<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year end December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number: 1-8444
USAir, Inc. 401(k) Savings Plan
US Airways Group, Inc.
(Issuer of securities held pursuant to the plan noted above)
2345 Crystal Drive, Arlington, VA 22227
(Address of principal executive offices)
(703) 872-5306
(Registrant's Telephone Number)
<PAGE>
USAIR, INC.
401(k) SAVINGS PLAN
Financial Statements
and Supplemental Schedules
December 31, 1996 and 1995
(With Independent Auditors'
Report Thereon)
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Table of Contents
-----------------
Page
----
Independent Auditors' Report 1
Financial Statements
Statements of Net Assets Available for Plan
Benefits as of December 31, 1996 and 1995 2
Statements of Changes in Net Assets Available
for Plan Benefits for the years ended
December 31, 1996 and 1995 3
Notes to Financial Statements 4 - 15
Schedule I - Item 27a
Schedule of Assets Held for Investment Purposes
as of December 31, 1996 16 - 17
Schedule II - Item 27d
Schedule of Reportable Transactions for the year
ended December 31, 1996 18
Signature 19
Exhibit 23
Consent of Independent Auditors 20
<PAGE>
Independent Auditors' Report
The Plan Administrator and Participants
USAir, Inc. 401(k) Savings Plan:
We have audited the accompanying statements of net assets
available for plan benefits of the USAir, Inc. 401(k) Savings
Plan (the "Plan") as of December 31, 1996 and 1995, and the
related statements of changes in net assets available for plan
benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the net assets
available for plan benefits of the Plan as of December 31, 1996
and 1995, and the changes in net assets available for plan
benefits for the years then ended in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
financial statements taken as a whole. The supplemental
schedules of assets held for investment purposes as of December
31, 1996 and reportable transactions for the year ended December
31, 1996 are presented for the purpose of additional analysis and
are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. The
supplemental schedules have been subjected to the auditing
procedures applied in the audits of the basic financial
statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
KPMG PEAT MARWICK LLP
Washington, D.C.
June 6, 1997
<PAGE>
USAIR, INC.
401(k) SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
----------------------------------------------------
December 31,
--------------------
1996 1995
---- ----
Assets
Investments:
At fair value:
Shares of registered investment
companies:
Fidelity Magellan Fund $ 196,731,304 $ 196,204,255
Fidelity Equity Income Fund 113,645,244 74,022,540
US Airways Common Stock Fund 72,760,893 22,642,988
Fidelity Spartan U.S. Equity
Index Portfolio 38,666,486 19,969,296
Fidelity Retirement Government
Money Market Portfolio 38,186,803 32,743,408
Capital Growth Mix Portfolio 35,778,877 21,889,133
Fidelity Intermediate Bond Fund 18,833,705 18,922,917
Neuberger and Berman Guardian
Fund 8,880,099 -
Moderation Mix Portfolio 8,417,652 4,954,946
Income Mix Portfolio 1,953,338 1,102,889
Participant loans 18,447,842 12,791,796
----------- -----------
552,302,243 405,244,168
At contract value:
Fixed Income Fund 31,401,787 28,440,801
----------- -----------
Total investments 583,704,030 433,684,969
----------- -----------
Receivables:
Participant contributions 2,284,062 1,526,859
Employer contributions 215,442 1,099,071
----------- -----------
Total receivables 2,499,504 2,625,930
----------- -----------
Total assets 586,203,534 436,310,899
----------- -----------
Liabilities:
Accrued expenses 44,689 42,650
----------- -----------
Total liabilities 44,689 42,650
----------- -----------
Net assets available for plan benefits $ 586,158,845 $ 436,268,249
=========== ===========
See accompanying Notes to Financial Statements.
