<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
US Airways Group, Inc.
(Commission file number: 1-8444)
and
US Airways, Inc.
(Commission file number: 1-8442)
(Exact names of registrants as specified in their charters)
Delaware US Airways Group, Inc. 54-1194634
(State of incorporation US Airways, Inc. 53-0218143
of both registrants) (I.R.S. Employer Identification Numbers)
US Airways Group, Inc.
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 872-5306
(Registrant's telephone number, including area code)
US Airways, Inc.
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 872-7000
(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 [ ]
As of July 31, 1997, there were outstanding approximately
80,154,000 shares of common stock of US Airways Group, Inc. and
1,000 shares of common stock of US Airways, Inc.
The registrant US Airways, 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>
US Airways Group, Inc.
and
US Airways, Inc.
Quarterly Report on Form 10-Q
Table of Contents
Part I. Financial Information Page
----
Item 1A. Financial Statements - US Airways Group, Inc.
Condensed Consolidated Statements of Operations
- Three Months and Six Months Ended June 30, 1997
and 1996 1
Condensed Consolidated Balance Sheets
- June 30, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Cash Flows
- Six Months Ended June 30, 1997 and 1996 3
Notes to Condensed Consolidated Financial Statements 4
Item 1B. Financial Statements - US Airways, Inc.
Condensed Consolidated Statements of Operations
- Three Months and Six Months Ended June 30, 1997
and 1996 7
Condensed Consolidated Balance Sheets
- June 30, 1997 and December 31, 1996 8
Condensed Consolidated Statements of Cash Flows
- Six Months Ended June 30, 1997 and 1996 9
Notes to Condensed Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
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<TABLE>
US Airways Group, Inc.
Condensed Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 1997 and 1996 (unaudited)
(in thousands, except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating Revenues
Passenger transportation $2,011,963 $1,957,169 $3,908,818 $3,634,710
Cargo and freight 44,714 40,066 89,045 78,243
Other 155,933 152,252 315,825 304,956
--------- --------- --------- ---------
Total Operating Revenues 2,212,610 2,149,487 4,313,688 4,017,909
Operating Expenses
Personnel costs 785,938 791,338 1,542,629 1,541,544
Aviation fuel 198,055 198,757 423,084 380,773
Commissions 165,208 160,832 309,799 293,137
Aircraft rent 113,784 92,072 234,717 205,263
Other rent and landing fees 99,344 105,350 199,687 205,700
Aircraft maintenance 104,873 90,484 201,754 190,457
Depreciation and amortization 94,772 79,135 171,783 160,661
Other, net 395,092 385,580 799,063 783,643
--------- --------- --------- ---------
Total Operating Expenses 1,957,066 1,903,548 3,882,516 3,761,178
--------- --------- --------- ---------
Operating Income 255,544 245,939 431,172 256,731
Other Income (Expense)
Interest income 23,435 16,158 47,277 29,677
Interest expense (64,177) (67,160) (128,685) (134,953)
Interest capitalized 2,861 1,973 5,636 3,422
Equity in earnings of affiliates 13,492 10,049 26,910 21,311
Other, net 809 (129) 15,028 (605)
--------- --------- --------- ---------
Other Income (Expense), Net (23,580) (39,109) (33,834) (81,148)
--------- --------- --------- ---------
Income Before Taxes 231,964 206,830 397,338 175,583
Provision for Income Taxes 26,378 6,055 39,094 7,101
--------- --------- --------- ---------
Net Income 205,586 200,775 358,244 168,482
Preferred Dividend Requirement (23,507) (22,522) (44,371) (44,796)
--------- --------- --------- ---------
Net Income Applicable to
Common Stockholders $ 182,079 $ 178,253 $ 313,873 $ 123,686
========= ========= ========= =========
Income per Common Share
Primary $2.46 $2.71 $4.48 $1.90
Fully diluted $1.92 $1.91 $3.37 $1.55
Shares Used for Computation (000)
Primary 74,149 65,863 69,996 65,266
Fully diluted 104,348 105,019 104,688 95,448
See accompanying Notes to Condensed Consolidated Financial Statements.
1
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<TABLE>
US Airways Group, Inc.
Condensed Consolidated Balance Sheets
June 30, 1997(unaudited) and December 31, 1996
(dollars in thousands, except per share amounts)
<CAPTION>
June 30, December 31,
1997 1996
--------- ---------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $1,135,750 $ 950,966
Short-term investments 482,118 635,839
Receivables, net 408,077 337,025
Materials and supplies, net 238,065 248,774
Prepaid expenses and other 140,571 137,590
--------- ---------
Total Current Assets 2,404,581 2,310,194
Property and Equipment
Flight equipment 5,200,979 5,202,057
Ground property and equipment 1,127,506 1,108,648
Less accumulated depreciation and amortization (2,599,954) (2,470,337)
--------- ---------
3,728,531 3,840,368
Purchase deposits 84,620 77,620
--------- ---------
Total Property and Equipment, Net 3,813,151 3,917,988
Other Assets
Goodwill, net 486,486 494,511
Other intangibles, net 279,060 283,309
Other assets, net 531,017 525,409
--------- ---------
Total Other Assets 1,296,563 1,303,229
--------- ---------
$7,514,295 $7,531,411
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Current maturities of long-term debt $ 103,295 $ 84,259
Accounts payable 363,536 438,951
Traffic balances payable and unused tickets 835,734 715,576
Accrued aircraft rent 487,448 510,752
Other accrued expenses 797,703 1,099,181
--------- ---------
Total Current Liabilities 2,587,716 2,848,719
Long-Term Debt, Net of Current Maturities 2,546,146 2,615,780
Deferred Credits and Other Liabilities
Deferred gains, net 346,137 359,748
Postretirement benefits other than pensions, noncurrent 1,130,596 1,093,519
Noncurrent employee benefit liabilities and other 624,934 439,308
--------- ---------
Total Deferred Credits and Other Liabilities 2,101,667 1,892,575
Commitments and Contingencies
Redeemable Cumulative Convertible Preferred Stock
Series A, 358,000 shares issued and outstanding, no par value 358,000 358,000
Series F, 30,000 shares issued and outstanding as of - 300,000
December 31, 1996, no par value
Series T, 10,000 shares issued and outstanding as of - 100,719
December 31, 1996, no par value
Stockholders' Equity (Deficit)
Series B cumulative convertible preferred stock, 213,128 213,128
no par value, 4,263,000 depositary shares issued
Common stock, par value $1 per share, authorized 80,111 64,306
150,000,000 shares, issued and outstanding
80,111,000 and 64,306,000 shares, respectively
Paid-in capital 1,677,513 1,386,557
Retained earnings (deficit) (1,925,097) (2,117,838)
Common stock held in treasury - -
Deferred compensation (89,680) (95,326)
Adjustment for minimum pension liability (35,209) (35,209)
--------- ---------
Total Stockholders' Equity (Deficit) (79,234) (584,382)
--------- ---------
$7,514,295 $7,531,411
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements.
