================================================================= US AIRWAYS BANKRUPTCY NEWS Issue Number 6 ----------------------------------------------------------------- Copyright 2002 (ISSN XXXX-XXXX) September 10, 2002 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- US AIRWAYS BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtor's cases. New issues are prepared by Geoff J. Bailey, Frauline Sinson-Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of US AIRWAYS GROUP BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00081] COMMITTEE'S APPLICATION TO RETAIN OTTERBOURG AS COUNSEL [00082] DEBTORS' MOTION TO ASSUME TWO AMEX AGREEMENTS [00083] DEBTORS' MOTION TO PAY PREPETITION EMPLOYEE OBLIGATIONS [00084] JPMORGAN ET AL'S MOTION TO VACATE MAINTENANCE CLAIM ORDER [00085] DEBTORS' MOTION TO SET-UP INTERIM COMPENSATION PROTOCOL [00086] DEBTORS' MOTION TO ESTABLISH JOINT FEE REVIEW COMMITTEE [00087] HANCOCK ET AL'S MOTION TO MODIFY AIRCRAFT REJECTION ORDER [00088] DEBTORS' MOTION TO SIGN BANK OF AMERICA PURCASHING PACT [00089] AIRPORT AUTHORITIES' REQUEST FOR ADEQUATE PROTECTION [00090] RICHARD SWEET ET AL'S MOTION FOR RULE 2004 EXAMINATION [00091] AEROSPACE FIRMS FILE NOTICES OF RECLAMATION DEMANDS [00092] DEBTORS' MOTION TO ASSUME 15 CRITICAL AIRLINE CONTRACTS [00093] DEBTORS' MOTION TO CONTINUE USING EXISTING BUSINESS FORMS [00094] DEBTORS' MOTION TO EMPLOY ORDINARY COURSE PROFESSIONALS [00095] DEBTORS' MOTION TO FIX NOVEMBER 4, 2002 CLAIMS BAR DATE [00096] DEBTORS' MOTION TO GIVE PRIORITY TO RECLAMATION CLAIMS [00097] DEBTORS' MOTION TO ASSUME 4 SPECIAL TRUST FUND AGREEMENTS [00098] US AIRWAYS GROUP REPORTS 77.1% AUGUST LOAD FACTOR [00099] US AIRWAYS SHUTTLE OFFERS ARRAY OF NEW TRAVEL INCENTIVES [00100] USAIR & CWA REACH TENTATIVE AGREEMENT ON CONTRACT CHANGES KEY DATE CALENDAR ----------------- 08/11/02 Voluntary Petition Date 08/31/02 Deadline to provide Utilities with adequate assurance 09/25/02 Deadline for filing Schedules of Assets and Liabilities 09/25/02 Deadline for filing Statement of Financial Affairs 09/25/02 Deadline for filing Lists of Leases and Contracts 10/10/02 Deadline to make decisions about lease dispositions 11/04/02 Bar Date for filing Proofs of Claim 11/09/02 Deadline to remove actions pursuant to F.R.B.P. 9027 12/09/02 Expiration of Debtors' Exclusive Plan Proposal Period 02/07/04 Expiration of Debtors' Exclusive Solicitation Period 08/10/04 Deadline for Debtors' Commencement of Avoidance Actions First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00081] COMMITTEE'S APPLICATION TO RETAIN OTTERBOURG AS COUNSEL ----------------------------------------------------------------- The Official Committee of Unsecured Creditors sought and obtained the Court's authority to retain Otterbourg, Steindler, Houston & Rosen to serve as lead counsel. Chairman R. Douglas Greco of Airbus North America Holdings informs the Court that the Committee also selected Vorys, Sater, Seymour & Pease as local counsel. An application to retain Vorys will be filed with the Court soon. As the Committee's lead counsel, Otterbourg is expected to: a. assist and advise the Committee in its consultation with in the administration of these cases; b. attend meetings and negotiate with representatives of the Debtors; c. assist and advise the Committee in its examination and analysis of the conduct of the Debtors' affairs; d. assist the Committee in the review, analysis and negotiation of any plan(s) of reorganization that may be filed and to assist the Committee in the review, analysis and negotiation of the disclosure statement; e. assist the Committee in the review, analysis and negotiation of any financing agreements; f. take all necessary action to protect and preserve the interests of the Committee, including: (i) the investigation and prosecution of certain actions, on the Committee's behalf, (ii) negotiations concerning all litigation in which the Debtors are involved, and (iii) if appropriate, review, analyze and reconcile claims filed against the Debtors' estates; g. generally prepare on behalf of the Committee all necessary motions, applications, answers, orders, reports and papers in support of positions taken by the Committee; h. appear before this Court, Appellate Courts and other courts and the U.S. Trustee and to protect the interests of the Committee before these bodies; and i. perform all other necessary legal services in these cases. Scott L. Hazan, Esq., at Otterbourg, assures the Court that the firm will work closely with Vorys, Sater and other professionals to ensure there is no unnecessary duplication of services performed or charged to the Debtors' estates. Otterbourg will charge for its services on an hourly basis in accordance with rates in effect when services are rendered. The firm will bill its time in one-tenth hour increments. Position Hourly Rate -------- ----------- Partner $400 - 595 Associate 195 - 425 Paralegal/Legal Assistant 155 According to Mr. Hazan, it is Otterbourg's policy to charge clients for all other expenses incurred in connection with the cases. These include telephone and telecopier toll, mail and express mail charges, special or hand delivery charges, photocopying, travel expenses, working meals, committee meetings, computerized research, transcription costs and other non-ordinary overhead expenses. Mr. Hazan informs the Court that he compiled a computerized master client database to ascertain whether his firm possessed any potential conflicts of interest or other connection. "Otterbourg professionals may have represented potential parties in interest, but will refrain from expanding that involvement into these proceedings. In all other regards, Otterbourg qualifies as a disinterested professional," Mr. Hazan asserts. ----------------------------------------------------------------- [00082] DEBTORS' MOTION TO ASSUME TWO AMEX AGREEMENTS ----------------------------------------------------------------- US Airways Group sought and obtained the Court's authority to assume two agreements with American Express -- the Charge Agreement and the Travel Agency Agreement. Under the Charge Agreement, USAir accepts