US Airways

Till the end, the real damage of the most famous and loud attack of modernity held on September 11, 2001 in the United States is unknown. During the terrorist acts of Al-Qaeda on New York and Washington, more than three thousand people died and about six thousand were injured. This attack has had a tremendous impact on the global economy and dramatically influenced the international politics. The exact amount of damage caused by the attacks is unknown. According to the International Monetary Fund, the losses from the acts of terrorism, taking into account the loss of property and loss of insurance companies, are $ 21 billion. Airlines began to experience serious difficulties and the world’s largest airline – US Airways – was on the verge of bankruptcy.

US Airways is the sixth largest airline in the world. The company works in the USA, Mexico, Western Europe, Canada and the Caribbean. Its basic airports are Philadelphia International Airport, Phoenix Sky Harbor International Airport and Charlotte-Douglas International Airport. US Airways was established in 1939 by two brothers. At first, the main specialization of the company was delivery of letters. However, in 1949 the company began to engage in regular passenger traffic. Gradually, the company expanded. It absorbed several airlines, thereby becoming the largest airline in the northeastern part of the United States and the sixth in the world in terms of passengers carried. Prior to the September 11 attacks, US Airways constantly bought new aircrafts and extended flight routes. The company had profit every year of its activity. However, in early 2000, management of US Airways wanted to unite with United Airlines – the largest air carrier. Despite the apparent success, negotiations led to nothing.

The company’s future was under threat because of the September 11 attacks. Almost all airlines were forced to cancel most flights and announce the upcoming staff reductions. Not only US Airways was under threat, but even the whole airline industry. However, the consequences of the attacks were the worst for US Airways among all US airline companies. In contrast to its competitors – United Airlines and American Airlines, which planes, suicide bombers used – US Airways was not directly involved in the events of September 11. However, the consequences of terrorist attacks hit the whole industry, and things were bad for the company. US Airways suffered more than others from these tragic events because Reagan National Airport in Washington DC remained closed for a long time after September 11 and it is the main airport of the company. However, in a year, the other important problem for US Airways, as well as for the rest US airlines arose. It was persistent reluctance of Americans to fly. The following sharp decline in the number of passengers and unplanned growth of the costs of providing safety did the rest. US Airways debt reached nearly $ 11 billion. However, flights to North America and Europe were on schedule, employees and supplier invoices were paid (Langewiesche 23).

Several months of struggle for financial rescue of US Airways were vain. “Among airlines that have survived, the turmoil has been nowhere worse than at US Airways” (Langewiesche 28). The company used every possible way to save money. For example, nearly a billion dollars was laid up by salaries of its employees. Unions representing pilots and flight attendants agreed for salary reduction for 35 thousand of people. Nevertheless, the company was unable to avoid bankruptcy. The president of the airline announced that they resorted to bankruptcy in order to protect passengers, employees and the community. The aim of the company management was to bring finances in order and return to self-sufficiency.

On the wave of the crisis in the aviation industry caused by the September 11 attacks, US Airways first of the major airlines filed for bankruptcy. The company’s management asked the government, declaring its willingness, to recognize itself a bankrupt and requested for protection from creditors’ claims. During the time of trial on bankruptcy procedure, the company was protected from creditors. The bankruptcy process helped US Airways significantly reduce production costs and conduct large-scale restructuring in the extremely short time. During this time, management intended to implement restructure. For this purpose, $ 900 million of state credit was spent, as well as money saved on reducing the salaries of employees. Also, there was a large investor that was willing to invest in US Airways $ 200 million in exchange for 38% stake. US Airways received $ 240 million in shares as an investment from the company Retirement Systems of Alabama (Langewiesche 30)

The airline passed the bankruptcy procedure in less than 8 months reducing staff by 36%, seats by 30% and number of flights by 25% compared with mid-2001. US Airways cut annual costs by 1.9 billion dollars and reduced the arrearages from $ 10.65 billion to $ 8 billion. The company emerged from bankruptcy being more efficient. It got rid of excess. However, it was still a loss-making company, which focused on the use of regional jets. After the end of the stage of bankruptcy, US Airways made a profit of $ 1.63 billion in the first quarter of 2003. In such a way, it masked operating loss of $ 282 million. Originated loans and investments in combination with funds received as a part of the bankruptcy proceedings allowed US Airways end the quarter with a profit of $ 1.63 billion with operating income of $ 1.53 billion. Without taking into account one-time items, the company suffered a loss of $ 282 million, against the losses of $ 269 million in the same quarter of the previous year, when it received revenue of $ 1.71 billion. The management of the company claimed that there were several negative factors affecting its performance including the war in Iraq and snow storms over the East Coast of the US.

In 2004, the company filed a lawsuit in bankruptcy court for protection against creditors again. The reason for this step was the failure of negotiations with the pilots to reduce wages, which was an essential element of the program of reducing the company’s costs by $ 1.5 billion. In the lawsuit, US Airways reported that it had assets of $ 8.81 billion and debts of $ 8.7 billion. Another voluntary bankruptcy of the airline had to give the company time to implement a new plan of salvation (Reed and Reed 140-145).

US Airways emerged from bankruptcy and announced its merger with another airline, America West, in order to create the largest airline-discounter in the United States. “In 2005, US Airways Group merged with America West Holdings Inc., combining an East Coast route network with one in the Western US” (Kumar 229). A united airline got the name and the brand American Airlines. It received delivery of 600 new aircrafts. Companies repeatedly stated that their operations complemented each other perfectly. American Airlines had a developed network of international routes, as well as joint ventures with European International Airlines Group on service of transatlantic flights and with Japan Airlines – across the Pacific Ocean. US Airways had a developed network of local routes covering the densely populated eastern seaboard (Reed and Reed 158-161).

It is known that terrorist acts take away many victims. However, it is not definitely estimated what damage terrorism causes to economies. Nevertheless, it is clear that terrorism has an extremely negative impact on the economic situation. Despite this, its negative influence lasts a relatively short period of time. US Airways is a definite example. It experienced several processes of bankruptcy, but could survive. Nowadays, its amalgamation with another airline company made it the largest airline company in the US. From the example of US Airways, it is understood that any disaster can be skillfully overcome in presence of good management.