2
</TABLE>
<PAGE>
<TABLE>
US Airways Group, Inc.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996 (unaudited)
(in thousands)
<CAPTION>
1997 1996
--------- -------
<S> <C> <C>
Cash and cash equivalents beginning of period $ 950,966 $881,854
--------- -------
Cash flows from operating activities
Net income 358,244 168,482
Adjustments to reconcile net income to net cash
provided by (used for) operating activities
Depreciation and amortization 171,783 160,661
Loss (gain) on disposition of property (16,521) 1,452
Amortization of deferred gains and credits (13,842) (13,832)
Other 2,800 43,846
Changes in certain assets and liabilities
Decrease (increase) in receivables (71,052) (101,039)
Decrease (increase) in materials and supplies,
prepaid expenses and pension assets 1,926 (30,933)
Increase (decrease) in traffic balances payable
and unused tickets 120,158 220,374
Increase (decrease) in accounts payable, accrued
aircraft rent and other accrued expenses (215,063) (19,268)
Increase (decrease) in postretirement benefits other than
pensions, noncurrent 37,077 39,953
--------- -------
Net cash provided by (used for) operating activities 375,510 469,696
Cash flows from investing activities
Aircraft acquisitions and purchase deposits, net (12,395) (10,987)
Additions to other property (75,609) (77,163)
Proceeds from disposition of property 45,837 7,067
Decrease (increase) in short-term investments 148,343 (442,697)
Decrease (increase) in restricted cash and investments 9,080 (1,466)
Other 4,409 (11,444)
--------- -------
Net cash provided by (used for) investing activities 119,665 (536,690)
Cash flows from financing activities
Issuance of debt - 103,002
Reduction of debt (50,598) (144,671)
Issuance of common stock 24,804 2,198
Sale of treasury stock 1,031 -
Redemption of preferred stock, including redemption premiums (126,173) -
Dividends paid on preferred stock (159,455) -
--------- -------
Net cash provided by (used for) financing activities (310,391) (39,471)
--------- -------
Net increase (decrease) in cash and cash equivalents 184,784 (106,465)
--------- -------
Cash and cash equivalents end of period $1,135,750 $775,389
========= =======
Noncash investing and financing activities
Conversion of preferred stock into common stock $ 283,723 $ -
Treasury stock acquired for tax withholding on employee
stock grants $ 1,163 $ -
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 $ - $ 13,784
Underwriter's fees - refinancing of debt secured by aircraft $ - $ 2,488
Supplemental Information
Cash paid during the period for interest, net of
amount capitalized $ 125,136 $129,918
Net cash paid during the period for income taxes $ 32,770 $ 1,226
See accompanying Notes to Condensed Consolidated Financial Statements.
3
</TABLE>
<PAGE>
US Airways Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying Condensed Consolidated Financial Statements
include the accounts of US Airways Group, Inc. ("US Airways Group"
or the "Company") and its wholly-owned subsidiaries US Airways,
Inc. ("US Airways"), Piedmont Airlines, Inc., PSA Airlines, Inc.,
Allegheny Airlines, Inc., US Airways Leasing and Sales, Inc., US
Airways Fuel Corporation, Material Services Company, Inc. and The
OR Group, Inc. ( "OR Group").
OR Group was a wholly-owned subsidiary of US Airways Group
that was incorporated in February 1996 and dissolved in the fourth
quarter of 1996. OR Group provided resource allocation consulting
services and decision-making support systems to US Airways, which
assumed these activities upon OR Group's dissolution.
US Airways terminated its Airline Technical Services, LLC
joint venture with a subsidiary of British Airways Plc ("British
Airways") effective January 1997. No material charges resulted from
its termination.
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 1996 amounts have been reclassified to conform with
1997 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, 1996.
2. Income Per Common Share
For the three months and six months ended June 30, 1997,
approximately 2,463,000 incremental shares of Common Stock were
included in the calculation of fully diluted income per common
share as the result of applying the "treasury stock method" to
outstanding stock options. For both periods, the effects of
assuming conversion of the Company's outstanding preferred stock
issuances were dilutive and therefore included in the calculation,
except for shares of Series F preferred stock which were redeemed
in May 1997 (See Note 3, "Redeemable Preferred Stock").
For both the three months and six months ended June 30, 1997,
the income effects of assuming conversion of dilutive preferred
stock issuances were approximately $18,053,000 and $38,561,000,
respectively. For the same periods, the share effects of assuming
conversion of dilutive preferred stock issuances were approximately
29,998,000 and 34,054,000 shares, respectively.
4
<PAGE>
3. Redeemable Preferred Stock
On May 21, 1997, British Airways converted 28,059.364 shares
of Series F Preferred Stock into 14,458,851 shares of Common Stock,
which it then sold. On May 22, 1997, the Company redeemed the
remaining outstanding shares of Series F Preferred Stock and all of
the Series T Preferred Stock (both series were held exclusively by
British Airways) for $126.2 million (which included a redemption
premium of $5.2 million for the shares of Series F Preferred Stock
redeemed and $0.8 million for the Series T Preferred Stock). The
Company's board of directors declared regular quarterly dividends
on the Series F and Series T Preferred Stock prior to the
conversion and redemption transactions. As of May 22, 1997, British
Airways held no ownership interest in the Company.
During the first six months of 1997, the Company paid
dividends totaling $108.2 million on its Series A, Series F and
Series T Preferred Stock (see Note 7 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 for a description
of each series), including payment of all dividends in arrears.
4. Stockholders' Equity
On April 17, 1997, the Company paid dividends of $46.6 million
on its Series B Preferred Stock. With that payment, the Company had
paid all dividends in arrears on its Series B Preferred Stock. The
Company paid regular quarterly dividends on its Series B Preferred
Stock on May 15, 1997.
On July 23, 1997, the Company's board of directors declared
regular quarterly dividends of $4.7 million on its Series B
Preferred Stock, to be paid on August 15, 1997.
5. British Airways Plc Investment
As discussed in Note 3, "Redeemable Preferred Stock," British
Airways held no ownership interest in US Airways Group as of May
22, 1997. As of December 31, 1996, the preferred stock held by
British Airways represented approximately 23% of the total voting
interest in the Company.
6. Select Financial Information - USAM Investments
As of June 30, 1997, USAM owned 11% of the Galileo
International Partnership ("GIP"), approximately 11% of the Galileo
Japan Partnership ("GJP") and approximately 21% of the Apollo
Travel Services Partnership ("ATS"). The following is summarized
financial information for these partnerships (combined, in
millions):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
Service revenues $415 $375 $829 $751
Cost and expenses 328 304 646 600
---- ---- ---- ----
Net earnings $ 87 $ 71 $183 $151
==== ==== ==== ====
USAM received distributions from GIP, GJP and ATS of $2.1
million, $0.2 million and $4.6 million, respectively, during the
first six months of 1997. USAM received distributions from GIP, GJP
and ATS of $1.5 million, $0.1 million and $39.8 million (including
a special distribution from
5
<PAGE>
ATS of $33.7 million during the second quarter of 1996),
respectively, during the first six months of 1996.
See Note 8, "Subsequent Events," regarding recent events
involving USAM's ATS and GIP investments.
7. Nonrecurring Items
The Company's results for the first six months of 1997 include
two Nonrecurring items totaling $26.8 million net expense
recognized during the second quarter. US Airways reversed $1.5
million of previously accrued lease obligations upon subleasing an
additional British Aerospace BAe-146-200 aircraft (recorded as a
credit to Aircraft rent expense).
US Airways also recognized nonrecurring expenses totaling
$28.3 million related to efficiency measures announced during May
1997: $6.9 million recorded in Personnel costs related to estimated
employee severance payments; $2.9 million recorded in Other rent
and landing fees related primarily to the write-off of lease
obligations at certain facilities to be abandoned (net of any
anticipated sublease revenues), and; $18.5 million recorded in
Depreciation and amortization related primarily to the write-down
of to-be-grounded McDonnell Douglas DC-9-30 ("DC-9") aircraft to
estimated fair market value. The efficiency measures include the
grounding of 22 excess aircraft, including five Fokker F28-4000 and
17 DC-9 aircraft, the elimination of unprofitable jet service to
nine cities (effective September 1997) and the elimination of other
unprofitable routes, closing the flight crew base in Los Angeles
and closing several reservations and maintenance facilities
(operations at these locations will be consolidated into other
existing facilities).
