<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
USAir Group, Inc.
(Commission file number: 1-8444)
and
USAir, Inc.
(Commission file number: 1-8442)
(Exact names of registrants as specified in their charters)
Delaware USAir Group, Inc. 54-1194634
(State of incorporation USAir, Inc. 53-0218143
of both registrants) Employer Identification Numbers)
USAir Group, Inc.
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 418-5306
(Registrant's telephone number, including area code)
USAir, Inc.
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 418-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrants were required to file such reports), and (2) have
been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
At April 30, 1996, there were outstanding approximately 63,828,000
shares of common stock of USAir Group, Inc. and 1,000 shares of common stock
of USAir, Inc.
The registrant USAir, Inc. meets the conditions set forth in General
Instructions H(1)(a) and (b) of Form 10-Q and is therefore participating in
the filing of this form with the reduced disclosure format.
<PAGE>
USAir Group, Inc.
and
USAir, Inc.
Quarterly Report on Form 10-Q
Table of Contents
Part I. Financial Information Page
Item 1A. Financial Statements - USAir Group, Inc.
Condensed Consolidated Statements of Operations
- Three Months Ended March 31, 1996 and 1995 1
Condensed Consolidated Balance Sheets
- March 31, 1996 and December 31, 1995 2
Condensed Consolidated Statements of Cash Flows
- Three Months Ended March 31, 1996 and 1995 3
Note to Condensed Consolidated Financial Statements 4
Item 1B. Financial Statements - USAir, Inc.
Condensed Consolidated Statements of Operations
- Three Months Ended March 31, 1996 and 1995 5
Condensed Consolidated Balance Sheets
- March 31, 1996 and December 31, 1995 6
Condensed Consolidated Statements of Cash Flows
- Three Months Ended March 31, 1996 and 1995 7
Note to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Part II. Other Information
Item 1. Legal Proceedings 15
Item 3. Defaults Upon Senior Securities 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 22
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<TABLE>
USAir Group, Inc.
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1996 and 1995 (unaudited) (in thousands except per share amounts)
=======================================================================================================
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Operating Revenues
Passenger transportation $1,677,541 $1,586,384
Cargo and freight 38,177 40,871
Other 152,704 136,083
--------- ---------
Total Operating Revenues 1,868,422 1,763,338
Operating Expenses
Personnel costs 750,206 723,998
Aviation fuel 164,058 162,217
Commissions 132,305 142,672
Aircraft rent 113,191 109,701
Other rent and landing fees 100,350 105,677
Aircraft maintenance 99,973 87,661
Depreciation and amortization 81,526 87,714
Other, net 416,021 385,694
--------- ---------
Total Operating Expenses 1,857,630 1,805,334
--------- ---------
Operating Income (Loss) 10,792 (41,996)
Other Income (Expense)
Interest income 13,519 7,259
Interest expense (67,793) (76,739)
Interest capitalized 1,449 4,165
Other, net 10,786 10,428
--------- ---------
Other Income (Expense), Net (42,039) (54,887)
--------- ---------
Income (Loss) Before Taxes (31,247) (96,883)
Income Tax Provision (Credit) 1,046 -
--------- ---------
Net Income (Loss) (32,293) (96,883)
Preferred Dividend Requirement (22,274) (20,583)
--------- ---------
Net Income (Loss) Applicable to Common Stockholders $ (54,567) $ (117,466)
========= =========
Income (Loss) per Common Share $ (0.86) $ (1.91)
========= =========
Shares Used for Computation (000) 63,618 61,627
See accompanying Note to Condensed Consolidated Financial Statements.
1
<PAGE>
USAir Group, Inc.
Condensed Consolidated Balance Sheets
March 31, 1996 (unaudited) and December 31, 1995 (dollars in thousands except per share amounts)
=======================================================================================================
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
--------- ---------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 785,939 $ 881,854
Short-term investments 45,487 19,831
Receivables, net 443,369 322,122
Materials and supplies, net 243,700 248,144
Prepaid expenses and other 133,331 111,131
--------- ---------
Total current assets 1,651,826 1,583,082
Property and Equipment
Flight equipment 5,229,665 5,251,742
Ground property and equipment 1,077,478 1,073,720
Less accumulated depreciation and amortization (2,340,793) (2,301,059)
--------- ---------
3,966,350 4,024,403
Purchase deposits 24,361 17,026
--------- ---------
Property and equipment, net 3,990,711 4,041,429
Other Assets
Goodwill, net 506,550 510,562
Other intangibles, net 313,039 312,786
Other assets, net 527,201 507,149
--------- ---------
Total other assets 1,346,790 1,330,497
--------- ---------
$6,989,327 $6,955,008
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 88,187 $ 80,721
Accounts payable 300,691 325,330
Traffic balances payable and unused tickets 834,008 607,170
Accrued expenses 1,336,991 1,471,475
--------- ---------
Total current liabilities 2,559,877 2,484,696
Long-term Debt, Net of Current Maturities 2,699,231 2,717,085
Deferred Credits and Other Liabilities
Deferred gains, net 380,167 386,947
Postretirement benefits other than pensions, non-current 1,034,426 1,015,623
Non-current employee benefit liabilities and other 420,257 427,726
--------- ---------
Total deferred credits and other liabilities 1,834,850 1,830,296
Commitments and Contingencies
Redeemable Cumulative Convertible Preferred Stock
Series A, 358,000 shares issued, no par value 358,000 358,000
(redemption value of $422,286 at March 31,1996)
Series F, 30,000 shares issued, no par value 300,000 300,000
(redemption value of $334,853 at March 31,1996)
Series T, 10,000 shares issued, no par value 100,719 100,719
(redemption value of $111,240 at March 31,1996)
Stockholders' Equity (Deficit)
Series B cumulative convertible preferred stock, no par value, 213,153 213,153
4,263,000 depositary shares issued (liquidation preference of
$243,461 at March 31,1996)
Common stock, par value $1 per share, authorized 150,000,000 63,782 63,449
shares, issued and outstanding 63,782,000 and
63,449,000 shares, respectively
Paid-in capital 1,367,929 1,362,756
Retained earnings (deficit) (2,330,504) (2,298,211)
Deferred compensation (99,622) (98,847)
Adjustment for minimum pension liability (78,088) (78,088)
--------- ---------
Total stockholders' equity (deficit) (863,350) (835,788)
--------- ---------
$6,989,327 $6,955,008
========= =========
See accompanying Note to Condensed Consolidated Financial Statements.
2
<PAGE>
USAir Group, Inc.