AMEX credit cards for flight purchases while under the Travel Agency Agreement, AMEX sells tickets to USAir's flights through its widely dispersed travel agency outlets. John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, tells the Court that the Agreements will enhance the Debtors' liquidity position and avoid disruption. USAir can't tell customers they can't use an American Express card to buy a ticket. Additionally, travel agency agreements comprise a critical vehicle for revenue generation. Mr. Butler relates that credit card sales represent a substantial source of revenues. During 2001, US Air generated about $8,700,000,000 of gross receipts on purchases made by credit card. This was almost 68% of total gross receipts. Approximately 81% of credit card charges are originated at travel agencies, including those operated by AMEX. About 39% of the Debtors' credit card sales are paid for with AMEX cards. The Charge Agreement specifies a discount rate that reduces the credit card receivables that AMEX pays to the Debtors. These discount rates are highly confidential but fall within the range customary in the industry. AMEX pays US Air for all charges submitted, less the discount rate. AMEX then bills card members for their purchases. AMEX is entitled to reimbursement from the Debtors on account of chargebacks, including disputed or erroneous charges. Mr. Butler informs the Court that there are unperformed continuing obligations for the Debtors and AMEX. For example, Debtors are under a continuing obligation to honor ticket purchases made by credit card holders and to pay commissions and fees. The Charge Agreement has an initial term of 5 years, subject to renewal for successive 1-year terms, unless cancelled. The Debtors must continue flights and transportation service in order to preserve consumer confidence. As the largest source of the Debtors' revenues, credit card sales are an essential component of the business. It will be impossible for USAir to reorganize if the revenues it regularly receives from AMEX evaporate. ----------------------------------------------------------------- [00083] DEBTORS' MOTION TO PAY PREPETITION EMPLOYEE OBLIGATIONS ----------------------------------------------------------------- See prior entries at [00040] and [00020]. Scrap Management Bonuses The International Association of Machinists and Aerospace Workers, AFL-CIO, ask the Court to vacate the order to the extent it authorizes the Debtors to pay $6,000,000 in bonuses to 500 executive and management level employees. Sharon Levine, Esq., at Lowenstein & Sandler, asserts that the Order should be vacated because the IAM had no actual or constructive notice of the Debtors' Motion. Also, Ms. Levine says, the Debtors' request for authority to pay the Bonuses was buried deep within a motion normally reserved for administrative or procedural, as opposed to substantive, relief. "Although the Debtors were in touch with the IAM about union concessions, they failed to provide the IAM with advance notice or copies of any first day pleadings in general or the Motion in particular," Ms. Levine tells the Court. According to Ms. Levine, the bonuses can be separated into two classifications: Management Bonuses and Executive Bonuses. Management Hasn't Earned the Bonuses Ms. Levine notes that the Debtors' Motion fails to identify the eligible managers and executives, the amount each individual will receive and the reasons for the Bonus. The Bonus recipients appear to be executives and managers, the same people who ran USAir into its current financial crisis. Additionally, the Bonuses represent an attempt to pay non-union employees at the expense of other general unsecured creditors and union employees. The IAM finds the Bonus payments especially offensive when management has been asking IAM members for millions of dollars in wage concessions for the last 6-1/2 years. The IAM contends that the Bonuses are neither a reasonable exercise of the Debtors' business judgment nor appropriate under the "doctrine of necessity." The Bonuses are Just Gifts The Bonuses are to be paid in 12 monthly installments. Although the recipient must be employed by the Debtors to receive each monthly installment, the Bonuses are not tied to either: -- the employee staying long enough to accomplish a goal that makes the employee "key", or -- until the Debtors determine that the employee's services are no longer necessary to implement the business plan. Ms. Levine points out that no portion of the Bonuses is tied to a successful reorganization or other benchmark. Rather, Ms. Levine observes, the Bonuses amount to an improper assumption of the Debtors' prepetition bonus obligations to its non-union employees without any indication of a contribution to the success of the Chapter 11 process. There is no evidence that the purportedly "key" employees have other job opportunities in the airline industry at similar pay levels. In fact, according to news media reports, Continental and American are undergoing layoffs and United is on the verge of bankruptcy. The Request Was Underhanded Ms. Levine relates that the request to pay the Bonuses is located at pages 17 to 19 of the Debtors' 73-page Motion. By burying this request deep in the Debtors' Motion and by not serving the IAM with a copy, the Debtors were clearly acting in a way that limited the exercise of substantive rights. Ms. Levine argues that treating the Bonuses in the middle of a lengthy motion, which in typical bankruptcy proceedings is reserved for administrative or procedural relief relating to payment of prepetition wages and employee benefit programs, was improper. "The Court should not tolerate this conduct," Ms. Levine asserts. Ms. Levine contends that the Bonuses go well beyond the type of relief that may be granted ex parte. "This was not the merely administrative or procedural relief required of a debtor to operate its business in the ordinary course, like avoiding only being allowed to pay one-half of its payroll in a payroll period or maintaining a bank account," Ms. Levine says. "This unusual request to pay postpetition bonuses earned prepetition for