2
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Statements of Changes in Net Assets Available for Plan Benefits
---------------------------------------------------------------
Years ended December 31,
------------------------
1996 1995
---- ----
Additions to net assets attributable to:
Net appreciation in fair value
of investments $ 35,546,979 $ 74,874,228
Investment income 44,104,565 19,980,222
Interest income on participant
loans 1,291,764 807,864
Participant contributions 73,059,151 63,657,563
Employer contributions 5,344,839 10,466,364
Rollover contributions 230,745 46,870
----------- -----------
Total additions 159,578,043 169,833,111
----------- -----------
Deductions from net assets attributable to:
Benefits paid to participants 9,492,170 7,723,919
Administrative expenses 180,669 166,411
----------- -----------
Total deductions 9,672,839 7,890,330
----------- -----------
Net increase 149,905,204 161,942,781
Net assets available for plan benefits:
Beginning of year 436,268,249 274,996,017
Transfer to the USAir, Inc.
Employee Savings Plan (14,608) (670,549)
----------- -----------
End of year $ 586,158,845 $ 436,268,249
=========== ===========
See accompanying Notes to Financial Statements.
3
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
1. Description of Plan
The following description of the USAir, Inc. 401(k) Savings
Plan (the "Plan") provides only general information.
Participants should refer to the Plan document for a more
complete description of the Plan's provisions.
(a) General
The Plan is a defined contribution plan intended to be a
qualified cash or deferred compensation arrangement under
Section 401(k) of the Internal Revenue Code ("IRC"), as
amended and to qualify under Section 401(a) of the IRC. The
Plan was established effective September 1, 1988 to provide
retirement income to employees of US Airways, Inc. ("US
Airways" or the "Company"), formerly USAir, Inc. In general,
employees of US Airways, who are covered by a collective
bargaining agreement which provides for their participation
in the Plan, with at least 90 days of service, are eligible
to participate except for those individuals not covered under
the United States income tax laws and those individuals who
are participants in another 401(k) plan sponsored by US
Airways. Effective December 31, 1995 the assets and
liabilities related to ground school training instructors
were transferred from the Plan to the USAir, Inc. Employee
Savings Plan. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
US Airways, Inc. ("US Airways" or the "Company"), the plan
administrator, is responsible for the content and issuance of
the Plan's financial statements. US Airways Group, Inc. ("US
Airways Group"), formerly USAir Group, Inc., is the issuer of
securities held pursuant to the Plan.
(b) Contributions
Eligible US Airways employees electing to participate in the
Plan make contributions to the Plan via payroll deductions.
Each year Plan participants may contribute up to 15 percent
of pretax annual compensation, as defined in the Plan, unless
the participant is a highly compensated employee. If the
participant is a highly compensated employee, as defined by
the IRC, the contribution percentage may not exceed a certain
percentage of pre-tax annual compensation as determined by
the plan administrator. The amount of contribution that may
be made by a participant to the Plan shall be a whole
percentage of a participant's compensation. Participant
contributions for 1996 and 1995 could not exceed the
statutory limit of $9,500 and $9,240 per year, respectively.
4
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
The Company will make a 50% matching contribution each
payroll period, up to 2 percent of compensation for those
participants who are represented by the International
Association of Machinists and Aerospace Workers (the "IAM").
(c) Vesting
Participants are immediately vested in their contributions,
plus actual earnings thereon. The Company's matching
contributions, plus actual earnings thereon, become 100
percent vested after two years of continuous service.
(d) Investment Options
The Company selects the number and type of investment options
available. Fidelity Institutional Retirement Services
Company, the Plan's Recordkeeper, is responsible for
maintaining an account balance for each participant.
Fidelity Management Trust Company is the Plan Trustee. Each
participant instructs the Recordkeeper how to allocate their
participant and company contributions. Participants may
invest their contributions in any combination among the
investment options available in increments of five percent.
If a participant fails to instruct the Recordkeeper on how to
allocate the contributions, then their contributions will be
invested in a cash equivalent fund, such as the Fidelity
Retirement Government Money Market Portfolio.