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 (unaudited) (in thousands)
=======================================================================================================
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash and cash equivalents beginning of period $ 881,854 $ 429,538
Cash flows from operating activities
Net income (loss) (32,293) (96,883)
Adjustments to reconcile net income (loss) to cash provided by
(used for) operating activities
Depreciation and amortization 81,526 87,714
Loss (gain) on disposition of property 3,454 (1,558)
Amortization of deferred gains and credits (6,915) (6,905)
Other 1,412 (2,173)
Changes in certain assets and liabilities
Decrease (increase) in receivables (121,247) (119,932)
Decrease (increase) in materials, supplies, prepaid expenses
and intangible pension assets (15,481) (11,879)
Increase (decrease) in traffic balances payable and unused
tickets 226,838 149,971
Increase (decrease) in accounts payable and accrued expenses (165,923) (18,198)
Increase (decrease) in postretirement benefits other than
pensions, non-current 18,803 17,174
------- -------
Net cash provided by (used for) operating activities (9,826) (2,669)
Cash flows from investing activities
Aircraft acquisitions and purchase deposits, net (3,385) (20,531)
Additions to other property (29,693) (18,327)
Proceeds from disposition of property 3,555 36,928
Change in short-term investments (25,695) -
Change in restricted cash and investments 985 2,565
Other (11,903) 177
------- -------
Net cash provided by (used for) investing activities (66,136) 812
Cash flows from financing activities
Issuance of debt 103,002 -
Reduction of debt (123,551) (16,556)
Issuance of Common Stock 596 5,509
------- -------
Net cash provided by (used for) financing activities (19,953) (11,047)
------- -------
Net increase (decrease) in cash and cash equivalents (95,915) (12,904)
------- -------
Cash and cash equivalents end of period $ 785,939 $ 416,634
======= =======
Noncash investing and financing activities
Issuance of debt - refinancing of debt secured by aircraft $ 159,998 $ -
======= =======
Reduction of debt - refinancing of debt secured by aircraft $ 154,422 $ -
======= =======
Issuance of debt - aircraft acquisitions $ 4,585 $ 101,215
======= =======
Underwriter's fees - refinancing of debt secured by aircraft $ 2,488 $ -
======= =======
See accompanying Note to Condensed Consolidated Financial Statements.
3
</TABLE>
<PAGE>
USAir Group, Inc.
Note to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying Condensed Consolidated Financial Statements include the
accounts of USAir Group, Inc. ("USAir Group" or the "Company") and its
wholly-owned subsidiaries USAir, Inc. ("USAir"), Piedmont Airlines, Inc., PSA
Airlines, Inc. (formerly Jetstream International Airlines, Inc.), Allegheny
Airlines, Inc. (formerly Pennsylvania Commuter Airlines, Inc.), USAir Leasing
and Services, Inc., USAir Fuel Corporation, Material Services Company, Inc.
and The OR Group, Inc. (the "OR Group").
The OR Group was incorporated in February 1996 and is a wholly-owned
subsidiary of USAir Group. OR Group provides resource allocation consulting
services and decision-making support systems to USAir, which is currently OR
Group's only customer.
Management believes that all adjustments necessary for a fair statement
of results have been included in the Condensed Consolidated Financial
Statements for the interim periods presented, which are unaudited. All
significant intercompany accounts and transactions have been eliminated. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain 1995 amounts have been reclassified to conform with 1996
classifications.
These interim period Condensed Consolidated Financial Statements should
be read in conjunction with the Consolidated Financial Statements contained
in the Company's Annual Report on Form 10-K for the year ended December 31,
1995.
(this space intentionally left blank)
4
<PAGE>
<TABLE>
USAir, Inc.
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1996 and 1995 (unaudited) (in thousands)
=======================================================================================================
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Operating Revenues
Passenger transportation $ 1,551,579 $ 1,486,590
Cargo and freight 37,308 40,071
Other 150,728 137,829
--------- ---------
Total Operating Revenues 1,739,615 1,664,490
Operating Expenses
Personnel costs 713,751 693,564
Aviation fuel 155,795 155,637
Commissions 123,535 134,924
Aircraft rent 102,415 100,831
Other rent and landing fees 96,357 102,004
Aircraft maintenance 86,539 74,927
Depreciation and amortization 77,738 83,659
Other, net 392,395 369,248
--------- ---------
Total Operating Expenses 1,748,525 1,714,794
--------- ---------
Operating Income (Loss) (8,910) (50,304)
Other Income (Expense)
Interest income 13,410 7,154
Interest expense (71,447) (73,105)
Interest capitalized 1,449 4,165
Other, net 10,860 10,266
--------- ---------
Other Income (Expense), Net (45,728) (51,520)
--------- ---------
Income (Loss) Before Taxes (54,638) (101,824)
Income Tax Provision (Credit) 292 -
--------- ---------
Net Income (Loss) $ (54,930) $ (101,824)
========= =========
See accompanying Note to Condensed Consolidated Financial Statements.
5
<PAGE>
USAir, Inc.
Condensed Consolidated Balance Sheets
March 31, 1996 (unaudited) and December 31, 1995 (dollars in thousands except per share amount)
=======================================================================================================
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 782,712 $ 879,613
Short-term investments 45,487 19,831
Receivables, net 444,680 321,755
Materials and supplies, net 213,359 222,245
Prepaid expenses and other 120,647 97,922
--------- ---------
Total current assets 1,606,885 1,541,366
Property and Equipment
Flight equipment 4,998,231 5,021,520
Ground property and equipment 1,056,173 1,052,706
Less accumulated depreciation and amortization (2,259,371) (2,222,814)
--------- ---------
3,795,033 3,851,412
Purchase deposits 24,361 17,026
--------- ---------
Property and equipment, net 3,819,394 3,868,438
Other Assets
Goodwill, net 506,550 510,562
Other intangibles, net 312,792 312,539
Other assets, net 611,833 590,622
--------- ---------
Total other assets 1,431,175 1,413,723
--------- ---------
$ 6,857,454 $ 6,823,527
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Current maturities of long-term debt $ 83,874 $ 77,496
Accounts payable 301,061 325,079
Payable to parent company 176,122 100,344
Traffic balances payable and unused tickets 875,442 638,019
Accrued expenses 1,308,529 1,435,194
--------- ---------
Total current liabilities 2,745,028 2,576,132
Long-term Debt, Net of Current Maturities
Long-term debt 2,657,587 2,674,376
Note payable - parent company - 67,556
--------- ---------
Total long-term debt, net of current maturities 2,657,587 2,741,932
Deferred Credits and Other Liabilities
Deferred gains, net 376,392 382,995
Postretirement benefits other than pensions, non-current 1,034,176 1,015,373
Non-current employee benefit liabilities and other 410,374 418,268
--------- ---------
Total deferred credits and other liabilities 1,820,942 1,816,636
Stockholder's Equity (Deficit)
Common stock, par value $1 per share, authorized 1,000 shares,
issued and outstanding 1,000 shares 1 1
Paid-in capital 2,416,131 2,416,131
Retained earnings (deficit) (2,704,240) (2,649,310)
Adjustment for minimum pension liability (77,995) (77,995)
--------- ---------
Total stockholder's equity (deficit) (366,103) (311,173)
--------- ---------
$ 6,857,454 $ 6,823,527
========= =========
See accompanying Note to Condensed Consolidated Financial Statements.