8. Subsequent Events
On July 30, 1997, Galileo International, Inc. ("Galileo")
completed an initial public offering ("IPO") and used the proceeds,
together with the proceeds of bank financing, to purchase ATS.
Immediately preceding the IPO, GIP was merged with and into a
wholly-owned limited liability company subsidiary of Galileo and
USAM received shares in Galileo in the same proportion as its
partnership interest in GIP. As part of the IPO, USAM sold some of
its Galileo shares and its interest in Galileo was reduced from 11%
to approximately 6.7%. USAM received proceeds of $62.2 million and
recognized a pre-tax gain of approximately $48 million from the
sell-down of its interest in Galileo and received proceeds of
$162.0 million and recognized a pre-tax gain of approximately $130
million in connection with the ATS sale.
USAM will apply the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," for its remaining investment in
Galileo, which will be classified as "available for sale."
(this space intentionally left blank)
6
<PAGE>
<TABLE>
US Airways, Inc.
Condensed Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 1997 and 1996 (unaudited)
(in thousands)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating Revenues
Passenger transportation $1,856,497 $1,802,522 $3,609,811 $3,354,101
Cargo and freight 43,651 39,087 86,952 76,395
US Airways Express transportation revenues 156,896 - 301,467 -
Other 151,423 151,988 300,590 302,716
--------- --------- --------- ---------
Total Operating Revenues 2,208,467 1,993,597 4,298,820 3,733,212
Operating Expenses
Personnel costs 744,648 752,284 1,460,627 1,466,035
Aviation fuel 187,512 188,080 400,451 360,840
Commissions 153,149 150,229 288,850 273,764
Aircraft rent 99,039 80,507 205,246 182,922
Other rent and landing fees 94,711 100,797 190,293 197,154
Aircraft maintenance 88,956 74,072 170,318 160,611
Depreciation and amortization 90,967 75,259 164,139 152,997
US Airways Express capacity purchases 121,537 - 242,460 -
Other, net 369,007 365,802 743,358 741,232
--------- --------- --------- ---------
Total Operating Expenses 1,949,526 1,787,030 3,865,742 3,535,555
--------- --------- --------- ---------
Operating Income 258,941 206,567 433,078 197,657
Other Income (Expense)
Interest income 23,740 16,071 47,499 29,481
Interest expense (64,916) (70,621) (132,166) (142,068)
Interest capitalized 2,861 1,973 5,636 3,422
Equity in earnings of affiliates 13,492 10,049 26,910 21,311
Other, net 1,107 31 15,154 (371)
--------- --------- --------- ---------
Other Income (Expense), Net (23,716) (42,497) (36,967) (88,225)
--------- --------- --------- ---------
Income Before Taxes 235,225 164,070 396,111 109,432
Provision for Income Taxes 33,439 3,502 50,696 3,794
--------- --------- --------- ---------
Net Income $ 201,786 $ 160,568 $ 345,415 $ 105,638
========= ========= ========= =========
See accompanying Notes to Condensed Consolidated Financial Statements.
7
</TABLE>
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<TABLE>
US Airways, Inc.
Condensed Consolidated Balance Sheets
June 30, 1997 (unaudited) and December 31, 1996
(dollars in thousands, except per share amount)
<CAPTION>
June 30, December 31,
1997 1996
---- ----
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $1,134,728 $ 950,134
Short-term investments 482,118 635,839
Receivables, net 406,154 325,478
Receivables from related parties, net 43,191 -
Materials and supplies, net 207,200 211,184
Prepaid expenses and other 133,224 129,380
--------- ---------
Total Current Assets 2,406,615 2,252,015
Property and Equipment
Flight equipment 4,970,435 4,972,873
Ground property and equipment 1,103,504 1,087,178
Less accumulated depreciation and amortization (2,505,043) (2,381,844)
--------- ---------
3,568,896 3,678,207
Purchase deposits 84,620 77,620
--------- ---------
Total Property and Equipment, Net 3,653,516 3,755,827
Other Assets
Goodwill, net 486,486 494,511
Other intangibles, net 279,029 283,274
Other assets, net 610,147 606,906
--------- ---------
Total Other Assets 1,375,662 1,384,691
--------- ---------
$7,435,793 $7,392,533
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current Liabilities
Current maturities of long-term debt $ 103,204 $ 84,171
Accounts payable 343,951 420,388
Payable to related parties, net - 193,860
Traffic balances payable and unused tickets 835,734 715,576
Accrued aircraft rent 478,900 495,662
Other accrued expenses 782,365 1,073,773
--------- ---------
Total Current Liabilities 2,544,154 2,983,430
Long-Term Debt, Net of Current Maturities 2,545,231 2,614,818
Deferred Credits and Other Liabilities
Deferred gains, net 343,378 356,583
Postretirement benefits other than pensions, noncurrent 1,130,346 1,093,269
Noncurrent employee benefit liabilities and other 612,424 429,588
--------- ---------
Total Deferred Credits and Other Liabilities 2,086,148 1,879,440
Commitments and Contingencies
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) (2,120,663) (2,466,078)
Adjustment for minimum pension liability (35,209) (35,209)
--------- ---------
Total Stockholder's Equity (Deficit) 260,260 (85,155)
--------- ---------
$7,435,793 $7,392,533
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements.
8
</TABLE>
<PAGE>
<TABLE>
US Airways, Inc.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996 (unaudited)
(in thousands)
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash and cash equivalents beginning of period $ 950,134 $879,613
--------- -------
Cash flows from operating activities
Net income 345,415 105,638
Adjustments to reconcile net income to net
cash provided by (used for) operating activities
Depreciation and amortization 164,139 152,997
Loss (gain) on disposition of property (16,590) 1,421
Amortization of deferred gains and credits (13,205) (13,206)
Other (1,027) 22,789
Changes in certain assets and liabilities
Decrease (increase) in receivables (123,867) (101,811)
Decrease (increase) in materials and supplies, prepaid expenses
and pension assets (4,499) (25,530)
Increase (decrease) in traffic balances payable and unused tickets 120,158 232,026
Increase (decrease) in accounts payable, accrued
aircraft rent and other accrued expenses (396,353) 53,255
Increase (decrease) in postretirement benefits other than
pensions, noncurrent 37,077 39,953
--------- -------
Net cash provided by (used for) operating activities 111,248 467,532
Cash flows from investing activities
Aircraft acquisitions and purchase deposits, net (12,395) (10,987)
Additions to other property (70,999) (73,628)
Proceeds from disposition of property 45,462 6,950
Decrease (increase) in short-term investments 148,343 (442,697)
Decrease (increase) in restricted cash and investments 9,080 (1,466)
Other 4,409 (11,444)
--------- -------
Net cash provided by (used for) investing activities 123,900 (533,272)
Cash flows from financing activities
Issuance of debt - 103,002
Reduction of debt (50,554) (142,517)
--------- -------
Net cash provided by (used for) financing activities (50,554) (39,515)
--------- -------
Net increase (decrease) in cash and cash equivalents 184,594 (105,255)
--------- -------
Cash and cash equivalents end of period $1,134,728 $774,358
========= =======
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 $ - $ 68,640
Issuance of debt - aircraft acquisitions $ - $ 13,784
Underwriter's fees - refinancing of debt secured by aircraft $ - $ 2,488
Supplemental Information
Cash paid during the period for interest, net of amount capitalized $ 125,093 $127,571
Net cash paid during the period for income taxes $ 32,678 $ 753
See accompanying Notes to Condensed Consolidated Financial Statements.
