Liquidation fears for US Airways

US AIRWAYS must rely on daily revenue and cash to operate during its bankruptcy reorganisation, leaving it vulnerable to liquidation should the funds run out or a creditor seek court permission for payment.

US Airways, which filed for protection from creditors yesterday, has pledged most of its assets, including cash, as collateral to a US board that gave the airline a $900 million loan guarantee last year, and to General Electric, which provided aircraft financing.

Without assets, the airline is unable to secure loans that companies usually arrange before filing for bankruptcy. “If they were to run short of cash, I would expect it would happen in the first quarter of next year,” said Philip Baggaley, an analyst at Standard & Poor’s.

Arlington, Virginia-based US Airways, which has $1.45 billion in cash, cash equivalents and short-term investments, said yesterday that an agreement with some creditors will provide unrestricted access to “a portion” of $750 million from the government-backed loan to be used as working capital.

The airline, in its second bankruptcy-court filing in two years, listed assets of $8.8 billion and liabilities of $8.7 billion.