced this spring, and US Airways said Thursday it was poised to wrap up its restructuring and finalize the merger by late September or early October.
The deadline for submitting competing bids to the America West deal or US Airways assets, including aircraft or airport slots, expires at 5 p.m. EDT Friday.
The U.S. Bankruptcy Court for the Eastern District of Virginia will consider the airline’s reorganization statement at an Aug. 9 hearing.
US Airways has until Oct. 31 to step out of court protection.
According to the reorganization plan, creditors with claims of $50,000 or less will receive a cash payment equal to 10 percent of their claim.
Creditors holding unsecured claims, including federal pension insurers and the pilots’ union, will receive stock in the reorganized company. The value of their shares will vary