The Recordkeeper values account balances daily. Each account
balance is based on the value of the underlying investments
in each account. Generally, participants may elect to change
how future contributions are allocated or may transfer
current account balances among investment options.
As of December 31, 1996, the Company offered eleven
investment options in the form of eight individual investment
options and three diversified portfolio mixes, which are pre-
selected combinations of mutual funds. The Neuberger and
Berman Guardian Fund was added as an investment option during
1996. The eleven options available to participants are as
follows:
Fidelity Magellan Fund - The Fund primarily invests in common
stocks and securities of both well-known and lesser known
companies with potentially above-average growth potential.
Securities may be of foreign, domestic and multinational
companies.
5
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
Fidelity Equity Income Fund - The Fund normally invests at
least 80% of its assets in income-producing common and
preferred stocks with the remaining 20% generally invested in
debt securities, like bonds.
US Airways Common Stock Fund - A fund comprised primarily of
US Airways Group, Inc. ("Group") common stock purchased on the
open market or directly from Group at market prices. A small
percentage of the fund is invested in short-term liquid
investments. Company contributions cannot be invested in this
Fund, in accordance with the Plan document.
Fidelity Spartan U.S. Equity Index Portfolio - The Portfolio
seeks growth and income by matching the composition and total
return of the Standard & Poor's Daily Stock Price Index of 500
common stocks.
Fidelity Retirement Government Money Market Portfolio -
Investments are made in obligations issued or guaranteed as to
principal and interest by the U.S. government, its agencies or
instrumentalities.
Capital Growth Mix Portfolio - A diversified portfolio mix
comprised of 80% equity securities and 20% fixed income
securities. The equity securities are invested 25% in the
Fidelity Equity Income Fund, approximately 19% in the Fidelity
OTC Portfolio, approximately 37% in the Fidelity Magellan Fund
and approximately 19% in the Fidelity Overseas Fund. The
fixed income securities are invested in the Fidelity
Intermediate Bond Fund.
Fidelity Intermediate Bond Fund - Investments are made
primarily in investment-grade fixed income securities,
including bonds, notes, mortgage securities, government and
government agency obligations and convertible securities. The
average maturity ranges from three to ten years.
Neuberger and Berman Guardian Fund - The Fund primarily
invests in stocks of established, high-quality companies
considered to be undervalued.
Moderation Mix Portfolio - A diversified portfolio mix
comprised of 60% equity securities and 40% fixed income
securities. The equity securities are invested approximately
33% in the Fidelity Equity Income Fund, approximately 33% in
the Fidelity Spartan U.S. Equity Index Portfolio, 25% in the
Fidelity Magellan Fund and approximately 9% in the Fidelity
Overseas Fund. The fixed income securities are invested
approximately 38% in the Fidelity Short-Term Bond Fund and
approximately 62% in the Fidelity Intermediate Bond Fund.
6
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
Income Mix Portfolio - A diversified portfolio mix comprised
of 20% equity securities and 80% fixed income securities. The
equity securities are invested 50% in the Fidelity Equity
Income Fund and 50% in the Fidelity Spartan U.S. Equity Index
Portfolio. The fixed income securities are invested
approximately 19% in the Fidelity Retirement Government Money
Market Portfolio, approximately 44% in the Fidelity Short-Term
Bond Fund and approximately 37% in the Fidelity Intermediate
Bond Fund.
Fixed Income Fund - This fund buys high-quality investment
contracts, a type of investment product offered to retirement
and savings plans by insurance companies, banks, and other
financial institutions. Money transferred out of the Fixed
Income Fund cannot be invested in the Fidelity Retirement
Government Money Market Portfolio, the Fidelity Intermediate
Bond Fund or the Income Mix Portfolio for a period of 90 days
because these funds are considered competitive by the
insurance industry.
(e) Participant Withdrawals
All participants can borrow from their account but may have
only one loan outstanding at any given point in time.