6
<PAGE>
USAir, Inc.
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 (unaudited) (in thousands)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash and cash equivalents beginning of period $ 879,613 $ 428,925
Cash flows from operating activities
Net income (loss) (54,930) (101,824)
Adjustments to reconcile net income (loss) to cash provided by
(used for) operating activities
Depreciation and amortization 77,738 83,659
Loss (gain) on disposition of property 3,466 (1,329)
Amortization of deferred gains and credits (6,603) (6,603)
Other (3,448) (1,876)
Changes in certain assets and liabilities
Decrease (increase) in receivables (122,925) (119,762)
Decrease (increase) in materials, supplies, prepaid
expenses and intangible pension assets (11,564) (13,675)
Increase (decrease) in traffic balances payable
and unused tickets 237,423 161,493
Increase (decrease) in accounts payable and accrued
expenses (150,880) (16,575)
Increase (decrease) in postretirement benefits
other than pensions, non-current 18,803 17,174
------- -------
Net cash provided by (used for) operating activities (12,920) 682
Cash flows from investing activities
Aircraft acquisitions and purchase deposits, net (3,385) (20,531)
Additions to other property (27,979) (17,337)
Proceeds from disposition of property 3,483 36,617
Change in short-term investments (25,695) -
Change in restricted cash and investments 985 2,565
Other (11,903) 177
------- -------
Net cash provided by (used for) investing activities (64,494) 1,491
Cash flows from financing activities
Issuance of debt 103,002 -
Reduction of debt (122,489) (15,240)
------- -------
Net cash provided by (used for) financing activities (19,487) (15,240)
------- -------
Net increase (decrease) in cash and cash equivalents (96,901) (13,067)
------- -------
Cash and cash equivalents end of period $ 782,712 $ 415,858
======= =======
Noncash investing and financing activities
Issuance of debt - refinancing of debt secured by aircraft $ 159,998 $ -
======= =======
Reduction of debt - refinancing of debt secured by aircraft $ 154,422 $ -
======= =======
Reduction of parent company debt - aircraft acquisitions $ 68,641 $ -
======= =======
Issuance of debt - aircraft acquisitions $ 4,585 $ 101,215
======= =======
Underwriter's fees - refinancing of debt secured by aircraft $ 2,488 $ -
======= =======
See accompanying Note to Condensed Consolidated Financial Statements.
7
</TABLE>
<PAGE>
USAir, Inc.
Note to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying Condensed Consolidated Financial Statements include the
accounts of USAir, Inc. ("USAir") and its wholly-owned subsidiary USAM Corp.
USAir is a wholly-owned subsidiary of USAir Group, Inc.
Management believes that all adjustments necessary for a fair statement
of results have been included in the Condensed Consolidated Financial
Statements for the interim periods presented, which are unaudited. All
significant intercompany accounts and transactions have been eliminated. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain 1995 amounts have been reclassified to conform with 1996
classifications.
These interim period Condensed Consolidated Financial Statements should
be read in conjunction with the Consolidated Financial Statements contained
in USAir's Annual Report on Form 10-K for the year ended December 31, 1995.
(this space intentionally left blank)
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion relates to the financial condition and results
of operations of USAir Group, Inc. ("USAir Group" or the "Company"). USAir,
Inc. ("USAir") is the Company's principal subsidiary and accounted for
approximately 92% of the Company's operating revenues for the first quarter
of 1996. Except where noted, the following discussion is based primarily upon
USAir's financial condition, results of operations and future prospects.
The Company recognized a net loss of $32.3 million for the first quarter
of 1996. USAir, whose results include USAir's wholly-owned subsidiary USAM
Corp., recorded a net loss of $54.9 million for the same period. The Company
estimates that severe winter weather within the Eastern United States and the
partial Federal Government shutdown adversely affected first quarter 1996
revenues by approximately $55 million.
The factors that contributed to the Company's 1995 results continued
during the first quarter of 1996. The Company recorded net income of $119.3
million for full-year 1995 - its first profitable year since 1988. The
domestic economic climate and capacity and pricing trends in markets served
by the Company's airline subsidiaries have remained relatively stable.
Despite USAir's cost reduction efforts, which also contributed to the
Company's improved financial performance during 1995, USAir continues to be
the highest-cost major air carrier in the United States. USAir's high cost
structure relative to its major competitors results in USAir being
particularly susceptible to adverse changes in general economic and market
conditions. However, barring unforeseen or unusual events, the Company
currently believes that it will realize pre-tax income for full-year 1996.
Stephen M. Wolf, Chairman of the Board of Directors and Chief Executive
Officer of both the Company and USAir, and Rakesh Gangwal, President of both
companies, recently held a series of employee meetings where they presented
their assessment of USAir's competitive position. The focal point of these
meetings was to communicate senior management's belief that USAir must lower
its personnel costs, increase employee productivity, increase the quality of
USAir's service and customer satisfaction and grow in size to ensure long-
term viability. The Company remains committed to reducing USAir's personnel
costs and improving employee productivity. With regards to the size of
USAir, the Company believes that internal growth is preferable, but has not
excluded other alternatives.
Low cost, low fare air carriers continued to expand into markets served
by the Company's airline subsidiaries during the first quarter of 1996.
Although ValuJet Airlines, Inc. ("ValuJet") announced in late March 1996 that
it would temporarily slow its growth rate, it added service at several
locations during the first quarter of 1996 where the Company's airline
subsidiaries have significant operations. A majority of ValuJet's operations
are within the Eastern United States, an area where USAir's departures and
capacity (as measured by available seat miles or "ASMs") currently represent
approximately 64% and 44%, respectively, of its system totals. In addition,
Delta Airlines, Inc. ("Delta") recently announced that its pilots' union has
ratified a new contract that allows for the creation of a low cost, low fare
operation in mainly short-haul markets within the Eastern United States.
Besides the continued competitive threat posed by the growth of low cost, low
fare air carriers in markets served by the Company's airline subsidiaries,
the ability of Delta to establish a low cost, low
9
<PAGE>
fare product further emphasizes the need for USAir to lower its cost
structure in order to be competitive and ensure long-term viability.
USAir's contract with the International Association of Machinists and
Aerospace Workers ("IAM") became open for negotiations in October of 1995.
Talks between USAir and the IAM continued during the first quarter of 1996.
USAir's contract with the Air Line Pilots Association ("ALPA") became open
for negotiations on April 30, 1996 and collective bargaining talks have
begun. USAir cannot predict the outcome of these negotiations at this time
or if it will be able to secure meaningful wage and benefit concessions and
productivity improvements from its unionized employee groups.
