US Airways CEO: Likely to request fed loan guarantees

Airline currently has $561 million in cash

WASHINGTON (CNN) -- US Airways, in deep financial trouble, could become the first major airline to ask for federal loan guarantees.

In announcing the company's $269 million first-quarter loss, US Airways' new CEO, David Siegel, said, "It is likely US Airways will file an application with the federal Air Transportation Stabilization Board for a government-guaranteed loan" sometime before the June 28 deadline.

US Airways is the nation's seventh-largest air carrier. Like most other airlines, it has been hurt by a drop in travel, especially business travel, after the September 11 hijackings. There's also been increased competition from low-cost airlines and regional jets. Siegel said the airline will restructure. A spokesman said details on the restructuring will be announced within 30 days.

US Airways said it has $561 million cash on hand.

'A game of chicken'

MORE STORIES US Airways is one of the American airlines reporting first-quarter earnings.  CNNMoney.com has full industry details.

Airline analyst Darryl Jenkins, director of the Aviation Institute at George Washington University, said he expects US Airways to apply for the loan guarantees, a move he said will open the floodgates.

"The moment they do everybody else does," he said. "Because one airline will have an advantage over the others in terms of cheap financing. Everyone was kind of playing a game of chicken to see who was first."

One reason more airlines haven't applied, Jenkins said, is that they were made cautious by America West's experience last December.

That airline -- a smaller player in the industry -- received the government loan guarantees. But the Air Transportation Stabilization Board insisted on receiving "warrants" for one-third of America West's stock. Warrants are options to purchase a stock at a certain price. Such a move is not unprecedented. The United States government did the same thing with Lockheed in the 1970s and Chrysler in the 1980s.

Vanguard Airlines, Frontier Flying Service and Evergreen International Airlines have applied for the government guarantees but they haven't been approved yet.

After September 11, Congress authorized $5 billion in loans and $10 billion in loan guarantees to help shore up the ailing airlines.