Participants may borrow from their fund a minimum of $1,000
up to a maximum amount equal to the lesser of $50,000
(reduced by the highest outstanding loan balance from the
Plan or any other plan maintained by the Company during the
preceeding twelve month period) or 50 percent of their vested
separate account balance as of the date of the loan. Loan
transactions are treated as transfers between the investment
funds and participant loans receivable. Loan terms cannot
exceed 5 years except for the purchase of a primary
residence. The loans are secured by the balance in the
participant's account and bear interest at a rate
commensurate with local prevailing market rates for loans
made under similar circumstances. Principal and interest are
paid ratably through payroll deductions.
Upon approval by the plan administrator, a participant may
withdraw his or her contributions from the account if it is
determined that the withdrawal is necessary to meet an
immediate and heavy financial need of the participant under
the deemed hardship standards set forth in the Plan.
7
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
(f) Payment of Benefits
Upon termination of service due to death, disability,
retirement or other termination of employment, distributions
to a participant or beneficiary is made as soon as reasonably
practicable. If the participant's account balance is less
than $3,500, a lump sum distribution is automatic upon
separation. If the participant's account balance is greater
than $3,500, the distribution can be deferred or provided in
cash as a lump sum distribution.
(g) Forfeited Accounts
Forfeited nonvested accounts are used by the Company to
reduce future employer contributions.
(h) Administrative expenses
Certain administrative expenses of the Plan are paid by US
Airways.
2. Summary of Accounting Policies
(a) Basis of Accounting
The financial statements of the Plan are prepared under the
accrual method of accounting.
(b) Investment Valuation and Income Recognition
The assets of the US Airways Common Stock Fund, Capital
Growth Mix Portfolio, Moderation Mix Portfolio, and Fixed
Income Fund are commingled with certain assets of other
defined contribution plans sponsored by US Airways. The
Plan's Recordkeeper separately identifies the assets of each
plan participant who has an interest in the commingled funds.
Fair values for assets were determined by quoted market
values, when available. The Plan presents in the statement
of changes in net assets the net appreciation (depreciation)
in the fair value of its investments, which consists of the
realized gains or losses and the unrealized appreciation
(depreciation) on those investments. The Plan's investments
in guaranteed investment contracts ("GICs") are stated at
contract value (See Note 4). Purchases and sales of
investments are recorded on a trade-date basis.
8
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
The value of a participant's investment in the USAir Common
Stock Fund, is represented by units credited to the
participant's account. The unit values were determined by the
trustee. The units and unit values (rounded to the nearest
whole unit and cent) of the USAir Common Stock Fund as of the
close of each quarter during 1996 was as follows:
1996 Number of Units Unit Value
- ----------- --------------- ----------
March 31 1,124,679 $ 28.84
June 30 1,568,339 28.32
September 30 1,859,303 25.97
December 31 1,986,917 36.62
(c) Payment of Benefits
Benefits are recorded as deductions when paid.
(d) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual
results may differ from those estimates.