9
</TABLE>
<PAGE>
US Airways, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying Condensed Consolidated Financial Statements
include the accounts of US Airways, Inc. ("US Airways") and its
wholly-owned subsidiary USAM Corp. ("USAM"). US Airways is a
wholly-owned subsidiary of US Airways Group, Inc. ("US Airways
Group").
US Airways terminated its Airline Technical Services, LLC
joint venture with a subsidiary of British Airways Plc effective
January 1997. No material charges resulted from its termination.
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 1996 amounts have been reclassified to conform with
1997 classifications.
These interim period Condensed Consolidated Financial
Statements should be read in conjunction with the Consolidated
Financial Statements contained in US Airways' Annual Report on Form
10-K for the year ended December 31, 1996.
2. Select Financial Information - USAM Investments
Please refer to Note 6 in US Airways Group's "Notes to
Condensed Consolidated Financial Statements" on Page 5 of this
report.
3. Nonrecurring Items
Please refer to Note 7 in US Airways Group's "Notes to
Condensed Consolidated Financial Statements" on Page 6 of this
report.
4. Subsequent Events
Please refer to Note 8 in US Airways Group's "Notes to
Condensed Consolidated Financial Statements" on Page 6 of this
report.
(this space intentionally left blank)
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
General
Item 2 of this report should be read in conjunction with Item
7 of US Airways Group, Inc.'s ("US Airways Group" or the "Company")
and US Airways, Inc.'s ("US Airways") Annual Report to the United
States Securities and Exchange Commission ("SEC") on Form 10-K for
the year ended December 31, 1996. The information contained herein
is not a comprehensive management overview and analysis of the
financial condition and results of operations of the Company and US
Airways, but rather updates disclosures made in the aforementioned
filing.
Certain information contained in Item 2 of this report should
be considered "forward-looking information" which is subject to a
number of risks and uncertainties. The preparation of forward-
looking information requires the use of estimates of future
revenues, expenses, activity levels and economic and market
conditions, many of which are outside the Company's control. Among
the specific factors that could cause actual results to differ
materially from those set forth in the forward-looking information
are the following: labor costs, aviation fuel costs, competitive
pressures from low cost competition, weather conditions, consumer
perceptions of the Company's products, demand for air
transportation and other risks listed from time to time in the
Company's reports to the SEC. Other factors and assumptions not
identified above are also involved in the preparation of forward-
looking information, and the failure of such other factors and
assumptions to be realized may also cause actual results to differ
materially from those discussed. The Company assumes no obligation
to update such estimates to reflect actual results, changes in
assumptions or changes in other factors affecting such estimates.
Except where noted, the following discussion relates primarily
to the financial condition, results of operations and future
prospects of US Airways. US Airways is the Company's principal
subsidiary, accounting for approximately 92% of the Company's
operating revenues for the first six months of 1997 on a
consolidated basis.
Financial Overview
For the second quarter of 1997, the Company's operating income
was $255.5 million, net income was $205.6 million (the Company's
Condensed Consolidated Statements of Operations are contained in
Part I, Item 1A of this report) and income per common share (or
"EPS") was $2.46 and $1.92 on a primary and fully diluted basis,
respectively. The Company's second quarter 1997 results for
operating revenues, operating income and net income were company
records for a quarter. For the first six months of 1997, operating
income was $431.2 million, net income was $358.2 million and EPS
was $4.48 on a primary basis and $3.37 on a fully diluted basis.
See also "Results of Operations" below.
US Airways recorded net income of $201.8 million and $345.4
million for the second quarter of 1997 and for the first six months
of 1997, respectively. US Airways' financial results include the
financial results of its wholly-owned subsidiary USAM Corp.
("USAM") and are significantly influenced by related party
transactions.
Update on US Airways' Competitive Position
Two of US Airways' three primary low cost, low fare
competitors, Southwest Airlines, Inc. ("Southwest") and ValuJet
Airlines, Inc. ("ValuJet"), increased service within the Eastern
United States during the first half of 1997. These competitors,
along with "Delta Express," each have a significant cost advantage
over US Airways, particularly with regard to personnel costs. US
Airways' cost structure continues to be the highest of all major
domestic air carriers. In addition,
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other low cost, low fare air carriers have introduced and/or
expanded operations within the Eastern U.S. during the first six
months of 1997. The Company's airline subsidiaries have a majority
of their operations within the Eastern U.S. By the end of July
1997, US Airways had low cost, low fare competition overlapping
approximately 59% of its traffic base compared to approximately 43%
as of March 1, 1997. Direct competition with low cost, low fare air
carriers or operations has typically resulted in the dilution of
yield realized by the Company's airline subsidiaries, depending on
the number of markets affected.
Southwest added one-stop same-plane transcontinental service
between Baltimore/ Washington International Airport ("BWI") and
Oakland and Los Angeles (see below for recent developments
regarding US Airways' operations at BWI) during June 1997. In
addition, Southwest has announced that it will add additional
service at Tampa, Orlando, Nashville, Providence, Kansas City,
Albuquerque and Austin during September 1997.
ValuJet resumed service to Charlotte on May 15, 1997, but has
announced that it will discontinue this service September 3, 1997.
In addition, ValuJet recently reinstated service to Washington's
Dulles International Airport, Philadelphia and Boston. The
Company's airline subsidiaries have operations at all four
locations and the major airports at Charlotte and Philadelphia are
two of US Airways' hubs. ValuJet, which operated 51 aircraft prior
to its service reduction during the summer of 1996, operated 15
aircraft as of December 31, 1996 and currently operates 30
aircraft. Prior to Valujet's service reduction, more than 35% of US
Airways' traffic base overlapped Valujet's route structure. The
Company is unable to predict whether ValuJet's capacity in markets
also served by US Airways will eventually match or exceed previous
levels.
The route network and capacity of Delta Express, the low cost,
low fare product offered by Delta Airlines, Inc. ("Delta"), has
remained relatively unchanged since January 1997. The Company is
unable to predict if Delta will expand Delta Express, which
currently operates exclusively within the Eastern U.S.
During April and May of 1997, the Company's senior management
engaged in a series of presentations to the Company's employees to
explain and emphasize their view that the Company must obtain a
competitive cost structure in order to implement the strategy of
becoming an effective global competitor. In particular, senior
management identified reductions in personnel costs as being the
key to the implementation of a competitive cost structure;
generally, a labor cost structure that is comparable with US
Airways' major competitors for mainline operations-American
Airlines, Inc., Delta, Northwest Airlines, Inc. and United Air
Lines Inc.-and Delta Express and Southwest for US Airways' low cost
response. In the presentations, senior management stated its view
that a competitive cost structure was necessary in order for the
Company to compete with low cost air carriers such as Southwest,
Delta Express and ValuJet, which have continued their rapid
expansion in Eastern U.S. markets, and for the Company to be in a
position to proceed with its planned purchase of approximately 400
Airbus Industrie ("Airbus") aircraft. The Company's senior
management further indicated that not obtaining a competitive cost
structure could result in, among other things: (i) downsizing BWI
operations; (ii) reducing Florida service; (iii) terminating
unprofitable east/west and north/south routes; (iv) reducing
aircraft types and achieving aircraft fleet rationalization; (v)
not affirming the order for Airbus aircraft, and; (vi) making other
operational changes to implement a "right-sizing" strategy. If and
to the extent that the alternatives pursued include reducing
operations, the Company could incur charges such as those related
to any resulting decrease in value of assets employed in such
operations. No final decisions have been made with respect to such
alternatives and, accordingly, the Company cannot determine the
amount of any such possible charges. As of the date of this report,
the Company has been unsuccessful in its attempts to achieve
meaningful wage and productivity changes from US Airways' organized
labor groups.