In April 1996, USAir introduced electronic ticketing or "ticketless
travel" as an option for customers traveling within the United States on
USAir or USAir Express. Electronic ticketing enables a customer to book a
flight through USAir's reservations system and receive a confirmation number
instead of a paper ticket. The Company believes that electronic ticketing
enhances customer convenience and will help reduce USAir's distribution
costs. Distribution costs currently account for approximately $1 billion of
the Company's annual operating expenses. Initial customer response to
electronic ticketing has been favorable. USAir is working to expand
electronic ticketing to international service and USAir Shuttle flights.
USAir is also working with the major computer reservation systems to make
electronic ticketing available to travel agencies.
Pursuant to the Investment Agreement between British Airways and USAir
Group, British Airways has the right to maintain its proportionate ownership
of USAir Group's securities under certain circumstances by purchasing
additional shares of certain series. British Airways has advised USAir Group
that it would not exercise the right (triggered by issuances of Common Stock
of USAir Group pursuant to certain USAir Group benefit plans during the nine
months ended March 31, 1996) to buy additional shares of Series T Cumulative
Convertible Exchangeable Senior Preferred Stock.
Results of Operations
=====================
USAir Group recorded a net loss of $32.3 million for the first quarter
of 1996, an improvement of $64.6 million (or 66.7%) as compared to the first
quarter of 1995. After provision for preferred stock dividends (see Part II,
Item 3, of this report for additional information regarding the Company's
deferral of preferred stock dividends), the Company lost $54.6 million during
the first quarter of 1996, or $0.86 per common share. USAir's $54.9 million
net loss for the first quarter of 1996 was an improvement of $46.9 million
(or 46.1%) over its $101.8 million loss for the first quarter of 1995.
During the first quarter of 1996, USAir reduced capacity (ASMs) by 11.4%
versus first quarter of 1995. For the same comparative periods, USAir boarded
6.0% fewer scheduled service revenue passengers and experienced a 4.1%
decrease in scheduled service revenue passenger miles (scheduled service
revenue passengers multiplied by the number of miles that they are flown or
"RPMs"), but realized an 8.8% increase in yield (revenue per RPM) and a 4.9
percentage point increase in load factor (percentage of seats occupied by
revenue passengers). The capacity decrease reflects USAir's schedule
reductions during mid-1995 and the effects of the harsh weather experienced
in the Eastern United States during the first quarter of 1996. The Company
estimates that approximately 1.5% of the quarter
10
<PAGE>
- -over-quarter capacity decrease is due to weather factors. USAir believes
that it has been able to recapture most of the revenues from flights
eliminated as the result of its schedule reductions. USAir's capacity (ASMs)
for full-year 1996 is expected to be 2.5% less than for full-year 1995.
The increase in yield for the first quarter of 1996 as compared to the
first quarter of 1995 was primarily driven by capacity and pricing factors
that prevailed during the first quarter of 1995, as well as select fare
increases that were put in place by USAir during the first quarter of 1996.
During the first quarter of 1995, USAir was facing considerable competitive
pressure from the low fare, "no frills" product, "Continental Lite," offered
by Continental Airlines, Inc. ("Continental"). In response to Continental
Lite, USAir selectively reduced fares in certain markets to maintain market
share. Continental eliminated its Continental Lite operation early in the
second quarter of 1995. USAir estimates that its yield will increase for the
second quarter of 1996 as compared to the second quarter of 1995, but remain
relatively flat or decrease slightly as compared to 1995 results for the
remainder of 1996 due to competitive factors.
USAir's unit cost, or cost per ASM, was 12.81 cents for the first
quarter of 1996, a 15.6% increase versus the first quarter of 1995. This
increase is primarily the result of relatively flat operating expenses
applied over 11.4% less capacity (ASMs). USAir estimates that its unit cost
for full-year 1996 will be approximately 8% higher than for full-year 1995,
reflecting slightly higher operating expenses and less capacity year-over-
year. However, this estimate is dependent on a number of factors that are
generally outside of the Company's control, including, for example, aviation
fuel prices and weather-related factors.
The following section provides an overview of changes in certain
components of the Company's results of operations for the first quarter of
1996 as compared to the first quarter of 1995. See Exhibit 99 to this Report
for USAir operating and financial statistics.
Operating Revenues
- ------------------
Passenger Transportation - USAir's Passenger Transportation revenues
increased $65.0 million, or 4.4%, with the remainder of the $91.2 million
increase attributable to the Company's regional airline subsidiaries. USAir's
increase is the result of an 8.8% increase in yield partially offset by a
4.1% decrease in scheduled service RPMs. As mentioned above, USAir
selectively increased fares during the first quarter of 1996. Collectively,
both revenue passengers and yield increased for the Company's regional
airline subsidiaries. The Company's regional airline subsidiaries are
operating certain routes formerly flown by USAir using jet aircraft. In
addition to other factors discussed previously, the Company's Passenger
Transportation revenues may have been stimulated by the expiration of the 10%
Federal Transportation Tax on January 1, 1996. USAir and its regional
affiliates stopped collecting this tax from customers when it lapsed. The
Company cannot estimate the dollar impact of the lapse of this tax on its
Passenger Transportation revenues due to the complexity and number of factors
that contribute to the Company's performance in this area.
Other Operating Revenues - Fees received by USAir from USAir Express carriers
(other than the fees USAir receives from the Company's three wholly-owned
regional air carriers, which are eliminated during the consolidation of the
Company's results of operations) increased due to higher passenger
11
<PAGE>
volumes and a higher per-passenger fee structure. In addition, USAir had
increased revenues from USAir Club membership renewals (a special renewal
incentive program was offered during the first quarter of 1996) and
reservation cancellation fees. Revenues received from the wet lease
arrangement with British Airways decreased approximately $6.9 million due to
the phase-out of these arrangements. Increases in this category are largely
offset by increases in the Other Operating Expenses category.
Operating Expenses
- ------------------
Personnel Costs - Interest rate-driven increases in pension and post-
retirement benefits expenses, contractual wage increases that USAir's pilot
and flight attendant employee groups received in January 1996 and wage
increases received by certain non-contract employees effective January 1,
1996, combined to more than offset personnel complement decreases. USAir's
pilots and flight attendants also received contractual wage increases in
January 1995 and July 1995, respectively, and USAir's mechanics received
contractual wage increases in March 1995. USAir had approximately 39,959
full-time equivalent employees on March 31, 1996 versus 41,887 full-time
equivalent employees on March 31, 1995. The Company also recognized expenses
of approximately $10.1 million during the first quarter of 1996 related to
restricted stock grants, sign-on bonuses, severance payments and other
compensation related to recent management changes. The Company expects to
recognize additional expenses related to executive compensation during the
second quarter of 1996. The Company did not recognize expenses related to
profit sharing plans during the first quarter of 1996, but expects to record
such expenses from the second quarter of 1996 through the end of the year,
subject to the Company's profitability and the terms of the profit sharing
plans.