prepetition services rendered should only be considered, if at all, on notice designed to provide all parties in interest with an opportunity to be heard," Ms. Levine asserts. ----------------------------------------------------------------- [00084] JPMORGAN ET AL'S MOTION TO VACATE MAINTENANCE CLAIM ORDER ----------------------------------------------------------------- See prior related entries at [00037] and [00017] (Debtors' Motion To Pay Prepetition Maintenance Claims). To finance construction, renovation, improvement, equipment and furnishings of US Air facilities at the Philadelphia International Airport, the Philadelphia Authority for Industrial Development authorized the issuance and sale of $71,140,000 of Special Facilities Revenue Bonds, Series 2000. The Bonds are non-recourse to the Authority, and are secured by the proceeds of the Bonds and by payments made under a Loan Agreement. On June 1, 2000, the Authority and US Air entered into a Loan Agreement where the Authority would loan the proceeds from the Bonds to the Debtor. The Authority and Chase Manhattan Trust Company, N.A., as trustee, entered into a Trust Indenture, where the Authority assigned all of its rights, title and interest in the Loan Agreement to Chase, and Chase agreed to serve as trustee for the Bonds. Chase is now known as JP Morgan & Company. Under the terms of the Indenture and the Loan Agreement, the proceeds of the Bonds were paid to the Trustee, and are to be used to pay costs related to the Project, the issuance of the Bonds, payment of interest on the Bonds, fees of the Trustee, and other specified costs. Under the terms of the Loan Agreement and Trust Indenture, the Trustee established accounts for the Bond proceeds, including a Construction Fund. Prior to the Petition Date, the Trustee made certain payments from the Construction Fund to contractors and others for work performed on the Project. Payments were made at Debtors' requisition. As of the Petition Date, there was $20,000,000 remaining in the Construction Fund. The Trustee believes that a variety of individual and institutional investors holds the Bonds. Several large holders contacted the Trustee and met on September 9, 2002, JPMorgan relates. Ann Schmitt, Esq., at Reed & Smith, asserts that the Court Order authorizing the Debtors to pay maintenance claims is inconsistent with the Loan Agreement, the Indenture, and applicable law. "The Indenture provides that the Trustee will enforce the Loan Agreement," Ms. Schmitt explains. Accordingly, the Trustee objects to the Motion as it relates to the Loan Agreement, the Project, and the Construction Fund. Ms. Schmitt contends that the Outside Mechanics Motion mischaracterizes the Debtors' rights and obligations with respect to payment for construction at the Philadelphia International Airport. The Debtors are not merely conduits for payment to the contractors. Instead, Ms. Schmitt says, advances under the Loan Agreement are a loan to the Debtor, and the Debtors are liable for all amounts owed under the Loan Agreement. Ms. Schmitt points out that the Debtors have not asked for authorization to use funds on deposit in the Construction Fund, but rather have assumed that it may do so. Funds held in the Construction Fund are held in trust and are subject to the conditions and limitations set forth in the Indenture and Loan Agreement, including that advances are not to be made following the occurrence of a default. Pursuant to the Loan Agreement, the filing of a voluntary petition under Title 11 is an event of default. Although generally ipso facto clauses are not enforceable where the default is the filing of a petition under Title 11, Ms. Schmitt says, an exception is made where the underlying agreement is a contract to make a loan. 11 U.S.C. Section 365(e)(2)(B); In re Best Products Company, Inc., 210 B.R. 714, 716 n.4 (Bankr. E.D.Va. 1997). The Loan Agreement and the Indenture provide that the Debtors have no right to use or direct payment of funds in the Construction Fund absent a certification that no Event of Default exists. Because an Event of Default exists, Ms. Schmitt asserts, the Debtors have no right to use or direct payment of any monies in the Construction Fund. APG-America Wants Clarification APG-America of Glassboro, New Jersey is a contractor and subcontractor, supplying and installing building materials for US Air at its new site at Philadelphia International Airport. APG-America takes issue with a specific quote from the Debtors' Motion: "(Debtors) are overseeing its [the Philadelphia International Airport Terminal One] construction on behalf of the Philadelphia Authority for Industrial Development and the City of Philadelphia. . ." Thomas Salzar, Esq., tells the Court that APG-America has a contract with the Debtors that expressly defines the Debtors as owners of the Philadelphia International Airport Terminal One. Mr. Salzar argues that the disputed passage is erroneous because it characterizes the Debtors as an entity with responsibilities and standing materially different from an owner. APG-America asks the Court to strike any reference to "Pass through Projects" and the Debtors as only "overseeing" construction and define the Debtors as "owners" as stated in the construction contracts. ----------------------------------------------------------------- [00085] DEBTORS' MOTION TO SET-UP INTERIM COMPENSATION PROTOCOL ----------------------------------------------------------------- By this Motion, US Airways Group asks Judge Mitchell to establish procedures for the compensation and reimbursement of court approved professionals. It will streamline the professional compensation process and enable the Court and all other parties to effectively monitor the professional fees incurred in these Chapter 11 cases. The Debtors contend that the significant size of these cases and the amount of effort that will be required from their professionals during these cases justify the procedures requested. The procedures are needed to avoid professionals funding the reorganization case. Almost all of the principal professionals have agreed to make economic concessions, deviating