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<PAGE>
Efficiency Measures
The Company announced certain "efficiency measures" during May
1997. These efficiency measures primarily relate to US Airways
reducing flying on some of its most unprofitable routes and closing
excess facilities. The actions are part of the Company's plan to
ensure that it has the strongest possible foundation as decisions
are made about its ultimate strategic direction (as discussed in
the preceding paragraph). These actions include:
- Removing 22 excess aircraft from US Airways' operating
fleet, including US Airways' last five Fokker F28-4000
aircraft and 17 older McDonnell Douglas DC-9-30 ("DC-9")
aircraft in the coming months;
- Ending unprofitable jet service to nine cities and
eliminating other routes that have not been profitable;
- Reducing capacity (as measured by available seat miles or
"ASMs"), resulting in a year-over-year decrease of
approximately 6.5% by Summer 1998;
- Closing the flight crew base in Los Angeles for pilots and
flight attendants by February 1998 (US Airways maintains 7
crew bases in other locations);
- Consolidating reservations operations by closing
reservations centers in Utica (NY) and Nashville in October
1997 (US Airways maintains reservations centers in seven
other cities), and;
- Closing maintenance facilities at Greensboro (NC), Winston-
Salem (NC) (except for a landing gear shop) and Roanoke (VA)
by the end of 1998 (maintenance work currently performed at
these cities will be shifted to other locations).
The Company is working closely with union leaders and employee
groups to minimize to the greatest degree possible the impact of
changes in operations on affected employees. However, the Company
expects these actions will result in the furlough of approximately
1,150 US Airways employees.
These efficiency measures resulted in nonrecurring expenses
totaling $28.3 million (see "Results of Operations" below).
Although the Company believes that the reduction in capacity
resulting from the aircraft retirements may result in decreased
operating revenues, it anticipates that these actions will result
in relative decreases in certain operating expenses, primarily
those linked to capacity and traffic levels.
US Airways moved a majority of its international operations at
BWI to Philadelphia effective June 15, 1997. These schedule
adjustments were made to further enhance the efficiency of US
Airways' route network and take advantage of the traffic base and
connection opportunities provided by US Airways' facilities at
Philadelphia, US Airways' primary international gateway. These
schedule adjustments have resulted in the elimination of
approximately 240 full-time and part-time customer service and
maintenance positions at BWI.
Resumption of Regular Dividend Payments on Preferred Stock
and British Airways' Divestiture
On March 26, 1997, the Company paid dividends totaling $34.8
million to the holders of its Series A, Series F and Series T
Preferred Stock and the Company's board of directors declared
dividends of $46.6 million on the Company's Series B Preferred
Stock (see Note 7 and Note 8 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996 for a description of each
of the Company's preferred stock issuances). After payment of the
Series B Preferred Stock dividends during May 1997, the Company had
paid all dividends in arrears (including penalty dividends on the
deferred dividends) and had resumed regular quarterly dividend
payments on all of its outstanding preferred stock issuances.
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<PAGE>
During May 1997, British Airways Plc ("British Airways")
converted 28,059.364 shares of Series F Preferred Stock into
14,458,851 shares of Common Stock, which it then sold. Also during
May 1997, the Company redeemed the remaining shares of Series F
Preferred Stock and all of the Series T Preferred Stock (both
series were held exclusively by British Airways). The Company's
board of directors declared regular quarterly dividends on the
Series F and Series T Preferred Stock prior to the conversion and
redemption transactions. After the conversion and redemption
transactions, British Airways held no ownership interest in the
Company (see also "Liquidity and Capital Resources" below).
Future dividend payments by the Company are primarily
dependent on the Company's future financial performance and
decisions by its board of directors. There can be no assurance that
the Company's current positive financial performance will continue
or if the Company will be able to maintain a capital surplus
position based on its balance sheet, as defined under the laws of
the State of Delaware.
Sections 382 and 383 of the Internal Revenue Code and the
regulations thereunder impose limitations on the utilization of net
operating loss and credit carryforwards if a corporation has had a
"change of control" as defined therein. Generally, a change of
control occurs if the corporation experiences more than a 50%
ownership change over a rolling three year testing period. In
general, if a corporation has a change of control, the amount of
loss carryforwards and credits that can be used in any subsequent
year are limited to an amount equal to the product of the value of
the corporation's stock immediately prior to the change multiplied
by the "long-term tax exempt rate," as defined by the U.S. Internal
Revenue Service. The Company does not believe it had experienced a
change of control before the British Airways transactions discussed
above, nor does it believe that those transactions caused a change
of control. As of December 31, 1996 the Company had approximately
$1.5 billion unused net operating loss carryforward, $375 million
alternative net operating loss carryforward, $50 million of
investment tax credits, and $33 million alternative minimum tax
credits. The Company expects to use a significant portion of these
carryforwards during 1997.
USAM's Investments
On July 30, 1997, Galileo International, Inc. ("Galileo")
completed an initial public offering ("IPO") and used the proceeds,
together with the proceeds of bank financing, to purchase Apollo
Travel Services Partnership ("ATS"). USAM owned approximately 21%
of ATS. Immediately preceding the IPO, Galileo International
Partnership ("GIP") was merged with and into a wholly-owned limited
liability company subsidiary of Galileo and USAM received shares in
Galileo in the same proportion as its partnership interest in GIP.
As part of the IPO, USAM sold some of its Galileo shares and its
interest in Galileo was reduced from 11% to approximately 6.7%.
USAM received proceeds of $62.2 million and recognized a pre-tax
gain of approximately $48 million from the sell-down of its
interest in Galileo and received proceeds of $162.0 million and
recognized a pre-tax gain of approximately $130 million in
connection with the ATS sale
USAM will apply the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," for its remaining investment in
Galileo, which will be classified as "available for sale."
US Airways Shuttle
On March 31, 1997, the Company exercised its right to commence
a procedure to value Shuttle, Inc. ("Shuttle"), the owner of the US
Airways Shuttle, in accordance with the agreement between the
Company, lenders to Shuttle and Shuttle's stockholders. Following
the establishment of such a value, the Company has an option to
purchase Shuttle at the established value. If the Company declines
to do so, it will continue to have a right of first refusal with
respect to any other agreement
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to purchase the assets or capital stock of Shuttle. Initiation of
the valuation procedure does not represent a commitment by the
Company to purchase Shuttle and there can be no assurance that any
such purchase will occur. Any decision by the Company to purchase
Shuttle either through the valuation procedure or the right of
first refusal will be made based on prices and related business
considerations.
The US Airways Shuttle currently operates a fleet of 12 Boeing
727-200 aircraft and provides high frequency service from New York
to Boston and Washington, DC.