(this space intentionally left blank)
9
<PAGE>
<TABLE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
3. Investment Activity
The following table represents the investment funds' and participant loans' activities, for the years ended
December 31, 1996 and 1995:
<CAPTION> Fidelity Fidelity
Retirement Fidelity Spartan
Fixed Government Fidelity Fidelity Equity U.S. Equity Income
Income Money Market Magellan Intermediate Income Index Mix
Fund 1) Portfolio 1) Fund 1) Bond Fund 1) Fund 1) Portfolio 1) Portfolio 1)
----------- ----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $24,054,055* $23,471,983* $123,161,624* $15,485,248* $49,043,705* $11,096,211 $ 379,652
Investment income 1,814,979 1,558,028 10,960,027 1,103,221 4,103,698 440,269 -
Net appreciation in fair value - - 36,331,018 979,773 12,490,106 4,165,036 98,013
Interest income on participant loans - - - - - - -
Contributions 4,026,615 7,894,731 34,104,511 3,188,554 11,484,650 3,313,508 275,600
Net exchanges between investment funds (661,838) 1,180,051 (5,071,804) (1,305,409) (1,633,905) 1,255,360 496,136
Administrative expenses (39,225) (5,858) (81,905) (1,620) (6,267) (361) (601)
Benefits paid to participants (719,233) (1,489,480) (2,739,723) (497,881) (1,344,344) (252,051) (135,598)
Transfers from (to) other plans (34,552) 133,953 (459,493) (28,969) (115,103) (48,676) (10,313)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net Change in Investment Funds 4,386,746 9,271,425 73,042,631 3,437,669 24,978,835 8,873,085 723,327
----------- ----------- ------------ ----------- ----------- ----------- ----------
Balance at December 31, 1995 28,440,801* 32,743,408* 196,204,255* 18,922,917* 74,022,540* 19,969,296* 1,102,889
Investment income 1,714,944 1,712,337 31,652,464 1,246,109 6,765,745 835,532 -
Net appreciation (depreciation)
in fair value - - (10,230,018) (598,733) 11,151,344 5,054,629 113,978
Interest income on participant loans - - - - - - -
Contributions 2,952,486 5,941,850 33,650,019 2,756,042 13,700,838 4,907,702 353,717
Net exchanges between investment funds (846,667) (914,433) (51,366,024) (3,049,978) 9,725,242 8,461,956 426,761
Administrative expenses (37,000) (5,844) (78,740) (1,165) (6,735) (630) (863)
Benefits paid to participants (823,911) (1,384,078) (3,066,540) (430,985) (1,699,405) (561,321) (43,144)
Transfers from (to) other plans 1,134 93,563 (34,112) (10,502) (14,325) (678) -
----------- ----------- ----------- ----------- ------------ ----------- ----------
Net Change in Investment Funds 2,960,986 5,443,395 527,049 (89,212) 39,622,704 18,697,190 850,449
----------- ----------- ----------- ----------- ------------ ----------- ----------
Balance at December 31, 1996 $31,401,787* $38,186,803* $196,731,304* $18,833,705 $113,645,244* $38,666,486* $1,953,338
=========== =========== ============ =========== ============ =========== ==========
(table continued on next page)
10
</TABLE>
<PAGE>
<TABLE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
<CAPTION>
Capital US Airways Neuberger
Growth Moderation Common & Berman
Mix Mix Stock Guardian Participant
Portfolio 1) Portfolio 1) Fund 1) Fund Loans Other Total
----------- ----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 8,345,918 $ 1,574,272 $ 7,501,151 $ - $ 9,423,342 $1,458,856 $274,996,017
Investment income - - - - - - 19,980,222
Net appreciation in fair value 3,175,530 596,273 17,038,479 - - - 74,874,228
Interest income on participant loans - - - - 807,864 - 807,864
Contributions 5,782,841 1,239,086 1,732,420 - - 1,128,281 74,170,797
Net exchanges between investment funds 4,661,576 1,775,862 (3,505,492) - 2,809,463 - -
Administrative expenses (9,461) (1,505) (15,751) - - (3,857) (166,411)
Benefits paid to participants (31,978) (212,704) (52,054) - (248,873) - (7,723,919)
Transfers from (to) other plans (35,293) (16,338) (55,765) - - - (670,549)
----------- ----------- ----------- ---------- ----------- ---------- -----------
Net Change in Investment Funds 13,543,215 3,380,674 15,141,837 - 3,368,454 1,124,424 161,272,232
----------- ----------- ----------- ---------- ----------- ---------- -----------
Balance at December 31, 1995 21,889,133* 4,954,946 22,642,988* - 12,791,796 2,583,280 436,268,249
Investment income - - - 177,434 - - 44,104,565
Net appreciation (depreciation)
in fair value 3,907,487 832,852 24,634,441 680,999 - - 35,546,979
Interest income on participant loans - - - - 1,291,764 - 1,291,764
Contributions 7,861,283 2,082,230 3,285,287 1,269,707 - (126,426) 78,634,735
Net exchanges between investment funds 2,481,780 627,180 22,871,103 6,793,413 4,789,667 - -
Administrative expenses (15,399) (3,397) (23,707) (5,150) - (2,039) (180,669)
Benefits paid to participants (323,042) (54,763) (644,605) (34,991) (425,385) - (9,492,170)
Transfers from (to) other plans (22,365) (21,396) (4,614) (1,313) - - (14,608)
----------- ----------- ----------- ---------- ----------- ---------- -----------
Net Change in Investment Funds 13,889,744 3,462,706 50,117,905 8,880,099 5,656,046 (128,465) 149,890,596
----------- ----------- ----------- ---------- ----------- ---------- -----------
Balance at December 31, 1996 $35,778,877* $ 8,417,652 $72,760,893* $8,880,099 $18,447,842 $2,454,815 $586,158,845
=========== =========== =========== ========== =========== ========== ============
* Investment fund balance represents greater than five percent of net assets available for plan benefits.