from their normal fees by providing the Debtors with periodic fee accommodations in an aggregate amount of up to 10%. These professionals have already agreed to accept a lesser amount of interim compensation than they would normally receive. This arrangement provides further justification for this Court to authorize this Motion. The Procedures Each Professional is required to submit a monthly statement to: * US Airways Group, Inc. 2345 Crystal Drive Arlington, VA 22227 Attn: Michelle V. Bryan * Skadden, Arps, Slate, Meagher & Flom (Illinois) 333 West Wacker Drive, Suite 2100 Chicago, Illinois 60606 Attn: John Wm. Butler, Jr. * McGuireWoods LLP 1750 Tysons Boulevard, Suite 1800 McLean, Virginia 22102 Attn: Lawrence E. Rifken * Counsel to the Debtors postpetition lenders * Counsel to the Committee * The United States Trustee The Monthly Statement Date will be on or before the last day of the month following the month for which compensation is sought. Each entity receiving a statement will have 20 days after the Monthly Statement Date to review it. The first statement will be served by each of the Professionals by September 30, 2002, and will cover the period from the Petition Date through August 31, 2002. At the expiration of the 20-day period, the Debtors will pay 90% of the fees and 100% of the disbursements requested, except those to which an objection has been served. Any professional who fails to submit a monthly statement is ineligible to receive payments until the monthly statement is submitted. If there is an objection to the compensation or reimbursement, the objecting party has 20 days from the Monthly Statement Date to serve the respective professional and other parties receiving monthly statements, a Notice of Objection to Fee Statement. This Statement will detail the nature of the objection and the amount at issue. Thereafter, the objecting party and the recipient Professional will attempt to reconcile the dispute. If the parties are unable to reconcile within 20 days, the objecting party has three business days file its objection with the Court and serve the objection on the respective professional and the other parties receiving monthly statements. The Court will consider and dispose of the objection at the next Omnibus Hearing Date. Every four months, each of the Professionals will file with the Court and serve on the parties receiving monthly statements, on or before the 45th day following the last day of the compensation period for which compensation is sought, an application for interim Court approval and allowance of the compensation and reimbursement of expenses requested for the prior four months. The first application will be filed on or before January 16, 2003 and will cover the period from the Petition Date through November 30, 2002. Professionals will not receive payments for fees and expenses until an application is submitted. The filing of an application for compensation or reimbursement of expenses or a Notice of Objection to Fee Statement will not disqualify a Professional from the future payment of compensation or reimbursement of expenses. Neither the payment of, nor the failure to pay, monthly interim compensation and reimbursement will bind any party-in-interest or this Court with respect to the final allowance of applications for compensation and reimbursement of Professionals. The Debtors further ask the Court to permit each member of the Committee to submit statements of expenses and supporting vouchers to counsel for the Committee who will collect and file requests for reimbursement in a similar procedure. ----------------------------------------------------------------- [00086] DEBTORS' MOTION TO ESTABLISH JOINT FEE REVIEW COMMITTEE ----------------------------------------------------------------- In connection with the payment of compensation to professionals, the Debtors want to establish a Joint Fee Review Committee consisting of: (a) a representative of the Office of the United States Trustee for this District; (b) Michelle V. Bryan, Executive Vice President, Corporate Affairs and General Counsel of US Airways Group, Inc.; (c) John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, lead counsel of the Debtors; (d) the chairperson of the Creditors' Committee; and (e) Scott Hazen, Esq., at Otterbourg, Steindler, Houston & Rosen, lead counsel selected by the Committee. The Fee Committee will meet on or prior to September 13, 2002 and establish budgeting and monthly fee review protocol for these cases consistent with the approach approved by the United States Bankruptcy Court for the Southern District of New York in the In re The Singer Co., N.V., chapter 11 cases for implementation no later than October 2002. The Debtors want the first report of the Fee Committee to include a summary description of the protocol that they agree to. ----------------------------------------------------------------- [00087] HANCOCK ET AL'S MOTION TO MODIFY AIRCRAFT REJECTION ORDER ----------------------------------------------------------------- See prior related entries at [00074] and [00049] (Debtors' Motion to Reject 57 Aircraft Leases). John Hancock Life Insurance Co. is a mortgagee of two Fokker F- 100 aircraft (U.S. Registration Nos. N897US and N898US) and four engines (Serial Numbers 17455; 17456; 17467; 17468). Jonathan R. Tuttle, Esq., at Debevoise & Plimpton, argues that the rejection of the aircraft leases was unwarranted. Unlike the abandonment of a storefront, Mr. Tuttle says, the Debtors cannot simply leave the premises and drop-off the keys to the door. To relinquish control of the aircraft, Mr. Tuttle explains, the Debtors must provide Hancock with operational control and comply with Federal Aviation Administration regulations to affect the transfer. The Debtors must return all four of Hancock's engines to Hancock's two airframes. None of Hancock's four engines are installed on either of Hancock's two airframes. Three of the engines apparently are installed on three different aircrafts. Thus, Mr. Tuttle asserts, releases must be obtained from the owners of three other aircraft before a contractor certified by the FAA can