Other Information
On August 5, 1997, President Clinton signed legislation
extending federal excise taxes on air transportation from October
1, 1997 through September 30, 2007. In addition, effective
October 1, 1997, the legislation reduces the domestic ticket tax
from the current level of 10% of fare to 9.0% (decreasing to 8.0%
on October 1, 1998 and to 7.5% on October 1, 1999), adds a new
segment tax of $1.00 (which increases to $3.00 by the year 2002),
changes the current $6.00 international departure tax to $12.00 and
adds a $12.00 international arrival tax. The legislation also adds
a new 7.5% tax effective October 1, 1997 on certain purchases of
frequent traveler miles from domestic air carriers. The Company
does not believe that the new ticket tax structure will have a
material adverse effect on its liquidity, financial condition or
results of operations.
US Airways' added a second daily non-stop flight between
Philadelphia and Paris on June 14, 1997. However, US Airways will
discontinue service from Boston to Frankfurt during October 1997.
US Airways, however, continues to explore additional international
opportunities and has filed with the Department of Transportation
("DOT") to serve London's Heathrow Airport from Boston, Charlotte,
Philadelphia and Pittsburgh.
During July 1997, electronic ticketing sales for travel on US
Airways and its regional affiliates reached 19% of all ticket
sales. The Company, whose "E-ticket" program was launched in April
1996, believes that electronic ticketing helps reduce distribution
costs.
On January 30, 1997, US Airways' passenger service employees
voted against representation by the Communications Workers of
America ("CWA") in an election monitored by the National Mediation
Board ("NMB"). However, on June 20, 1997, the NMB ordered that a
new representation election be held for these employees, currently
approximately 9,200 employees, because of alleged interference by
US Airways with the January election. US Airways has filed an
action challenging this order in federal court. The re-run election
is currently scheduled for August 1997 with ballots scheduled to be
counted in September 1997.
The Federal Aviation Administration has proposed new
regulations that would require certain commercial passenger
aircraft to have cargo hold fire detection/suppression systems. The
proposed regulations, subject to DOT approval, would affect US
Airways' Boeing 737-Series and McDonnell Douglas MD-80 and DC-9
aircraft (the other aircraft types in US Airways' operating fleet
already have such systems). US Airways estimates that compliance
with the proposal, as currently drafted, would cost approximately
$22 million over the recommended three-year phase-in period. The
Company is unable to predict whether or when the proposed
regulations will be adopted or if any such regulations, if adopted,
would differ materially from the current proposed regulations.
Results of Operations
The following section includes information related to changes
in certain line categories on the Company's Condensed Consolidated
Statements of Operations and in select US Airways operating
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<PAGE>
and financial statistics. Except where noted, statistics refer to
scheduled service only (excludes charter service).
Three Month Period Ended June 30, 1997
Compared With the
Three Month Period Ended June 30, 1996
Operating Revenues (See also "Select US Airways Operating and
Financial Statistics" below):
Passenger Transportation - US Airways' Passenger transportation
revenues increased $54.0 million, or 3.0%, resulting from a 9.1%
increase in revenue passenger miles ("RPMs") partially offset by
the effects of a 5.6% decrease in yield. The second quarter has
historically been the Company's best quarter in terms of Passenger
transportation revenues primarily due to higher levels of business
traffic and North-South leisure traffic.
Cargo and freight - Increased primarily due to volume factors.
Other Operating Revenues - Revenues from partners in US Airways
Dividend Miles frequent traveler program and rebooking fees both
increased. Wet lease revenues decreased approximately $3.7 million
quarter-over-quarter due to the phase-out of this arrangement with
British Airways during second quarter 1996. Changes in components
of Other operating revenues are largely offset by correlating
changes in operating expenses, primarily those recorded as Other
operating expenses, net. US Airways' results include certain
transactions with related parties that are eliminated at the US
Airways Group level.
US Airways' Operating Revenues include the line item "US
Airways Express transportation revenues." Effective October 1,
1996, US Airways began purchasing all of the capacity (ASMs)
generated by the Company's three wholly-owned regional air carriers
and, concurrently, recognizes the passenger transportation revenues
that result from passengers being carried by these companies. The
rate per ASM that US Airways pays is based on estimates of the
costs incurred to produce the capacity. The program is designed to
reflect the reality of US Airways' relationship with the Company's
regional airline subsidiaries-US Airways controls the markets these
air carriers operate in, the marketing programs and the fares
charged. US Airways' revenues from this program are reclassified to
Passenger transportation revenues and the related expenses
eliminated during the consolidation of the Company's results of
operations.
Operating Expenses (see also "Select US Airways Operating and
Financial Statistics" below):
Nonrecurring Items - US Airways recognized nonrecurring expenses
totaling $28.3 million during second quarter 1997 related to
certain efficiency measures (see "Efficiency Measures" above). The
table below shows where these Nonrecurring items were recorded in
the Company's Condensed Consolidated Statements of Operations
(dollars in millions).
Severance
payments Aircraft Facilities Totals
-------- -------- ---------- ------
Operating Expenses
Personnel costs $6.9 - - $ 6.9
Other rent and landing fees - - $2.9 2.9
Depreciation and amortization - $18.1 .4 18.5
--- ---- --- ----
$6.9 $18.1 $3.3 $28.3
=== ==== === ====
The Aircraft charge relates to the write-down of to-be-
grounded DC-9 aircraft to estimated fair market value and the
Facilities charges relate primarily to the write-off of leasehold
improvements and the accrual of lease obligations at certain
facilities to be abandoned (net of any anticipated
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<PAGE>
sublease revenues). In addition, US Airways recorded a Nonrecurring
item of $1.5 million (a credit to Aircraft rent expense) during the
second quarter of 1997 upon subleasing an additional British
Aerospace BAe-146-200 ("BAe-146") aircraft.
During the second quarter of 1996, US Airways recognized two
Nonrecurring items related to its BAe-146 aircraft. A credit of
$22.5 million, a reversal of previously accrued lease obligations,
was recorded in Aircraft rent and a credit of $7.0 million, a
reversal of previously accrued lease return provisions, was
recognized in Aircraft maintenance. The credits were associated
with US Airways' subleasing of eleven of these aircraft.
Personnel Costs - Excluding Nonrecurring items (see above),
Personnel costs decreased $12.3 million. Expenses associated with
stock appreciation rights ("SARs") were $20.2 million during the
second quarter of 1997 (no such expenses during second quarter
1996). The Company recognized profit sharing expenses associated
with US Airways' 1992 Salary Reduction Program of $41.2 million
during the second quarter of 1996 (no such expenses during second
quarter 1997). In addition, defined benefit pension and
postretirement benefits expenses decreased quarter-over-quarter
primarily due to higher interest rates (discount factors) used for
1997 calculations.
Aviation Fuel - A decrease in the average cost of aviation fuel per
gallon offset an increase in gallons of aviation fuel consumed.
Effective for 1997, the Company classifies fuel taxes as an element
of Aviation fuel expense. These expenses were previously an element
of Other operating expense (prior period results have been
reclassified for comparability purposes).
Aircraft Rent - Relatively unchanged if Nonrecurring items (see
above) are excluded.
Aircraft Maintenance - Excluding Nonrecurring items (see above),
costs increased $7.4 million. The increase is attributable to an
increase in the cost of certain JT8D jet engine parts and timing
factors. US Airways is realizing savings from the "power-by-the-
hour" maintenance contract covering its CFM-56 and CF-6 jet engines
which began during the fourth quarter of 1996.
Depreciation and Amortization - Decreased $2.9 million if
Nonrecurring items (see above) are excluded.
Other Operating Expenses, Net - Increased primarily due to
increases in certain sales and traffic-related expenses (most
notably, credit card expenses). Expenses related to the wet lease
arrangement with British Airways decreased $3.7 million (see also
Other Operating Revenues above). See also Aviation Fuel above
related to fuel taxes.