Aviation Fuel - Consumption decreased approximately 33 million gallons, but
was offset by the effects of a 6.55 cent increase in the average cost of
aviation fuel per gallon. USAir experienced even higher aviation fuel prices
during April 1996; however, the Company cannot predict whether or not this
trend will continue. Sustained increases in the price of aviation fuel would
have a materially adverse effect on the Company's results of operations.
Based on current consumption, each one cent increase in USAir's cost of
aviation fuel per gallon translates into an increase of approximately $11
million in USAir's annual aviation fuel expense. See Other Operating Expenses
below related to Federal taxes on aviation fuel.
Commissions - Decreased primarily due to the effects of the revised rate
structure for commissions paid to travel agencies, which went into effect
during February 1995.
Other Rent and Landing Fees - Decreased due mainly to credits received by
USAir from certain airport facilities related to 1995 activity (these
facilities experienced lower operating costs than expected) and an increase
in the sublease of certain facilities to third parties. USAir also
experienced a slight decrease in landing fees expenses quarter-over-quarter
due to capacity reductions.
Aircraft Maintenance - Efficiencies gained from re-engineering efforts in
USAir maintenance areas and the effects of fewer operating aircraft in
USAir's fleet were more than offset by timing factors and an increase in the
rate-per-engine USAir pays to an outside contractor to overhaul certain jet
engines.
12
<PAGE>
Aircraft Rent - Increased due primarily to two leased Boeing 767-200ER
aircraft re-entering USAir's operating fleet during the first quarter of
1996. USAir recognized expenses related to these two aircraft in the Other
Operating Expenses category while they were operated by British Airways (see
also Other Operating Revenues).
Depreciation and Amortization - Decreased due mainly to fewer owned aircraft
in USAir's operating fleet. During 1995, USAir sold 13 owned Boeing 737-300
aircraft and took delivery of 7 new Boeing 757-200 aircraft.
Other Operating Expenses - Increased primarily due to additional Federal
taxes on aviation fuel and increases in insurance, de-icing fluid and
communications-related costs. The Federal Excise Tax on Transportation Fuels,
which USAir and the Company's regional airline subsidiaries became obligated
to pay beginning October 1, 1995, totaled approximately $10 million for the
first quarter of 1996. Expenses related to the wet lease arrangements with
British Airways decreased approximately $6.9 million due to the recent
termination of two of the three wet leases (see also Other Operating Revenues
and Aircraft Rent).
Other Income (Expense)
- ---------------------
Interest Income - Increased due mainly to higher Cash and Cash Equivalents
and Short-Term Investments balances period-over-period.
Interest Expense - Decreased primarily as the result of less long-term debt
outstanding period-over-period. USAir made early debt repayments totaling
approximately $202.1 million during 1995.
Liquidity and Capital Resources
===============================
Net cash used for operations was $9.8 million for the first quarter of
1996. As of March 31, 1996, Cash and Cash Equivalents totaled $785.9 million
and Short-Term Investments totaled $45.5 million. USAir also had $99.0
million deposited in trust accounts to collateralize letters of credit and
worker's compensation policies at quarter-end. These deposits are included in
the Other Asset category on the Company's Condensed Consolidated Balance
Sheets.
The Company is highly leveraged. The Company and USAir require
substantial working capital in order to meet scheduled debt and lease
payments and to finance day-to-day operations. In addition, the Company
currently does not have access to a short-term credit or receivables sale
facilities. However, based on current projections, the Company expects to
satisfy its liquidity requirements for the remainder of 1996 through a
combination of cash on hand and cash flows from operations. USAir has
committed financing for a significant portion of the purchase price for each
of its scheduled 1998 aircraft deliveries. The Company's expectations are
subject to revision; changes in certain factors that are generally outside
the Company's control, such as the general economic environment, intensified
competition from low cost, low fare air carriers or operations and the price
of aviation fuel, could have a materially adverse effect on the Company's
liquidity, financial condition and results of operations.
13
<PAGE>
Investing activities during the first quarter of 1996 included cash
outflows of $33.1 for the acquisition of assets ($3.4 million related to
progress payments for Boeing 757-200 aircraft scheduled for delivery in 1998
and $29.7 million related to the purchase of rotables, hush kits, computer
equipment and various ground support equipment). The Company's Short-Term
Investments increased by $25.7 million during the period and the Other
investing uses of cash category includes $12.2 million related to the
purchase of debt issued by Shuttle, Inc. The net cash used by investing
activities during the first quarter of 1996 was $66.1 million.
Net cash used by financing activities during the first quarter of 1996
was $20.0 million. USAir sold $263.0 million principal amount of Enhanced
Equipment Notes ("Enhanced Notes") during the first quarter of 1996 through a
private placement offering under Securities and Exchange Commission
Regulation 144A. USAir used the proceeds from the offering as part of the
funds necessary to repay in full the indebtedness incurred in connection with
certain 757-200 aircraft delivered to USAir in 1994 and 1995. The transaction
is reflected on the Company's Condensed Consolidated Statements of Cash Flows
as proceeds from the issuance of debt of $103.0 million and a "non-cash"
issuance of debt of $160.0 million. The non-cash component reflects proceeds
that USAir directed to reduce debt and pay underwriter's fees at the time of
the offering. USAir used cash proceeds it received from the offering and
additional funds to make debt repayments of approximately $105.5 million
immediately following the offering. The Enhanced Notes are secured by 9 757-
200 aircraft. In addition to the refinancing transaction, the Company's
subsidiaries made scheduled debt repayments of approximately $18.1 million
during the first quarter of 1996. USAir also incurred new debt of $4.6
million associated with progress payments for Boeing 757-200 aircraft
scheduled for delivery in 1998. The $4.6 million is reflected as non-cash
activity in the Company's Condensed Consolidated Statements of Cash Flows
because USAir incurred the related debt in conjunction with the payment of
the progress payments. As mentioned above, USAir has committed financing for
a significant portion of the purchase price for each of its scheduled 1998
aircraft deliveries.
As of March 31, 1996, USAir Group's ratio of current assets to current
liabilities was 0.65 to 1 and the debt component of USAir Group's
capitalization structure was greater than 100% (and also greater than 100% if
the three series of mandatorily redeemable preferred stock are considered to
be debt) due to a net capital deficiency.
(this space intentionally left blank)
14
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
There are no significant developments in the pending legal proceedings
as previously reported on the Annual Report of USAir Group and USAir on Form
10-K for the year ended December 31, 1995, and no new material legal
proceedings have commenced during the time period covered by this interim
report.