begin to transfer the engines back to Hancock's airframes. Similarly, Mr. Tuttle continues, the four engines installed on the two Hancock airframes must be returned to four different aircraft. The fourth engine is reportedly "on the ground" but its exact location is unknown and the Debtors have provided no indication of whether the engine is in one piece or dismantled. The Debtors have informed the manager of the storage facility in Mojave, California that the US Air is no longer responsible for the aircraft or related storage fees. The Debtors have walked away, leaving the facility manager to sort out, with no instruction, which engines and which aircraft belong to which owners. "This chaos can be avoided if the Debtors are required to return the engines to the proper aircraft before abandoning them," Mr. Tuttle says. In addition, Mr. Tuttle asserts, the Debtors must turn over maintenance manuals and other records to Hancock. The Debtors have informed Hancock that it will be given two and one-half days per aircraft to review all of the documents and supporting documentation. "This review normally takes 10 to 14 days to ensure that all records are present," Mr. Tuttle relates. If the documentation is incomplete and does not permit Hancock to trace certain parts of an engine, Hancock could be required to completely overhaul the engine to receive FAA certification. Worse, USAir has informed Hancock, that if any deficiencies in the documentation are found, the Debtors will not assist in curing them. Regulations also require that a bill of sale and an Aircraft Registration Application be filed with the FAA indicating aircraft transfer of ownership before Hancock can operate the aircraft and engines. "They are of little value without the necessary documentation," Mr. Tuttle notes. Without the documentation, the transfer of title and registration with the FAA, the aircraft cannot be operated in compliance with FAA regulations. Mr. Tuttle contends that it simply inequitable to force Hancock to assume responsibility for the aircraft and engines on the Petition Date, when the Debtors are still in possession of and are not prepared to transfer the aircraft, parts and documentation necessary. "The Debtors cannot have it both ways," Mr. Tuttle asserts. They should not be granted the extraordinary benefit of immediate abandonment without also being prepared to transfer the aircraft and engines. The Debtors should be required to retain responsibility for the aircraft and engines until they are prepared to effectively transfer them. Until the aircrafts are transferred, the Debtors should also be required to maintain all insurance and storage fees. ABN AMRO Wants The Order Modified ABN AMRO Bank N.V. holds mortgages for Wilmington Trust Company on two Fokker F28 MK0100 Aircrafts, registration numbers N854US and N855US and Rolls Royce model Tay Mark 650-15 aircraft Engines. The Engines bear manufacturer's serial numbers 17213, 17215, 17220, 17221. The mortgage was granted pursuant to an Amended and Restated Trust Indenture and Security Agreements dated April 20, 1990 between US Airways and Wilmington Trust Company as security trustee. Bradford F. Englander, Esq., at Linowes & Blocher, in Silver Spring, Maryland, relates that ABN AMRO is a lender to, and creditor of, US Airways pursuant to Note Purchase Agreements dated January 30, 1990, among US Airways, Wilmington Trust Company, as security Trustee and ABN AMRO as purchaser. US Airways financed its purchase of the Aircrafts and Engines through a secured loan by issuing Notes. As security for its obligations to ABN AMRO under the Notes, US Airways granted the Trustee -- for the benefit and security of ABN AMRO -- a purchase money equipment security interest in the Aircraft and Engines. On June 15, 2002, ABN AMRO's aviation consultants inspected the Aircrafts and determined that the Engines had been removed and replaced with substitute engines, without the prior consent of the Trustee as required under the Security Agreements. On August 15, 2002, ABN AMRO's aviation consultants again inspected the Aircrafts and determined that one of the Substitution Engines had been removed from one of the Aircrafts. ABN AMRO believes that the removal of the Substitution Engine took place after the Petition Date. On August 19, 2002, ABN AMRO consultants inspected the Aircrafts and determined that a second Substitution Engine had been removed from its Aircrafts. According to ABN AMRO, the Debtors are employing Avtel Services to store and maintain aircraft. On August 21, 2002, Avtel refused to permit ABN AMRO to remove its Engines from the aircraft. Instead, Avtel demanded written permission from the aircraft's owners. It may require additional insurance, FAA documentation, and undertakings to pay, before ABN AMRO could take possession of its Engines. Avtel has asserted a statutory lien for services provided on behalf of the Debtors. As a result, ABN AMRO has been unable to gain possession of its Aircrafts and Engines since entry of the Abandonment Order, although the Debtors purportedly relinquished possession of the property. Thus, ABN AMRO asks Judge Mitchell to modify the Abandonment Order to compel the Debtors to surrender the Aircrafts and Engines. ----------------------------------------------------------------- [00088] DEBTORS' MOTION TO SIGN BANK OF AMERICA PURCASHING PACT ----------------------------------------------------------------- See prior entry at [00046]. Motion granted. ----------------------------------------------------------------- [00089] AIRPORT AUTHORITIES' REQUEST FOR ADEQUATE PROTECTION ----------------------------------------------------------------- Two Airport Authorities filed Notices of Non-Consent to Use of Cash Collateral: (1) the Denver Municipal Airport System, on behalf of the Department of Aviation, City and County of Denver, Colorado, and (2) the City and County of San Francisco and the San Francisco Airport Commission. Douglas W. Jessop, Esq., informs the Court that Denver is a USAir creditor and the owner and operator of the airport system including facilities at Denver International Airport. The Debtors