1) Party in interest.
11
</TABLE>
<PAGE>
USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
4. Investment Contracts with Insurance Companies
The Plan had an interest in a portfolio of GICs with certain
insurance companies of $31,401,787 and $28,440,801 at
December 31, 1996 and 1995, respectively. The GICs are
benefit responsive because they provide reasonable access by
Plan participants to invested funds. Therefore, in
accordance with the American Institute of Certified Public
Accountant's Statement of Position 94-4, the interest in
these contracts is disclosed in the financial statements at
contract value which equals contributions made, plus accrued
interest at the specified rate, less plan withdrawals and
administrative expenses. The portfolio's contract value at
December 31, 1996 and 1995 was $79,111,397 and $73,426,290.
The average portfolio crediting interest rate was
approximately 5.8% and 5.7% at December 31, 1996 and 1995,
respectively. The portfolio average yield was approximately
6.1% and 6.5% for the years ended December 31, 1996 and
1995, respectively.
For GICs with variable rates (approximately 33% of the
portfolio, as measured by contract values), crediting rates
are reset either quarterly or bi-annually. Crediting rates
are determined based upon the yields to maturity of the
underlying assets, net of certain origination fees.
No valuation reserves were recognized related to the
portfolio as all insurance companies in the portfolio had
received an investment grade rating from nationally
recognized rating agencies as of December 31, 1996 and 1995.
The fair value of the portfolio was $79,347,056 and
$74,818,203 at December 31, 1996 and 1995.
5. Plan Termination
Although it has not expressed any intent to do so, the
Company reserves the right to terminate the Plan at any
time. Upon termination of the Plan, participants will
become 100 percent vested in their accounts. In addition
the following actions shall be taken for the benefit of
participants:
(a) As of the termination date, each investment fund shall
be valued. In determining the net worth of the
investment funds there shall be included as a liability
such amounts as shall be necessary to pay all expenses
in connection with the termination of the investment
funds and the liquidation and distribution of the
property of the funds, as well as other expenses,
whether or not accrued, and shall include as an asset
all accrued income.
12
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
(b) All participant accounts must be disposed of in the
forms of payment available under the Plan, unless the
participant's spouse consents to another form of
distribution.
6. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for
plan benefits per the financial statements to the Form 5500:
December 31,
-------------------
1996 1995
---- ----
Net assets available for plan
benefits per the financial
statements $586,158,845 $436,268,249
Amounts allocated to withdrawing
participants (164,172) (260,152)
----------- -----------
Net assets available for plan
benefits per the Form 5500 $585,994,673 $436,008,097
=========== ===========
The following is a reconciliation of benefits paid to
participants per the financial statements to the Form 5500:
Year Ended
December 31, 1996
-----------------
Benefits paid to participants per the
financial statements $ 9,492,170
Add: Amounts allocated to withdrawing
participants at December 31, 1996 164,172
Less: Amounts allocated to withdrawing
participants at December 31, 1995 (260,152)
---------
Benefits paid to participants per the
Form 5500 $ 9,396,190
=========
Amounts allocated to withdrawing participants are recorded
on the Form 5500 for benefit claims that have been processed
and approved for payment prior to December 31 but not yet
paid as of that date.