Item 3. Defaults Upon Senior Securities
As of March 31, 1996, the Company believes that it was legally
prohibited from paying dividends on or repurchasing or redeeming its capital
stock due to the provisions of Section 170 of the Delaware General
Corporation Law ("Delaware Law"), which require a company to maintain a
capital surplus in order to pay dividends on or repurchase or redeem its
capital stock. In addition, as of March 31, 1996, the Company does not
believe that it can comply with certain provisions of Delaware Law which
permit a company with a capital deficit to pay dividends on its capital stock
under special circumstances.
The Company deferred quarterly dividend payments on all outstanding
series of its preferred stock beginning with payments due September 30, 1994.
The outstanding issues of preferred stock are the: 9 1/4 % Series A
Cumulative Convertible Redeemable Preferred Stock ("Series A Preferred
Stock") owned by affiliates of Berkshire Hathaway, Inc.; Series F Cumulative
Convertible Senior Preferred Stock ("Series F Preferred Stock") and Series T
Cumulative Convertible Exchangeable Senior Preferred Stock ("Series T
Preferred Stock") both owned by an affiliate of British Airways Plc; and the
Series B Cumulative Convertible Preferred Stock ("Series B Preferred Stock")
which is publicly held.
The redemption value of the Series A Preferred Stock at March 31, 1996
was $422.3 million (face amount of $358.0 million plus deferred dividends and
interest thereon of $64.3 million). The redemption values of the Series F and
Series T Preferred Stock at March 31, 1996 were $334.9 million (face amount
of $300.0 million plus deferred dividends and interest thereon of $34.9
million) and $111.2 million (face amount of $100.7 million plus deferred
dividends and interest thereon of $10.5 million), respectively. The
liquidation preference of the Series B Preferred Stock was $243.5 million
(face amount of $213.2 million plus deferred dividends of $30.3 million) at
March 31, 1996.
There can be no assurance when or if the Company will resume preferred
dividend payments.
Item 5. Other Information
Two unions are engaged in efforts to unionize USAir's passenger service
employees. The Railway Labor Act (the "RLA") governs, and the National
Mediation Board (the "NMB") has jurisdiction over, such campaigns. Under the
RLA, the NMB could order an election among a class or craft of eligible
employees if a union submitted an application to the NMB supported by the
authorization cards from at least 35% of the applicable class or craft of
employees. If the NMB ordered
15
<PAGE>
an election and a majority of the eligible employees voted for
representation, USAir would be required to negotiate a collective bargaining
agreement with the union that wins the election. On April 24 and 25, 1996,
respectively, the International Association of Machinists and Aerospace
Workers and the Communications Workers of America filed applications with the
NMB requesting that an election be held among USAir's passenger service
employees, a class or craft of approximately 10,000 workers consisting
primarily of USAir's ticket counter/gate agents and reservation agents. The
NMB is in the process of determining whether these applications are supported
by sufficient authorization cards to warrant an election. USAir cannot
predict whether an election will be held among the passenger service class or
craft and the outcome of the election, if held.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Designation Description
3.1 Restated Certificate of Incorporation of USAir Group
(incorporated by reference to Exhibit 3.1 to USAir Group's
Registration Statement on Form 8-B dated January 27, 1983),
including the Certificate of Amendment dated May 13, 1987
(incorporated by reference to Exhibit 3.1 to USAir Group's and
USAir's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1987), the Certificate of Increase dated June 30, 1987
(incorporated by reference to Exhibit 3 to USAir Group's and
USAir's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1987), the Certificate of Increase dated October 16,
1987 (incorporated by reference to Exhibit 3.1 to USAir Group's
and USAir's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1987), the Certificate of Increase dated August 7,
1989 (incorporated by reference to Exhibit 3.1 to USAir Group's
Annual Report on Form 10-K for the year ended December 31, 1989),
the Certificate of Increase dated April 9, 1992 (incorporated by
reference to Exhibit 3.1 to USAir Group's and USAir's Annual
Report on Form 10-K for the year ended December 31, 1992), the
Certificate of Increase dated January 21, 1993 (incorporated by
reference to USAir Group's and USAir's Annual Report on Form 10-K
for the year ended December 31, 1992), and the Certificate of
Amendment dated May 26, 1993 (incorporated by reference to
Appendix II to USAir Group's Proxy Statement dated April 26,
1993).
3.2 By-Laws of USAir Group (incorporated by reference to Exhibit 3.2
of USAir Group's and USAir's Annual Report on Form 10-K for the
year ended December 31, 1995).
3.3 Rights Agreement, dated as of July 29, 1989, as amended and
restated as of January 21, 1993, between USAir Group and Chemical
Bank, as Rights Agent (incorporated by reference to Exhibit 28.4
to USAir Group's Current Report on Form 8-K dated January 21,
1993).
16
<PAGE>
3.4 Restated Certificate of Incorporation of USAir (incorporated by
reference to Exhibit 3.1 to USAir's Registration Statement on
Form 8-B dated January 27, 1983).
3.5 By-Laws of USAir (incorporated by reference to Exhibit 3.2 of
USAir Group's and USAir's Annual Report on Form 10-K for the year
ended December 31, 1995).
4.1 Amended Certificate of Designation, Preferences, and Rights of
the Series D of Junior Preferred Stock of USAir Group
(incorporated by reference to Exhibit 4(c) to USAir Group's
Current Report on Form 8-K dated August 11, 1989).
4.2 Certificate of Designation of Series A Cumulative Convertible
Preferred Stock of USAir Group (incorporated by reference to
Exhibit 4(b) to USAir Group's Current Report on Form 8-K dated
August 11, 1989).
4.3 Certificate of Designation of Series B Cumulative Convertible
Preferred Stock of USAir Group (incorporated by reference to
Exhibit 3.3 to Amendment No. 4 to USAir Group's Registration
Statement on Form S-3 (Registration No. 33-39540) dated May 17,
1991).
4.4 Agreement between USAir Group and Berkshire Hathaway Inc. dated
August 7, 1989 (incorporated by reference to Exhibit 4(a) to
USAir Group's Current Report on Form 8-K dated August 11, 1989).
4.5 Certificate of Designation of Series F Cumulative Convertible
Senior Preferred Stock of USAir Group (incorporated by reference
to Exhibit 28.2 to USAir Group's Current Report on Form 8-K dated
January 21, 1993).
4.6 Form of Certificate of Designation of Series T Cumulative
Exchangeable Convertible Senior Preferred Stock of USAir Group
(incorporated by reference to Appendix VII to USAir Group's Proxy
Statement dated April 26, 1993). Neither USAir Group nor USAir is
filing any instrument (with the exception of holders of exhibits
10.1(a-c)) defining the rights of holders of long-term debt
because the total amount of securities authorized under each such
instrument does not exceed ten percent of the total assets of
USAir. Copies of such instruments will be furnished to the
Securities and Exchange Commission upon request.
