US Airways Gets OK to Emerge From Ch. 11

ALEXANDRIA, Va. - A federal bankruptcy judge approved US Airways Group Inc.'s reorganization plan Friday, clearing the airline to emerge from its second Chapter 11 filing in three years and complete a merger with America West Holdings Corp.

Judge Stephen Mitchell confirmed the plan during a hearing in Alexandria, Va., after the airline resolved the last objections from creditors and the federal pension insurer. The combined carrier will keep the US Airways name and become the nation's fifth-largest airline.

"Today we start the real work," said America West chief executive Doug Parker, who will run the merged airline from its new headquarters in Tempe, Ariz. "This merger gives US Airways a national reach it could never have achieved on its own."

US Airways filed for bankruptcy protection in September 2004 for the second time since 2002, hobbled by high labor costs, brutal fare competition from low-cost carriers and record fuel prices.

The restructuring won approval only after the airline extracted more than $1 billion in wage and benefit concessions from its unions, terminated its pilots' pension plan, and lined up new investors to replace the federal loan guarantee that had kept it aloft.

America West shareholders will control a majority of the combined company, but the airline will operate under the better-known US Airways brand and keep its East Coast shuttle and its hubs in Charlotte, Philadelphia and Phoenix.

The deal closes as fuel prices near $2 a gallon for jet fuel are squeezing every major carrier. On Wednesday, Delta Air Lines and Northwest Airlines — the industry's third- and fourth-largest carriers — both filed for bankruptcy protection on the same day.

Airline analysts called Friday's ruling a milestone but warned the merged carrier faces the same storm battering the rest of the industry. "Getting out of bankruptcy is the easy part," one analyst said. "Surviving $60 oil is the hard part."

US Airways shares will be canceled under the plan, with creditors and new investors receiving stock in the combined company. The airline employs about 34,000 people.