Based on those preliminary agreements, US Airways says that the Retirement Systems of Alabama (RSA) will invest $240 million in the airline upon its emergence from bankruptcy, and will hold the lead investor position with a 36.6% stake and receive 8 seats on a newly reconstituted 15-member Board of directors.
The Alabama pension system 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, according to the New York Times.
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
Of the remaining 7 board seats, four will be representatives of US Airways union groups (the Air Line Pilots Association, the International Association of Machinists, the Association of Flight Attendants/Transport Workers Union, and the Communications Workers of America), CEO David Siegel will have a seat, as well as two independent directors nominated by the company in consultation with the Committee of Unsecured Creditors.
The International Association of Machinists and the Association of Flight Attendants were the final two employee groups to agree to give US Airways additional cuts in pay and benefits, on top of an initial round of $850 million in concessions in the fall. The machinists originally refused to give more in concessions (see US Airways Seeks Benefit Cuts ), while the flight attendants’ union had said it would agree to more cutbacks only after other unions at US Airways had done so.
The machinists’ union will vote on the proposed cuts in early January, while the flight attendants’ union will reportedly vote on the package by January 10.
David Bronner, chief executive of the Retirement Systems of Alabama (RSA), which is serving as the primary lender to the airline, had pushed for additional concessions – threatening to withdraw the debtor-in-possession financing extended to US Airways and seek liquidation if the unions did not agree to further concessions (see Bronner Looks To Sweeten US Airways Deal ).
The RSA made a $240 million bid in September for the airline, in exchange for a 37.5% stake in the airline after it emerged from bankruptcy (see Alabama Fund Makes a Bid for US Airways ). Earlier this month, US Airways sweetened the deal with the RSA, awarding the fund two more board seats than it had initially secured, and giving it a majority block of the 13 seats on US Airways’ board of directors (see USAirways Cuts A New Deal With Alabama Fund ).
Last week the pilots’ union agreed to its share of the new round of concessions, along with tentative agreements with the Communications Workers of America, representing gate agents and customer service representatives, and the Transport Workers Union, representing flight controllers.
US Airways also said it plans to explore options to resolve a pension funding liability estimated at $3.1 billion over the next seven years.
The airline said it had asked the Transportation Department to allocate six slots at Reagan National Airport in Washington so that it could begin regional jet service from there to three new cities: Pensacola, Florida, Savannah, Georgia, and – Mobile, Alabama. RSA’s Bronner had said that one of the fund’s goals in the US Airways investment was to bring more business to the state.
The bankruptcy court is due to consider the plan on January 16.
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