10.1(a) Supplemental Agreement No. 16, dated July 19, 1990, to Purchase
Agreement No. 1102 between USAir and The Boeing Company
(incorporated by reference to Exhibit 10.2(a) to USAir Group's
Annual Report on Form 10-K for the year ended December 31, 1990).
17
<PAGE>
10.1(b) Supplemental Agreement No. 17, dated November 28, 1990, to
Purchase Agreement No. 1102 between USAir and The Boeing Company
(incorporated by reference to Exhibit 10.2(b) to USAir Group's
Annual Report on Form 10-K for the year ended December 31, 1990).
10.1(c) Supplemental Agreement No. 18, dated December 23, 1991, to
Purchase Agreement No. 1102 between USAir and The Boeing Company
(incorporated by reference to Exhibit 10.2(c) to USAir Group's
Annual Report on Form 10-K for the year ended December 31, 1991).
10.2 Purchase Agreement No. 1725 dated December 23, 1991 between USAir
and The Boeing Company (incorporated by reference to Exhibit 10.3
to USAir Group's and USAir's Annual Report on Form 10-K for the
year ended December 31, 1991).
10.3 Executive Incentive Compensation Plan of USAir Group, Inc. as
amended and restated December 1, 1995 (incorporated by reference
to the Exhibit 10.3 to USAir Group's and USAir's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.4 USAir, Inc. Officers' Supplemental Benefit Plan (incorporated by
reference to Exhibit 10.5 to USAir's Annual Report on Form 10-K
for the year ended December 31, 1980).
10.5 USAir, Inc. Supplementary Retirement Benefit Plan (incorporated
by reference to Exhibit 10.5 to USAir Group's Annual Report on
Form 10-K for the year ended December 31, 1989).
10.6 USAir, Inc. Supplemental Executive Defined Contribution Plan
(incorporated by reference to Exhibit 10.6 to USAir Group's and
USAir's Annual Report on Form 10-K for the year ended December
31, 1994).
10.7 USAir Group's 1984 Stock Option and Stock Appreciation Rights
Plan (incorporated by reference to Exhibit A to USAir Group's
Proxy Statement dated March 30, 1984).
10.8 USAir Group's 1988 Stock Incentive Plan (incorporated by
reference to Exhibit 10.15 to USAir Group's Annual Report on Form
10-K for the year ended December 31, 1987).
10.9 USAir Group's 1992 Stock Option Plan (incorporated by reference
to Exhibit A to USAir Group's Proxy Statement dated March 30,
1992).
10.10 USAir Group's 1996 Stock Incentive Plan (incorporated by
reference to Exhibit A to USAir Group's Proxy Statement dated
April 15, 1996).
18
<PAGE>
10.11 Employment Agreement between USAir and its Chief Executive
Officer (incorporated by reference to the Exhibit 10.11 to USAir
Group's and USAir's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.12 Employment Agreement between USAir and its President and Chief
Operating Officer (incorporated by reference to the Exhibit 10.12
to USAir Group's and USAir's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.13 Employment Agreement between USAir and its Executive Vice
President-Corporate Affairs and General Counsel. (incorporated by
reference to the Exhibit 10.13 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.14 Agreement between USAir and its Chief Executive Officer with
respect to certain employment arrangements (incorporated by
reference to the Exhibit 10.14 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.15 Agreement between USAir and its President and Chief Operating
Officer with respect to certain employment arrangements
(incorporated by reference to the Exhibit 10.15 to USAir Group's
and USAir's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.16 Agreement between USAir and its Executive Vice President-
Corporate Affairs and General Counsel with respect to certain
employment arrangements (incorporated by reference to the Exhibit
10.16 to USAir Group's and USAir's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.17 Employment Agreement between USAir and its former Chief Executive
Officer, as amended by a severance agreement (incorporated by
reference to the Exhibit 10.17 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.18 Employment Agreement between USAir and its former President and
Chief Operating Officer, as amended by a severance agreement
(incorporated by reference to the Exhibit 10.18 to USAir Group's
and USAir's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.19 Employment Agreement between USAir and its former Executive Vice
President, General Counsel and Secretary, as amended by a
severance agreement (incorporated by reference to the Exhibit
10.19 to USAir Group's and USAir's Annual Report on Form 10-K for
the year ended December 31, 1995).
19
<PAGE>
10.20 Employment Agreement between USAir and its Executive Vice
President-Marketing (incorporated by reference to the Exhibit
10.20 to USAir Group's and USAir's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.21 Trust Agreement dated as of April 1, 1992 between USAir and
Wachovia Bank of North Carolina, N.A. providing for certain
compensation arrangements for the Executive Vice President-
Marketing (incorporated by reference to the Exhibit 10.21 to
USAir Group's and USAir's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.22 Employment Agreement between USAir and its Executive Vice
President-Customer Services (incorporated by reference to the
Exhibit 10.22 to USAir Group's and USAir's Annual Report on Form
10-K for the year ended December 31, 1995).
10.23 Agreement between USAir and its Chief Executive Officer providing
supplemental retirement benefits (incorporated by reference to
the Exhibit 10.23 to USAir Group's and USAir's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.24 Agreement between USAir and its President and Chief Operating
Officer providing supplemental retirement benefits (incorporated
by reference to the Exhibit 10.24 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.25 Agreement between USAir and its Executive Vice President-
Corporate Affairs and General Counsel providing supplemental
retirement benefits (incorporated by reference to the Exhibit
10.25 to USAir Group's and USAir's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.26 Agreement between USAir and its former Chief Executive Officer
providing supplemental retirement benefits (incorporated by
reference to the Exhibit 10.26 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.27 Agreement between USAir and its former President and Chief
Operating Officer providing supplemental retirement benefits
(incorporated by reference to the Exhibit 10.27 to USAir Group's
and USAir's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.28 Agreement between USAir and its former Executive Vice President,
General Counsel and Secretary providing supplemental retirement
benefits (incorporated by reference to the Exhibit 10.28 to USAir
Group's and USAir's Annual Report on Form 10-K for the year ended
December 31, 1995).
20
<PAGE>
10.29 Agreement between USAir and its Executive Vice President-
Marketing providing supplemental retirement benefits
(incorporated by reference to the Exhibit 10.29 to USAir Group's
and USAir's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.30 Employment Agreement between USAir and its Executive Vice
President-Customer Services providing retirement benefits
(incorporated by reference to the Exhibit 10.30 to USAir Group's
and USAir's Annual Report on Form 10-K for the year ended
December 31, 1995).
11 Computation of Primary and Fully-Diluted Earnings Per Share for
the three months ended March 31, 1996 and 1995 for USAir Group,
Inc.
27.1 Financial Data Schedule - USAir Group, Inc.
27.2 Financial Data Schedule - USAir, Inc.
99 Airline Operating Statistics for the three months ended March 31,
1996 and 1995 for USAir, Inc.
