Wednesday, January 5, 2005

Ailing airline's survival in doubt

Baggage fiasco at US Airways leaves customers and agents using other carriers.

By Elizabeth Souder / Dow Jones Newswires

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US Airways Group Inc.'s problems during the holidays with mishandled baggage are prompting travel agents and customers to book trips with other airlines.

Travel agents said they're concerned that operations disruptions or even liquidation will lead to more canceled trips as the bankrupt airline continues contract negotiations with the baggage-handlers union and faces $260 million in airplane payments in the next two months.

"Their future rests in the hands of thousands of travel agents," said William Rochelle, an airline bankruptcy expert with Fulbright.

Rochelle and other travel experts said the trouble during the holiday weekend prompted a greater degree of concern among customers than either of the bankruptcy filings of the past few years. US Airways continues to operate under Chapter 11 protection.

"I think that what's going on now is very dangerous for US Airways," said Standard & Poor's analyst Jim Corridore. "I frankly have been surprised that they've been able to survive this long." Corridore doesn't own any airline shares.

The airline mishandled thousands of suitcases in Philadelphia and canceled hundreds of flights during the holiday weekend. Company officials have said bad weather and the higher-than-usual number of employees calling in sick caused the trouble. Union officials said poor management was to blame, and the sick calls weren't part of a concerted job action. Still, the sick calls came despite US Airways' offer of incentives to employees who worked all of their scheduled shifts during the holidays.

Amy Kudway, a spokeswoman for the airline, said the airline is working with corporate customers and travel agents.