13
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
7. Tax Status
The Internal Revenue Service has determined and informed the
Company by a letter dated July 22, 1995, that the Plan and
related trust are designed in accordance with applicable
sections of the IRC. The Plan has been amended since
receiving the determination letter. However, the Plan
administrator and the Plan's legal counsel believe that the
Plan is designed and is currently being operated in
compliance with the applicable requirements of the IRC.
8. Legal Proceedings
During the fourth quarter of 1995, the Association of Flight
Attendants ("AFA") filed a grievance against US Airways
contending that the Company has violated certain sections of
the collective bargaining agreement between the AFA and US
Airways. US Airways' flight attendants are eligible to
participate in the Plan pursuant to their collective
bargaining agreement with the Company. The AFA maintains
that US Airways' flight attendants are entitled to receive
company matching contributions based on certain provisions
of their collective bargaining agreement. The Company
recently lost a similar grievance filed by the International
Association of Machinists and Aerospace Workers, which
represents US Airways' mechanics and related workers, which
resulted in the Company matching the contributions made to
the Plan by IAM participants. If the Company and the Plan
are unsuccessful in their defense of the AFA's claim, US
Airways may be required to make a contribution to the Plan
for benefits which would have accrued as of December 31,
1996, and match the future contributions of AFA employees
who participate in the Plan up to a certain amount. Due to
the uncertainties related to this grievance, management is
not able to estimate the amount of Company contributions
that may be due to the Plan upon resolution of the dispute.
14
<PAGE> USAIR, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
9. Arbitration Remedy Settlement
As the result of a decision and award by an arbitrator who
ruled that the Company was required to match 401(k)
contributions made by mechanics and related personnel
represented by the IAM as of September 30, 1995, the Company
entered into an agreement with the IAM with respect to US
Airways employees whose coverage in this Plan is provided
pursuant to a collective bargaining agreement with the IAM.
Key points in this agreement are as follows: (i) in December
1995, the Company made a special one-time contribution of
$9.4 million to the accounts of IAM employees who were
covered under the agreement as of September 30, 1995 and who
made payroll contributions to the Plan during the period
April 1, 1993 through September 30, 1995 equal to 50% of such
contributions up to a maximum of 2 percent of the employees
compensation for each payroll period; (ii) during the first
quarter of 1996, the Company made another special one-time
contribution of $1.1 million to the accounts of IAM employees
who made payroll contributions to the Plan during the period
October 1, 1995 through December 31, 1995 equal to 50% of
such contributions up to a maximum of 2 percent of
compensation for each payroll period; and (iii) effective
January 1, 1996, the Company amended the Plan to provide for
50% company matching contributions each payroll period up to
2 percent of compensation for IAM employee participants.
10. Transfer to USAir, Inc. Employee Savings Plan
Transfer to USAir, Inc. Employee Savings Plan represents a
rollover contribution which was due to the aforementioned
plan as a result of a record keeping error, and will be
corrected in 1997.
