US Airways wins permission from judge to keep operating

ALEXANDRIA, Va. -- US Airways, the first major airline to declare bankruptcy since last year's terrorist hijackings, won permission from a federal judge on Monday to continue operating temporarily while it tries to reorganize its finances.

The nation's seventh-largest carrier said flights would continue normally, and it expressed optimism that it will emerge from bankruptcy early next year. But airline stocks fell at the news, particularly those of United Airlines.

US Airways filed its Chapter 11 bankruptcy petition Sunday, and appeared in U.S. Bankruptcy Court in Alexandria on Monday to discuss the filing.

In addition to permission to continue operations, the airline sought an Aug. 30 deadline to negotiate wage and benefits concessions from unions representing more than half its work force.

The company is seeking $290 million in givebacks. If representatives of its machinists and communications workers unions do not reach an agreement by then, the airline will ask the court to invalidate those labor agreements.

Pilots, flight attendants and transportation workers have already agreed to concessions that will yield $550 million in annual savings.

In its Chapter 11 filing, the company listed assets of $7.81 billion and liabilities of $7.83 billion and said its cash flow was relatively stable. But Chris Chiames, US Airways' vice president for corporate affairs, said that would not last with the peak summer travel season about to end.

US Airways shares did not immediately open for trading by midday Monday. Among other airline stocks, UAL Corp., the parent of United, dropped 15.8 percent, down 82 cents to $4.38, by early afternoon on the New York Stock Exchange while AMR, the parent of American, was down 95 cents to $8.64.

Delta fell 51 cents to $14.09, and Northwest declined 65 cents to $8.06. Continental fell 81 cents to $8.31, and Southwest declined 37 cents to $12.89.

Hurt most by Sept. 11

US Airways had been struggling well before Sept. 11. In July 2001, the airline suffered a blow when federal regulators balked at a proposed purchase by United Airlines that would have given US Airways investors $60 a share.

After the attacks, no airline was harmed financially more than US Airways. The Arlington-based carrier is the largest airline at Reagan Washington National Airport, which remained closed for weeks after the attacks.

In addition, Chiames said, the airline suffered disproportionately when many travelers opted to drive or take the train instead of making short-haul flights up and down the East Coast -- US Airways' strength.

"Clearly US Airways was impacted more than any other carrier after Sept. 11," Chiames said.