US Airways' Operating Expenses include the line item "US
Airways Express capacity purchases." These expenses, which are
eliminated during the consolidation of the Company's results of
operations, are discussed under Operating Revenues above.
Other Income (Expense):
Equity in Earnings of Affiliates - Results for all three of USAM's
computer reservation system ("CRS") investments improved primarily
due to continued increases in airline industry passenger volumes.
See also "USAM's Investments" above.
Provision for Income Taxes - Increased primarily due to increased
pre-tax income and an increase in the Company's effective tax rate
as of a result of the Company's projected utilization of all
remaining alternative minimum tax net operating loss carryforwards
during 1997.
Income per Common Share - In May 1997, most of the Series F
Preferred Stock was converted into 14,458,851 shares of Common
Stock. On a weighted average basis, this had the effect of
increasing
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shares used for calculating primary EPS for the second quarter of
1997 by approximately 6.5 million (see Note 2 to the Company's
Condensed Consolidated Financial Statements contained in Part I,
Item 1A of this report for additional information related to the
Company's EPS calculations). In February 1997, the Financial
Accounting Standards Board (the "FASB") adopted Statement No. 128,
"Earnings per Share" ("SFAS 128"). This statement specifies new
computation, presentation and disclosure requirements for reporting
income per common share. The provisions of SFAS 128 preclude the
Company from implementing the new standard prior to December 31,
1997. The Company believes that the implementation of SFAS 128 will
not have a material impact on its income per common share
disclosures for the first period affected or on prior period income
per common share amounts, which must be restated to conform with
the provisions of SFAS 128.
Supplemental Information - In June 1997, the FASB adopted
Statements of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("SFAS 130") and No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131").
SFAS 130 establishes standards for the reporting and presentation
of comprehensive income and its components in financial statements.
SFAS 131 establishes standards for defining operating segments and
the reporting of certain information regarding operating segments.
The Company believes that neither SFAS 130 nor SFAS 131 will have
an effect on the Company's liquidity, financial condition or
results of operations as both standards are informational only. If
the Company determines that it has a reporting obligation under
either or both new standards, the necessary information will be
disclosed as part of the Company's financial reporting of its full-
year 1998 financial results.
Six Month Period Ended June 30, 1997
Compared With the
Six Month Period Ended June 30, 1996
Operating Revenues (See also "Select US Airways Operating and
Financial Statistics" below):
Passenger Transportation - US Airways' Passenger transportation
revenues increased $255.7 million, or 7.6%, resulting from a 11.2%
increase in RPMs offset by the effects of a 3.2% decrease in yield.
The Company estimates that severe winter weather within the Eastern
U.S. and the partial Federal Government shutdown adversely affected
first quarter 1996 revenues by approximately $55 million.
Cargo and freight - Increased primarily due to volume factors.
Other Operating Revenues - Increased primarily due to increased
revenues from partners in US Airways' Dividend Miles frequent
traveler program and from reservation rebooking fees offset by
decreased wet lease revenues. Wet lease revenues decreased $12.6
million because the arrangement was phased-out during the first
half of 1996. Changes in the components of Other operating revenues
are largely offset by correlating changes in related operating
expenses, primarily those recorded as Other operating expenses,
net. US Airways' results include certain transactions with related
parties that are eliminated at the US Airways Group level.
US Airways' Operating Revenues include the line item "US
Airways Express transportation revenues." This activity is
discussed in the quarter-over-quarter comparison above.
Operating Expenses (see also "Select US Airways Operating and
Financial Statistics" below):
Nonrecurring Items - The Company's Operating Expenses for both 1997
and 1996 include the Nonrecurring items discussed above in the
quarter-over-quarter comparison.
Personnel Costs - Relatively unchanged if Nonrecurring items (see
above) are excluded. Expenses associated with stock appreciation
rights ("SARs") were $25.7 million during the first six months
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of 1997 (no such expenses during the first six months of 1996). The
Company recognized profit sharing expenses associated with US
Airways' 1992 Salary Reduction Program of $41.2 million during the
first six months of 1996 (none during 1997). In addition, defined
benefit pension and postretirement benefits expenses decreased
period-over-period primarily due to higher interest rates (discount
factors) used for 1997 calculations.
Aviation Fuel - The average cost of aviation fuel per gallon and
gallons of aviation fuel consumed both increased.
Aircraft Rent - Excluding the effects of the Nonrecurring items
(see above), costs increased due primarily to a rent expense
adjustment totaling $7.2 million recorded during the first quarter
of 1997 related to certain US Airways F28-4000 aircraft.
Aircraft Maintenance - Excluding the effects of Nonrecurring items,
timing factors and an increase in the cost of certain JT8D jet
engine parts offset savings US Airways is realizing from the
"power-by-the-hour" maintenance contract covering its CFM-56 and
CF-6 jet engines.
Depreciation and Amortization - Excluding Nonrecurring items (see
above), expense decreased $7.4 million.
Other Operating Expenses, Net - Wet lease expenses decreased $12.6
million (see also Other Operating Revenues above). This decrease
was more than offset by increases in certain sales and traffic-
related expenses (most notably, credit card expenses).
US Airways' Operating Expenses include the line item "US
Airways Express capacity purchases." These expenses, which are
eliminated during the consolidation of the Company's results of
operations, are discussed under Operating Revenues above.
Other Income (Expense):
Equity in Earnings of Affiliates - Results for all three of USAM's
CRS investments improved primarily due to increases in airline
industry passenger volumes.
Other, Net - Results for the first six months of 1997 include gains
totaling $18.0 million related to US Airways' sale of eleven
B737-200 and one F28-4000 aircraft.
Provision for Income Taxes - Increased primarily due to increased
income and an increase in the Company's effective tax rate as of a
result of the Company's projected utilization of all remaining
alternative minimum tax net operating loss carryforwards during
1997.
Income per Common Share - In May 1997, most of the Series F
Preferred Stock was converted into 14,458,851 shares of Common
Stock. On a weighted average basis, this had the effect of
increasing shares used for calculating primary EPS for the first
six months of 1997 by approximately 3.3 million.
(this space intentionally left blank)
19
<PAGE>
<TABLE>
Select US Airways
Financial and Operating Statistics (see Note 1 below)
<CAPTION>
Three Months Six Months
Ended June 30, Increase Ended June 30, Increase
1997 1996 (Decrease) 1997 1996 (Decrease)
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenue passengers (thousands)* 15,533 14,961 3.8 % 29,400 27,899 5.4 %
Total RPMs (millions) (Note 2) 11,003 10,131 8.6 % 20,951 18,920 10.7 %
RPMs (millions)* 10,953 10,044 9.1 % 20,853 18,753 11.2 %
Total ASMs (millions) (Note 3) 14,922 14,223 4.9 % 29,460 27,806 5.9 %
ASMs (millions)* 14,865 14,123 5.3 % 29,346 27,616 6.3 %
Passenger load factor* (Note 4) 73.7 % 71.1 % 2.6 pts. 71.1 % 67.9 % 3.2 pts.
Break-even load factor (Note 5) 66.0 % 66.7 % (0.7)pts. 65.1 % 66.9 % (1.8)pts.