have used DIA's facilities to: -- land and takeoff their passenger aircraft from DIA, -- transfer luggage using DIA's handling facilities, and -- occupy ticket counters, offices and maintenance facilities. The Debtors incur these charges on a monthly basis: -- $300,000 rent, -- $130,000 landing fees, and -- $114,000 Passenger Facility Charges. As of the Petition Date, the Debtors owe DIA: -- $24,000 for prepetition rent, -- $150,000 for prepetition landing fees, and -- $144,000 for prepetition passenger facility charges. Since commencing operations at DIA, the Debtors were required to collect and remit to Denver passenger facility charges as required by 49 U.S.C. Section 40117 and governed by detailed Federal regulations, 14 C.F.R. Section 158. Passenger Facility Charges are charges of $4.50 that are added to the price of each ticket sold. The proceeds are used by DIA for airport development. Under the passenger facility charges regulatory scheme, passenger facility charges are trust funds collected by the Debtors and held for the benefit of Denver. The Debtors also incur these charges on the monthly basis in using the facilities of the San Francisco Airport: -- $614,000 rent and services, -- $270,000 landing fees, and -- $200,000 passenger facility charges. As of the Petition Date, the Debtors owe San Francisco: -- $258,000 for prepetition rent and services, -- $638,000 for prepetition landing fees, and -- $200,000 for prepetition passenger facility charges. Pursuant to Section 363(c)(2) of the Bankruptcy Code, Mr. Jessop asserts that the Debtors may not use, sell, or lease cash collateral unless: (A) each entity that has an interest in cash collateral consents; or (B) the court, after notice and a hearing, authorizes the use, sale or lease in accordance with the provisions of this title. Mr. Jessop concedes that the Debtors intend to honor these prepetition obligations and remit the fees in the ordinary course of business. However, if US Air does not remit the fees, the Airport Authorities will object to the Debtors' use of their cash as collateral for any purpose. The Airport Authorities ask the Court, to the extent any fees are not paid, to impose a constructive trust on those dollars and grant them adequate protection by requiring that PFCs and other fees be segregated from the Debtors' operating funds and paid to the Airport Authorities as soon as practicable following their collection. ----------------------------------------------------------------- [00090] RICHARD SWEET ET AL'S MOTION FOR RULE 2004 EXAMINATION ----------------------------------------------------------------- See prior related entry at [00070] (Richard Sweet Et Al's Motion For Restraining Order). Richard L. Sweet, et al, asks Judge Mitchell to order the U.S. Trustee to conduct a Rule 2004 Examination. The request is based on stockholder allegations of fraud and mismanagement by US Air's past and/or present top executives, independently or in conjunction with the International Association of Machinists. The examination of an entity under Rule 2004 of the Federal Rules of Bankruptcy Procedure or of the debtor under Section 343 of the Bankruptcy Code may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor. It usually calls for the attendance of an entity for examination and the production of documentary evidence. ----------------------------------------------------------------- [00091] AEROSPACE FIRMS FILE NOTICES OF RECLAMATION DEMANDS ----------------------------------------------------------------- Rohr Inc., and its subsidiaries Goodrich Aerostructures Group, Simmonds Precision Products Inc., Goodrich Corporation Aircraft Wheels and Brakes, Goodrich-Messier and Rosemount Aerospace, want to reclaim aircraft parts and equipment shipped to US Air. In the alternative, Rohr wants to have its claim for payment secured by a lien or have its claim allowed as an administrative priority. Rohr & Subsidiaries ------------------- Rohr, Goodrich Aerostructures $34,435 Simmonds Precision Products $9,123 Goodrich Corporation Aircraft Wheels & Brakes $452,637 Goodrich-Messier $122,205 Rosemount Aerospace $11,369 --------- Total $629,769 B/E Aerospace, with subsidiaries Winston-Salem, Lenexa, Anaheim and Leighton Buzzard Gallery also make a similar demand. B/E Aerospace & Subsidiaries ---------------------------- Winston-Salem Division $134,966 Lenexa Division $2,640 Anaheim Division $1,668 Leighton Buzzard Gallery Division $1,784 ---------- Total $141,059 ----------------------------------------------------------------- [00092] DEBTORS' MOTION TO ASSUME 15 CRITICAL AIRLINE CONTRACTS ----------------------------------------------------------------- See prior entry at [00064]. Motion granted. ----------------------------------------------------------------- [00093] DEBTORS' MOTION TO CONTINUE USING EXISTING BUSINESS FORMS ----------------------------------------------------------------- See prior entry at [00015]. Motion granted. ----------------------------------------------------------------- [00094] DEBTORS' MOTION TO EMPLOY ORDINARY COURSE PROFESSIONALS ----------------------------------------------------------------- See prior entry at [00066]. Motion granted. ----------------------------------------------------------------- [00095] DEBTORS' MOTION TO FIX NOVEMBER 4, 2002 CLAIMS BAR DATE ----------------------------------------------------------------- See prior entry at [00067]. Motion granted. ----------------------------------------------------------------- [00096] DEBTORS' MOTION TO GIVE PRIORITY TO RECLAMATION CLAIMS ----------------------------------------------------------------- See prior entry at [00069]. Motion granted. ----------------------------------------------------------------- [00097] DEBTORS' MOTION TO ASSUME 4 SPECIAL TRUST FUND AGREEMENTS ----------------------------------------------------------------- See prior entry at [00068]. Motion granted. ----------------------------------------------------------------- [00098] US AIRWAYS GROUP REPORTS 77.1% AUGUST LOAD FACTOR ----------------------------------------------------------------- ARLINGTON, Virginia -- September 4, 2002 -- US Airways reported that revenue passenger miles for August 2002 declined 17.3% compared to August 2001, while available seat miles for the month were down 18.2% compared to the same period last year. The passenger load factor for August 2002 was 77.1%, an increase of 0.9 percentage points compared to August 2001. Revenue passenger miles for the first eight months of the year decreased 17.6% compared to the same period in 2001, while available seat miles were down 19.2% year-over-year. The passenger load factor for the period was 73.2%, an increase of 1.5 percentage points over the same period in 2001. The three wholly owned subsidiaries of US Airways Group, Inc. -- Allegheny Airlines, Inc., Piedmont Airlines, Inc., and PSA, Inc., -- reported that revenue passenger miles for August 2002 increased 3.4% compared to August 2001, while available seat miles increased 8.3%. The passenger load factor for the month was 55.8%, a decrease of 2.6 percentage points compared to the same period in 2001. Revenue passenger miles for the first eight months of the year for the 3 US Airways Express wholly owned subsidiaries increased 3.7% compared to the same period in 2001, while available seat miles were up 10.0%. The passenger load factor for the second quarter was 53.2%, a decrease of 3.3 percentage points compared to the same period in 2001. "I am extremely proud of our employees for another month of outstanding operations across our system," said US Airways President and Chief Executive Officer David Siegel. In August, 86.6% of US Airways flights arrived on time, which was the best August in the Company's history. US Airways also completed 99.2% of its flights, another Company best for the month. "Our hubs have been running smoothly and we have operated every scheduled transatlantic flight since May," said Siegel. Mainline passenger unit revenues continue to fall, with an expected decline of between 8.5% and 9.5% for August 2002, compared to August 2001. US AIRWAYS, INC. SELECTED TRAFFIC STATISTICS August August Percent 2002 2001 Change ------ ------ ------- Revenue Passenger Miles (000): Domestic* 3,093,579.0 3,919,397.0 (21.1) International* 859,187.0 858,794.0 0.0 Total - Scheduled Service 3,952,766.0 4,778,191.0 (17.3) Total (Including Charter) 3,953,495.0 4,779,916.0 (17.3) Available Seat Miles (000): Domestic* 4,128,370.0 5,237,295.0 (21.2) International* 1,001,649.0 1,037,646.0 (3.5) Total - Scheduled Service 5,130,018.0 6,274,941.0 (18.2) Total (Including Charter) 5,131,120.0 6,277,285.0 (18.3) Passengers Boarded* 4,399,952.0 5,627,916.0 (21.8) System Load Factor* 77.1 76.1 0.9 Average Passenger Journey* 898.4 849.0 5.8 * scheduled service NOTE: Numbers may not add or calculate due to rounding US AIRWAYS, INC. SELECTED TRAFFIC STATISTICS YEAR-TO-DATE August August Percent 2002 2001 Change ------ ------- ------- Revenue Passenger Miles (000): Domestic* 22,740,675.0 28,474,977.0 (20.1) International* 5,685,464.0 6,002,281.0 (5.3) Total - Scheduled Service 28,426,139.0 34,477,258.0 (17.6) Total (Including Charter) 28,431,545.0 34,499,665.0 (17.6) Available Seat Miles (000): Domestic* 31,817,271.0 40,398,162.0 (21.2) International* 6,990,678.0 7,646,206.0 (8.6) Total - Scheduled Service 38,807,950.0 48,044,369.0 (19.2) Total (Including Charter) 38,814,571.0 48,070,487.0 (19.3) Passengers Boarded* 33,595,388.0 42,044,527.0 (20.1) System Load Factor* 73.2 71.8 1.5 Average Passenger Journey* 846.1 820.0 3.2 * scheduled service NOTE: Numbers may not add or calculate due to rounding US AIRWAYS EXPRESS** SELECTED TRAFFIC STATISTICS August August Percent 2002 2001 Change ------ ------- ------- Revenue Passenger Miles (000) 141,542.0 136,908.0 3.4 Available Seat Miles (000) 253,877.0 234,454.0 8.3 Passengers Boarded* 629,196.0 629,180.0 0.0 System Load Factor* 55.8 58.4 (2.6) Average Passenger Journey 225.0 217.6 3.4 US AIRWAYS EXPRESS** SELECTED TRAFFIC STATISTICS YEAR-TO-DATE August August Percent 2002 2001 Change ------ ------- ------- Revenue Passenger Miles (000) 1,033,479.0 997,042.0 3.7 Available Seat Miles (000) 1,940,870.0 1,763,916.0 10.0 Passengers Boarded* 4,626,184.0 4,577,363.0 1.1 System Load Factor* 53.2 56.5 (3.3) Average Passenger Journey 223.4 217.8 2.6 * Scheduled service ** Allegheny Airlines, Inc., Piedmont Airlines, Inc., and PSA Airlines, Inc. NOTE: Numbers may not add or calculate due to rounding ----------------------------------------------------------------- [00099] US AIRWAYS SHUTTLE OFFERS ARRAY OF NEW TRAVEL INCENTIVES ----------------------------------------------------------------- ARLINGTON, Virginia -- September 5, 2002 -- US Airways is offering a 2,500-mile first time Shuttle mileage bonus to members who join Dividend Miles and fly their first flight on US Airways Shuttle by Oct. 31, 2002. US Airways also introduced "Shuttle Smart," a new fare discount program where Shuttle customers have the ability to purchase four unrestricted roundtrip tickets for the price of three roundtrip tickets -- that's a savings of 25% off the standard individual ticket price. To earn the first-flight bonus, the customer must enroll in the Dividend Miles program through usairways.com or at any US Airways ticketing facility, and take his or her first US Airways Shuttle flight as a Dividend Miles member. Travel is valid through Oct. 31, 2002. As an added value, this special offer is combinable with other bonus mile offers, enabling customers to earn miles towards free travel quicker than ever. Dividend Miles members traveling the Shuttle will continue to earn Triple Dividend Miles through Dec. 31, 2002, and the bonus miles count toward Dividend Miles Preferred Status. Additionally, US Airways will honor all competitive airline discount fare coupons for Shuttle travel. Terms and conditions will apply as set forth on the coupon. Shuttle Smart packs are available for purchase on all US Airways Shuttle routes. US Airways' Shuttle operates hourly between New York's LaGuardia Airport and Ronald Reagan Washington National Airport, and between LaGuardia and Boston and Boston and Reagan National. The cost of the roundtrip ticket packs are as follows: Between New York and