(this space intentionally left blank)
15
<PAGE>
<TABLE> Schedule I
USAIR, INC. Page 1 of 2
401(k) SAVINGS PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
----------------------------------------------------------
December 31, 1996
<CAPTION>
Identity Description Current
of Issue of Investment Cost Value
-------- ------------- ---- -------
<S> <C> <C> <C>
Fidelity Magellan Fund* Shares in registered $178,077,082 $196,731,304
investment company
Fidelity Equity Shares in registered 92,029,956 113,645,244
Income Fund* investment company
US Airways Common Common stock of employer's 53,696,677 72,760,893
Stock Fund* parent company, US Airways
Group, Inc., and short-
term investments
Fidelity Spartan U.S. Shares in registered 30,121,712 38,666,486
Equity Index Portfolio* investment company
Fidelity Retirement Shares in money 38,186,803 38,186,803
Government Money market fund
Market Portfolio*
Capital Growth Mix Shares in registered 30,186,105 35,778,877
Portfolio* investment companies
Fidelity Intermediate Shares in registered 19,107,885 18,833,705
Bond Fund* investment company
Neuberger & Berman Shares in registered 8,254,380 8,880,099
Guardian Fund investment companies
(table continued on next page)
16
</TABLE>
<PAGE>
<TABLE> Schedule I
USAIR, INC. Page 2 of 2
401(k) SAVINGS PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
----------------------------------------------------------
(Continued)
December 31, 1996
<CAPTION>
Identity Description Current
of Issue of Investment Cost Value
-------- ------------- ---- -------
<S> <C> <C> <C>
Moderation Mix Portfolio* Shares in registered $ 7,335,665 $ 8,417,652
investment companies
Income Mix Portfolio* Shares in registered 1,816,984 1,953,338
investment companies
Participant Loans Interest rates range - 18,447,842
from 7% to 10%
per annum
Fixed Income Fund* Guaranteed Investment 31,401,787 31,401,787
contracts, interest rates
range from 4.05% to 8.28%
per annum
------------ ------------
Total Investments $490,215,036 $583,704,030
============ ============
*Party in interest.
17
</TABLE>
<PAGE>
<TABLE> Schedule II
USAIR, INC.
401(k) SAVINGS PLAN
Item 27d - Schedule of Reportable Transactions
----------------------------------------------
Year Ended December 31, 1996
Aggregate transactions during the year ended December 31, 1996, with securities of the same issue,
accounting for greater than five percent of the value of Plan assets at the beginning of the period
were as follows:
<CAPTION>
Total Number of Total Number Realized
Purchases Purchases Sales of Sales Gain
--------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Fidelity Magellan Fund* $94,000,526 253 $83,243,459 253 $3,451,525
Fidelity Equity 57,545,078 253 29,073,718 248 2,555,719
Income Fund*
US Airways Common 114,651,717 254 89,168,253 250 9,147,044
Stock Fund*
Fidelity Spartan U.S. 25,019,265 251 11,376,703 238 994,513
Equity Index Portfolio*
Fidelity Retirement 74,209,275 258 68,765,879 254 -
Government Money
Market Portfolio*
Capital Growth 23,169,133 252 13,186,876 232 1,128,219
Mix Portfolio*
Fixed Income Fund* 12,827,244 210 9,866,258 136 -
*Party in interest.
18
</TABLE>
<PAGE>
Signature
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the trustees (or other persons who administer the
employee benefit plan) have duly caused this annual report to be
signed on their behalf by the undersigned thereunto duly
authorized.
USAir, Inc.
401(k) Savings Plan
By: /s/ James A. Hultquist
----------------------
James A. Hultquist
Controller
US Airways Group, Inc.
June 30, 1997
19
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
US Airways Group, Inc.:
We consent to the use of our report dated June 6, 1997, on the
statements of net assets available for plan benefits as of
December 31, 1996 and 1995, and the related statements of changes
in net assets available for plan benefits for the years then
ended for the USAir, Inc. 401(k) Savings Plan (the "Plan")
included in the Annual Report on Form 11-K relating to the Plan
filed by US Airways Group, Inc. for the years ended December 31,
1996 and 1995, and to the incorporation by reference of such
report in the Registration Statement, as amended, on Form S-8
pertaining to the Plan (File No. 33-44835).
KPMG Peat Marwick LLP
Washington, D.C.
June 30, 1997
20
