The parent of US Airways submitted to the US Bankruptcy Court in Alexandria, Virginia, a new lineup of director nominees, which includes only three current directors:
- David Siegel, US Airways’ chief executive
- Robert Johnson, chairman of BET Holdings Inc.
- Raymond Smith, a retired telecommunications executive
Eight of the remaining slots would be filled with designees by the Retirement Systems of Alabama (RSA), the pension fund that provided interim financing to US Airways and intends to take a 37% stake in the equity of the reorganized carrier through a $240-million investment (See USAirways Cuts A New Deal With Alabama Fund ). RSA’s CEO, David Bronner, PLANSPONSOR’s 2002 Plan Sponsor of the Year (See Maverick ) and the fund’s general counsel are on the slate, according to a Wall Street Journal report.
Also included in RSA’s board member group are four additional outsiders and two airline veterans: Hans Mirka, a former executive of American Airlines and Rono Dutta the former president of United Airlines.
Officials of US Airways’ four largest unions were designated to fill the remaining four board seats. Unionized workers and management employees together will own 38% of the reorganized airline.
US Airways’ unsecured creditors already have voted on the plan of reorganization and results should be filed soon with the judge. Creditors representing at least two-thirds of the claims, in dollar value, must approve the plan before the judge can confirm it. These creditors are expected to recover two cents on the dollar.
If the plan is approved at the hearing, US Airways could emerge from Chapter 11 following a 10-day appeal period. That would trigger the cancellation of its existing stock and the issuance of 51 million new shares of Class A common and five million Class B common shares. The current 12-member board would step down, including Stephen Wolf, the former CEO, who is nonexecutive chairman.
Under the proposed terms of the reorganization, RSA would receive 19.7 million shares, as well as the entire issue of new preferred shares. That will give the RSA 72% voting control, due to the combination of common and preferred holdings. The remaining stock will be divided as follows:
- 19.3% – members of the Air Line Pilots Association
- 10.5% – unsecured creditors
- 10.8% – other employees
- 10.0% – the Air Transportation Stabilization Board (which will be giving $1 billion in loan guarantees)
- 7.8% – management
- 5.0% – General Electric
US Bankruptcy Judge Stephen Mitchell ruled that US Airways could terminate its pilots’ pension plan, but acknowledged it was a “disheartening option” to help save the bankrupt carrier. US Airways says it cannot afford the pilots’ retirement plan, which currently carries a $1.6-billion pension liability, and wants to replace it with one that would offer $850 million over seven years. The pension plan covers 3,600 active and 1,100 retired pilots – some of whom could lose up to 75% of their benefits under the proposal. Mitchell also authorized US Airways to implement a defined contribution pension plan on terms to be worked out between the company and Air Line Pilots Association (ALPA).