US Airways on the rack

US Airways has said agents will be able to continue to book in confidence despite entering Chapter 11 bankruptcy protection for the second time in as many years.

The airline has struck a deal with Barclays Bank and insurance company IPP to ensure agents will be financially protected if it eventually goes bust.

It has placed an undisclosed amount of cash in the bank which can be accessed by IPP if the airline collapses, to cover agents’ losses.

The carrier was hit by a drop in sales when it last applied for Chapter 11 in 2002 because agents and consolidators’ insurers refused to provide cover for the airline (Travel Weekly August 19 2002).

Travel 4, Flightbookers, Trailfinders and Unijet all suspended bookings due to a lack of insurance cover.

Under the new arrangement, agents have to be nominated by the airline and allocated a specified level of business to be covered by the scheme.

So far 50 of the carrier’s top sellers have been nominated but only half of the fund has been allocated.

A US Airways spokeswoman said: “Lessons were definitely learnt last time and we have entered Chapter 11 much better prepared than in 2002. Other airlines learnt from our experience too.”

IPP has operated a similar scheme with United Airlines since it went into Chapter 11 last year.

US Airways made history by becoming the first company to enter bankruptcy protection twice in two years when it filed on Sunday, a move that has triggered the largest-ever default on a federal loan guarantee.

The Air Transport Stabilisation Board handed the carrier $900 million to help it emerge from Chapter 11 in April 2003.

The carrier’s move highlights a difficult time for US airlines. It could be followed by Delta into Chapter 11, while United’s emergence from bankruptcy protection has been delayed indefinitely.