Airline to Skip Interest Payment on Junk Bonds

Cash-strapped America West Airlines said Monday that it will skip an interest payment due July 1 on its junk bonds.

The move by the Phoenix-based airline followed its decision earlier this month to conserve cash by halting lease payments on its 115 aircraft. America West said that, under the terms of its financing, it cannot continue its bond interest payments if its lease payments are past due.

Analysts have raised concerns that America West is heading toward collapse, but a spokesman for the airline said Monday that “as far as I’m aware, there’s been no contemplation of bankruptcy.”

The spokesman, Michael R. Mitchell, added that the company’s recent financial disclosures would not affect passenger service. America West flies to 55 destinations, including all of the major Southern California airports.

Along with other airlines, 8-year-old America West has been hurt by higher fuel prices and recession. It lost $49.9 million on revenue of $353 million in the first quarter of this year, after losing $74.7 million on revenue of $1.32 billion last year.

In an apparent effort to keep its finances from unraveling, America West said in a news release that it is negotiating “certain long-term financings” that could enable it to resume its lease and bond interest payments. The statement said the company is “hopeful” that negotiations will be completed before a 30-day grace period on its bonds expires.

America West’s announcement came after the stock market closed. Its shares closed in over-the-counter trading at $3.875, off 37.5 cents.