Airlines hiring bankruptcy lawyers
Wednesday, January 22, 2003
BY KATHY FIEWEGER
REUTERS
Several major U.S. airlines, including No. 1 American, have hired bankruptcy lawyers in the face of an unprecedented downturn and the possibility of war with Iraq, sources familiar with the matter said yesterday.
The sources said the hiring of various firms does not necessarily mean the airlines are preparing imminent bankruptcy filings. Some airlines may just want to be ready to purchase assets, such as routes, out of bankruptcy court.
The moves, though, signal the airlines are keeping their options open as billions of dollars in industry losses have continued since the Sept. 11 attacks threw the industry into an unprecedented financial crisis. Wall Street estimates the major U.S. carriers lost between $8 billion and $10 billion in 2002, levels that cannot be sustained.
Among the airlines said to have hired bankruptcy attorneys for various purposes were Continental Airlines, the dominant carrier at Newark Liberty International Airport, and America West Holdings Corp. A source familiar with the matter said Delta Air Lines and Northwest Airlines were also shopping around.
Continental spokesman Ned Walker downplayed the report.
We have not retained a law firm to counsel us on bankruptcy protection, and we have no plans to do so, he said.
Continental chief Gordon Bethune has said the airline would be interested in United assets, such as its landing rights at London''s Heathrow airport. The prime hub is now only open to two U.S. carriers, American and United. He also said Continental might also be interested in United facilities at San Francisco and Denver.
Bankruptcy has become an all- too-common event in the industry.
UAL Corp., parent of United Airlines, and US Airways Group filed for protection from creditors last year, after lagging revenue and high costs drained their cash.
Both airlines are using the bankruptcy process to sharply cut costs with union employees, change work rules and restructure aircraft leases. Analysts and airline executives say that will leave competitors at a serious disadvantage.
As United and US Airways restructure, sources said competing carriers wishing to purchase any assets that might come up for sale during a court-mediated reorganization would also require bankruptcy advice for that purpose.
American, a unit of Dallas- based AMR Corp., has retained lawyers Marcia Goldstein and Martin Bienenstock at its long-time legal adviser Weil Gotshal & Manges, sources said.
The law firm partners were not available for comment.
Harvey Miller, the former head of the bankruptcy group at Weil Gotshal, also has been retained as an adviser to American from his current banking firm of Greenhill & Co., several sources said. Miller was not available to comment.
Tim Doke, a spokesman for American, declined to comment on whether AMR had retained either firm, but noted that the airline had a long-standing legal relationship with Weil Gotshal.
With a third of the airline industry in bankruptcy and the prospect of war with Iraq, it would be imprudent of any airline not to be exploring all of its options, Doke said.
America West spokeswoman Patty Nowack said the Phoenix- based carrier had retained Skadden Arps Slate Meagher & Flom in the fall of 2001 and continues to consult with their attorneys.
America West was the first major U.S. airline to win backing from the federal government for backing of private sector loans. US Airways also won conditional approval but United was denied its bid for backing of $1.8 billion in loans.
Shortly after the Sept. 11 attacks, Continental''s Bethune predicted imminent bankruptcy at the Houston-based carrier without immediate government aid. At one point in 2002, the Houston-based carrier was predicting a return to profitability. But in the spring, an industry recovery evaporated. Continental said last week it did not expect profits in 2003.
Wednesday, January 22, 2003
BY KATHY FIEWEGER
REUTERS
Several major U.S. airlines, including No. 1 American, have hired bankruptcy lawyers in the face of an unprecedented downturn and the possibility of war with Iraq, sources familiar with the matter said yesterday.
The sources said the hiring of various firms does not necessarily mean the airlines are preparing imminent bankruptcy filings. Some airlines may just want to be ready to purchase assets, such as routes, out of bankruptcy court.
The moves, though, signal the airlines are keeping their options open as billions of dollars in industry losses have continued since the Sept. 11 attacks threw the industry into an unprecedented financial crisis. Wall Street estimates the major U.S. carriers lost between $8 billion and $10 billion in 2002, levels that cannot be sustained.
Among the airlines said to have hired bankruptcy attorneys for various purposes were Continental Airlines, the dominant carrier at Newark Liberty International Airport, and America West Holdings Corp. A source familiar with the matter said Delta Air Lines and Northwest Airlines were also shopping around.
Continental spokesman Ned Walker downplayed the report.
We have not retained a law firm to counsel us on bankruptcy protection, and we have no plans to do so, he said.
Continental chief Gordon Bethune has said the airline would be interested in United assets, such as its landing rights at London''s Heathrow airport. The prime hub is now only open to two U.S. carriers, American and United. He also said Continental might also be interested in United facilities at San Francisco and Denver.
Bankruptcy has become an all- too-common event in the industry.
UAL Corp., parent of United Airlines, and US Airways Group filed for protection from creditors last year, after lagging revenue and high costs drained their cash.
Both airlines are using the bankruptcy process to sharply cut costs with union employees, change work rules and restructure aircraft leases. Analysts and airline executives say that will leave competitors at a serious disadvantage.
As United and US Airways restructure, sources said competing carriers wishing to purchase any assets that might come up for sale during a court-mediated reorganization would also require bankruptcy advice for that purpose.
American, a unit of Dallas- based AMR Corp., has retained lawyers Marcia Goldstein and Martin Bienenstock at its long-time legal adviser Weil Gotshal & Manges, sources said.
The law firm partners were not available for comment.
Harvey Miller, the former head of the bankruptcy group at Weil Gotshal, also has been retained as an adviser to American from his current banking firm of Greenhill & Co., several sources said. Miller was not available to comment.
Tim Doke, a spokesman for American, declined to comment on whether AMR had retained either firm, but noted that the airline had a long-standing legal relationship with Weil Gotshal.
With a third of the airline industry in bankruptcy and the prospect of war with Iraq, it would be imprudent of any airline not to be exploring all of its options, Doke said.
America West spokeswoman Patty Nowack said the Phoenix- based carrier had retained Skadden Arps Slate Meagher & Flom in the fall of 2001 and continues to consult with their attorneys.
America West was the first major U.S. airline to win backing from the federal government for backing of private sector loans. US Airways also won conditional approval but United was denied its bid for backing of $1.8 billion in loans.
Shortly after the Sept. 11 attacks, Continental''s Bethune predicted imminent bankruptcy at the Houston-based carrier without immediate government aid. At one point in 2002, the Houston-based carrier was predicting a return to profitability. But in the spring, an industry recovery evaporated. Continental said last week it did not expect profits in 2003.
