Local News

Judge Rules In Favor Of Creditors In Midway Airlines Case

Posted August 5, 2002 5:39 a.m. EDT

— A bankruptcy court judge ruled Monday in favor of a unsecured creditor group in the Midway Airlines case, but the decision may be beneficial to the airline company.

Officials with Midway Airlines were attempting to sell millions of dollars in spare 737 parts, but they had to get permission from creditors, including Wexford Capital, which loaned Midway millions less than a year ago. Midway later defaulted on that loan, and the creditors' group did not want Midway to sell its parts.

In addition, the bankruptcy administrator had asked the judge to move the bankruptcy from Chapter 11 to Chapter 7, which would mean putting Midway out of business and liquidating all its assets. That agreement was worked out in court and will not happen.

Midway ceased operations July 17, putting about 400 employees out of work and stranding thousands of people holding Midway tickets.

If everything goes Midway's way, the company will fly regional jets as it did a couple of years ago, but under the name of US Airways Express. However, the plan is contingent on several things.

Midway has to lease 18 airplanes, which is not easy for a bankrupt company. The airline must reach agreements with its pilots' and flight attendants' unions. Midway Airlines' flight attendants reached a tentative contract agreement late Monday afternoon.

Midway must also get $5 million in financing. US Airways has already committed $3.5 million of that, secured by Midway's gates at New York's LaGuardia and Washington, D.C.'s Reagan airports.

Midway officials are due to appear in court again on Tuesday.