B. Reports on Form 8-K
Date of Report Subject of Report
January 17, 1996 News Release dated January 16, 1996 of USAir
Group, Inc. (the "Company") announcing that the
Company's Board of Directors had elected Stephen M.
Wolf as Chairman of the Board of Directors and
Chief Executive Officer of the Company and USAir,
Inc.
January 22, 1996 News Release dated January 22, 1996 of USAir
Group, Inc. and USAir, Inc. with consolidated
statements of operations for each company for the
year ended December 31, 1995.
February 15, 1996 USAir Group, Inc. did not pay the dividend due
the holders of its Series B Cumulative Convertible
Preferred on February 15, 1996, the sixth
consecutive quarterly dividend deferred.
Accordingly, the holders of such stock are entitled
to elect two additional directors to the Company's
Board of Directors.
May 1, 1996 New Release dated April 24, 1996 of USAir
Group, Inc. and USAir, Inc. with consolidated
statements of operations for each company for the
three months ended March 31, 1996.
21
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
USAir Group, Inc.
(Registrant)
Date: May 10, 1996 By: /s/ James A. Hultquist
---------------------------
James A. Hultquist
Controller
(Principal Accounting Officer)
USAir, Inc.
(Registrant)
Date: May 10, 1996 By: /s/ James A. Hultquist
-----------------------
James A. Hultquist
Controller
(Principal Accounting Officer)
22
<PAGE>
<TABLE>
USAir Group, Inc.
Exhibit 11
Computation of Primary and Fully Diluted Earnings Per Share
(unaudited)
(in thousands except per share amounts)
<CAPTION>
Three Months Ended March 31,
--------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Adjustments to Net Income (Loss)
==========================================
Net income (loss) $ (32,293) $ (96,883)
Preferred dividend requirement (22,274) (20,583)
------- -------
Net income (loss) applicable to common stock and common
stock equivalents used for primary computation (54,567) (117,446)
Fully diluted adjustments:
Assume conversion of preferred stock:
Preferred dividend requirement 22,274 20,583
------- -------
Adjusted net income (loss) applicable to common stock
assuming full dilution $ (32,293) $ (96,883)
======= =======
Adjustments to Common Shares Outstanding
==========================================
Average number of shares of common stock 63,618 61,627
Primary adjustments 1)
Assume exercise of options and common stock
equivalents - -
------- -------
Total average number of common and common equivalent
shares used for primary computation 63,618 61,627
======= =======
Average number of shares of common stock 63,618 61,627
Fully diluted adjustments 2)
Assume exercise of options 1,210 16
Assume conversion of preferred stock 39,156 39,156
------- -------
Total average number of common shares to be
outstanding after full conversion 103,984 100,799
======= =======
Income (Loss) Per Common Share
==========================================
Primary income (loss) per common share 1) $ (0.86) $ (1.91)
===== =====
Fully diluted income (loss) per common share 2) $ (0.31) $ (0.96)
===== =====
1) The assumed exercise of options and common stock equivalents which are anti-dilutive are not
included in the computation of primary earnings per share.
2) The assumed exercise of options and conversion of preferred stock are anti-dilutive but are included
in accordance with Regulation S-K Item 601(b)(11).
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000701345
<NAME> USAIR GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 785,939
<SECURITIES> 45,487
<RECEIVABLES> 443,369<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 243,700
<CURRENT-ASSETS> 1,651,826
<PP&E> 6,331,504
<DEPRECIATION> 2,340,793
<TOTAL-ASSETS> 6,989,327
<CURRENT-LIABILITIES> 2,559,877
<BONDS> 2,699,231
758,719
213,153
<COMMON> 63,782
<OTHER-SE> (1,140,285)
<TOTAL-LIABILITY-AND-EQUITY> 6,989,327
<SALES> 0
<TOTAL-REVENUES> 1,868,422
<CGS> 0
<TOTAL-COSTS> 1,857,630
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,793
<INCOME-PRETAX> (31,247)
<INCOME-TAX> 1,046
<INCOME-CONTINUING> (32,293)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,293)
<EPS-PRIMARY> (.86)
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>Fully diluted EPS is anti-dilutive and therefore not presented.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000714560
<NAME> USAIR, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 782,712
<SECURITIES> 45,487
<RECEIVABLES> 444,680<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 213,359
<CURRENT-ASSETS> 1,606,885
<PP&E> 6,078,765
<DEPRECIATION> 2,259,371
<TOTAL-ASSETS> 6,857,454
<CURRENT-LIABILITIES> 2,745,028
<BONDS> 2,657,587
0
0
<COMMON> 1
<OTHER-SE> (366,104)
<TOTAL-LIABILITY-AND-EQUITY> 6,857,454
<SALES> 0
<TOTAL-REVENUES> 1,739,615
<CGS> 0
<TOTAL-COSTS> 1,748,525
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,447
<INCOME-PRETAX> (54,638)
<INCOME-TAX> 292
<INCOME-CONTINUING> (54,930)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,930)
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>EPS calculations are not relevant because USAir, Inc. is a wholly owned
subsidiary of USAir Group, Inc.
</FN>
</TABLE>
<PAGE>
<TABLE>
USAir, Inc.
Exhibit 99
Airline Operating Statistics 1)
<CAPTION>
Three Months Ended March 31,
--------------------------------------
Increase
1996 1995 (Decrease)
------ ------ -----------
<S> <C> <C> <C>
Revenue passengers (thousands) * 12,938 13,767 (6.0) %
Total revenue passenger miles ("RPMs") (millions) 8,788 9,191 (4.4) %
Revenue passenger miles (millions) * 8,709 9,079 (4.1) %
Total available seat miles ("ASMs") (millions) 13,583 15,334 (11.4) %
Available seat miles (millions) * 13,493 15,206 (11.3) %
Passenger load factor 2) * 64.6 % 59.7 % 4.9 pts.
Break even load factor 3) 4) 67.1 % 64.0 % 3.1 pts.
Passenger revenue per ASM * 11.50 c 9.78 c 17.6 %
Total revenue per ASM 4) 12.74 c 10.75 c 18.5 %
Cost per ASM 4) 12.81 c 11.08 c 15.6 %
Yield (revenue per RPM) * 17.81 c 16.37 c 8.8 %
Cost of jet fuel per gallon 5) 58.61 c 52.06 c 12.6 %
Gallons of jet fuel consumed (millions) 266 299 (11.0) %
* = denotes scheduled service only (excludes charter service).
c = cents
1) Statistics include free frequent travelers and the related miles flown.
2) Passenger load factor is the percentage of aircraft seating capacity that is actually utilized
(RPMs/ASMs).
3) Break even load factor represents the percentage of aircraft seating capacity that must be
utilized, based on fares in effect during the period, for USAir to break even at the pretax income
level.
4) Financial statistics exclude revenue and expense generated under the British Airways wet lease
arrangement.
5) Cost includes the base cost of jet fuel and transportation charges.
</TABLE>
