US Airways, the sixth biggest airline in the United States, has filed for bankruptcy protection. Under the so-called Chapter 11 procedure, the company will continue to operate while it attempts to restructure its business and return to financial health, estimated to be the first quarter of 2003.

Last month US Airways pilots agreed to pay cuts amounting to $465m a year, in an effort to keep the company afloat and the company is also attempting to save $1.3bn in annual expenses from labour, suppliers, lenders and creditors.

All of the US airlines have experienced a downturn in air travel since 9-11, but this is the first carrier to file for bankruptcy. Part of the reason is that whilst US Airways did not lose any planes on 11 September, its main hub, Reagan National Airport, near Washington DC, was shut down for three weeks and reopened with only a limited schedule.

United Airlines, the second-ranking US carrier, has warned it may follow rival US Airways in filing for bankruptcy protection. They say that unless it succeeds in cutting its costs, it will also be forced to file for Chapter 11 bankruptcy protection from creditors. Interestingly, UA is 55% owned by employees. The firm has given itself 30 days to conclude talks with staff on rebuilding the carrier around a new business plan. Watch this space!

Blaming the problem on a slump in passengers, Chairman and Chief Executive Jack Creighton said: “The world has changed, revenue isn't coming back the way the industry expected. Demand isn't returning, fares remain low, and the industry is grappling with how to respond.”