Boston: $1,308 Between Washington and New York: $1,308 Between Boston and Washington: $1,968 "Whether customers are traveling for business or pleasure, 'Shuttle Smart' is an economical means of flying the busy Northeast corridor," said US Airways Vice President of Marketing and Revenue Management Stephen M. Usery. "Why drive or take the train when we can get you there quicker, more conveniently and affordably? With our bonus mile offers, the next free trip is closer than ever." The cost for these Shuttle sale packs does not include up to $22.50 airport passenger facility charges where applicable, and does not include federal excise tax of $3, which will be added on each flight segment of each itinerary. A flight segment is defined as a takeoff and a landing. The fares listed also do not include the September 11 Security Fee of up to $5 per itinerary. Lower fares may be available in these markets. Shuttle Smart Pack tickets become nonrefundable once any coupon is used. These fares are subject to change without advance notice. This new Shuttle discount program is available for travel in either direction and can be used for any flight at any time of the day. Customers simply need to call US Airways Reservations at 1-800-428-4322, or visit any US Airways airport ticket counter or City Ticket Office to purchase the booklets. Advance reservations are not required. Customers who fly US Airways Shuttle are accustomed to its consistent ontime performance, dedicated check-in counters, kiosks and gates always in the same location, Club-style waiting areas built around the business traveler's needs, and wide comfortable seating aboard every aircraft. Shuttle customers also have complete assurance that on any Monday through Friday, if they do not make it to their boarding gate within 20 minutes of checking in at the Shuttle ticket counter or electronic ticket kiosks to make their scheduled departure, they will be entitled to a $200 voucher toward future travel on US Airways, the US Airways Express carriers or US Airways Shuttle. To qualify for the 20-Minute Guarantee, customers must complete check-in at the dedicated Shuttle ticket counter or at an electronic-ticket kiosk at least 25 minutes before scheduled departure -- and not be able to arrive at the gate in time for final boarding at five minutes before departure. The 20-Minute Guarantee offer does not apply during irregular operations, such as weather, government-mandated security actions, or other circumstances out of US Airways' control. This offer only applies to customers booked in Y, B, or U class service, excluding U class youth fares (fare basis: UOPKY24) and U class senior fares (fare basis: UOPKSR62), and it applies only to customers who originate their travel on US Airways Shuttle. The $200 voucher towards a US Airways ticket is valid systemwide and will be provided upon the customer's request at the Shuttle gate check-in only on the scheduled date of departure after not making the scheduled departure to their ticketed destination. This voucher program is the exclusive remedy under the 20-Minute Guarantee. In no event shall US Airways' liability exceed the award amount of the voucher. The voucher amount of $200 applies toward the base fare and federal excise tax of 7.5 percent only and applies only to the future purchase of airline tickets on US Airways. The purchase of the ticket must occur within one year of the voucher's issuance. Other terms and conditions for the voucher apply as stated on the voucher. ----------------------------------------------------------------- [00100] USAIR & CWA REACH TENTATIVE AGREEMENT ON CONTRACT CHANGES ----------------------------------------------------------------- WASHINGTON, D.C. -- September 6, 2002 -- The Communications Workers of America has reached a tentative agreement with US Airways on proposed changes to the contract covering about 8,000 passenger service agents. CWA's leadership is recommending acceptance of the proposed changes. Information about the proposed settlement terms is being mailed to members at their homes immediately. The ratification process is being conducted for CWA by the American Arbitration Association, which also is sending information on voting procedures to union members' homes. CWA members will vote on the proposed changes by telephone or via the Internet under the AAA process; the voting period ends on Tuesday, Sept. 17. * * * ARLINGTON, Virginia -- September 6, 2002 -- US Airways reached a tentative agreement today with the Communications Workers of America (CWA), which represents approximately 8,000 reservations and airport ticketing and gate personnel. The tentative agreement requires ratification by the CWA membership. Votes are expected to be tallied no later than Sept. 17, 2002. "This has been a difficult process, yet US Airways and the CWA together have worked to reach an agreement that meets the target cost reductions," said Jerry A. Glass, US Airways senior vice president of employee relations. "We thank the CWA's leadership and recognize the significance of the sacrifices we are asking our employees to make." Glass said that US Airways will ask the U.S. bankruptcy court for a short delay from its request to seek relief from the CWA's existing contract to allow for an expedited ratification. US Airways currently has restructuring plan agreements in place with its pilots, represented by the Air Line Pilots Association; flight attendants, represented by the Association of Flight Attendants; simulator engineers, dispatchers, and the flight crew training instructors, each represented by the Transport Workers Union; fleet service workers, represented by International Association of Machinists (IAM) District 141; and maintenance training specialists, also represented by the IAM. *** End of Issue No. 6 *** ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: Professor Stuart Gilson's newest title, "Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups." List Price: $79.95 -- Discounted to $55.96 at http://amazon.com/exec/obidos/ASIN/0471405590/internetbankrupt -------------------------------------------------------------------------