Yield* (Note 6) 16.95 c 17.95 c (5.6)% 17.31 c 17.89 c (3.2)%
Passenger revenue per ASM* (Note 7) 12.49 c 12.76 c (2.1)% 12.30 c 12.15 c 1.2 %
Revenue per ASM (Note 8) 13.75 c 13.99 c (1.7)% 13.57 c 13.38 c 1.4 %
Cost per ASM (Note 9) 12.07 c 12.75 c (5.3)% 12.21 c 12.78 c (4.5)%
Average passenger journey (miles)* 705 671 5.1 % 709 672 5.5 %
Average stage length (miles)* 592 576 2.8 % 589 575 2.4 %
Revenue aircraft miles (millions)* 111 106 4.7 % 219 208 5.3 %
Cost of aviation fuel per gallon (Note 10) 65.18 c 68.18 c (4.4)% 70.26 c 66.62 c 5.5 %
Cost of aviation fuel per gallon (Note 11) 58.71 c 61.87 c (5.1)% 63.83 c 60.27 c 5.9 %
Gallons of aviation fuel consumed (millions) 288 276 4.3 % 570 542 5.2 %
Operating aircraft at period-end 390 395 (1.3)% 390 395 (1.3)%
Full-time equivalent employees at period-end 40,246 39,949 0.7 % 40,246 39,949 0.7 %
* Scheduled service only (excludes charter service).
c cents
Note 1 Operating statistics include free frequent travelers and the related miles flown. Operating statistics exclude
flights operated by US Airways under a wet lease arrangement with British Airways that expired May 31,
1996. Financial statistics exclude revenues and expenses generated by the US Airways Express capacity
purchase program and the wet lease arrangement and Nonrecurring items (see above). For purposes of
financial statistic calculation, wet lease amounts of $3.7 million and $12.6 million have been excluded from
the second quarter and year-to-date results for 1996 from both Other operating revenues and Other
operating expenses (revenues and expenses generated by the wet lease arrangement net to zero).
Note 2 Revenue Passenger Miles ("RPMs") - revenue passengers multiplied by the number of miles they flew.
Note 3 Seats available multiplied by the number of miles flown (a measure of capacity).
Note 4 Percentage of aircraft seating capacity that is actually utilized (RPMs/ASMs).
Note 5 Percentage of aircraft seating capacity utilized that equates to US Airways breaking-even at the pre-tax
income level.
Note 6 Passenger transportation revenue divided by RPMs.
Note 7 Passenger transportation revenue divided by ASMs (a measure of unit revenue).
Note 8 Total Operating Revenues divided by ASMs (a measure of unit revenue).
Note 9 Total Operating Expenses divided by ASMs (a measure of unit cost).
Note 10 Includes the base cost of aviation fuel, fuel taxes and transportation charges.
Note 11 Includes the base cost of aviation fuel and transportation charges (excludes fuel taxes).
</TABLE>
US Airways' traffic levels continue to be bolstered by
favorable domestic economic conditions. However, US Airways' yield
decreased for both the second quarter of 1997 and first six months
of 1997 versus the comparable periods in 1996 primarily due to the
effects of the 10% federal excise tax on domestic air
transportation (the "ticket tax") and increased competitive
pressures (see "Update on US Airways' Competitive Position" above).
The ticket tax was not in place during the first six months of
1996, but was reinstated during March 1997. In addition, US
Airways' average passenger journey increased for both the second
quarter and first six months of 1997 resulting in an
20
<PAGE>
"averaging-down" of yield quarter-over-quarter and year-over-year.
Capacity (ASMs) increased for both periods in 1997 primarily as the
result of higher aircraft utilization rates during 1997; aircraft
utilization was adversely affected by inclement weather during the
first quarter of 1996.
US Airways' revenue passengers, RPMs and passenger load factor
increased both quarter-over-quarter and year-over-year primarily
due to the same factors discussed above. During second quarter
1997, US Airways set company records for a quarter for RPMs and
passenger load factor (the previous records for these statistics
were set during first quarter 1997).
Liquidity and Capital Resources
As of June 30, 1997, the Company's Cash and cash equivalents
totaled $1.14 billion and its Short-term investments totaled $482.1
million. As of June 30, 1997, US Airways also had $79.8 million
deposited in trust accounts to collateralize letters of credit and
worker's compensation policies. These deposits are included in
Other assets, net on the Company's Condensed Consolidated Balance
Sheets (which are contained in Part I, Item 1A of this report).
As indicated in the Company's Condensed Consolidated
Statements of Cash Flows (which are also contained in Part I, Item
1A of this report), net cash provided by operations during the
first six months of 1997 was $375.5 million, primarily due to the
factors discussed under "Results of Operations" above. During the
first quarter of 1997, US Airways remitted ticket taxes collected
in 1996 of approximately $180 million to the Federal government.
The ticket tax was not in effect during the periods January 1,
1996-August 27, 1996 and January 1, 1997-March 7, 1997. The Company
also made profit sharing payments to employees totaling $129.1
million during first quarter 1997. These payments ended the
Company's obligation for profit sharing under its 1992 Salary
Reduction Plan (the related expenses were recognized by the Company
during 1996 and earlier periods). USAM received distributions
totaling $6.9 million from its CRS investments during the first six
months of 1997, as reflected in the Other operating adjustments
category (see also "USAM's Investments" above).
SAR exercises resulted in cash outflows of $45.5 million
during the first six months of 1997. As of June 30, 1997,
approximately 545,000 SARs granted under the 1992 Stock Option Plan
remained outstanding (approximately 4.2 million SARs were
outstanding as of December 31, 1996).
Investing activities during the first six months of 1997
included cash outflows of $88.0 million for the acquisition of
assets and cash inflows of $45.8 million related to asset
dispositions. Asset acquisitions included cash outflows of $48.8
million for aircraft and aircraft-related assets at US Airways,
$10.2 million for third-party maintenance performed on certain
subleased US Airways aircraft, $9.2 million for computer equipment
purchased by US Airways and $6.0 million related to US Airways'
purchase of slots at Washington National Airport. Asset
dispositions included cash inflows related to US Airways' sale of
eleven B737-200, one F28-4000 and one BAe-146 aircraft. The
Company's Short-term investments decreased $148.3 million from the
year-end 1996 level related to the Company's need to fulfill
certain operational needs (see discussion above regarding cash
outflows related to ticket taxes and profit sharing payments) and
for dividend payments and the redemption of certain of its
preferred stock (see below). The net cash provided by investing
activities during the first six months of 1997 was $119.7 million.
As discussed under "USAM's Investments" above, during July
1997 USAM received proceeds of $162.0 million in connection with
the sale of its interest in ATS and proceeds of $62.2 million
related to a sell-down of its interest in Galileo.
Net cash used by financing activities during the first six
months of 1997 was $310.4 million. The Company paid dividends
totaling $159.5 million to holders of its preferred stock during
the
21
<PAGE>
first six months of 1997 and redeemed the Series T Preferred Stock
and 1,940.636 shares of Series F Preferred Stock during May 1997
for a combined $126.2 million. As mentioned above, British Airways
converted the remaining Series F shares into Common Stock and
subsequently sold those shares. With the retirement of the Series F
and Series T Preferred Stock, the annual dividend requirement of
the Company's outstanding preferred stock issuances has been
reduced to $51.8 million. Issuances of common stock related to the
exercise of stock options resulted in proceeds of $24.8 million.
The Company's subsidiaries made scheduled debt repayments of
approximately $41.4 million and US Airways prepaid early capital
lease obligations of $9.2 million associated with three DC-9
aircraft (and assumed title of the aircraft) during the first six
months of 1997.
On July 23, 1997, the Company's board of directors declared
regular quarterly dividends of $4.7 million to holders of the
Company's Series B Preferred Stock (payable on August 15, 1997).
On July 25, 1997, Standard & Poor's raised its ratings outlook
on US Airways Group and US Airways to "Positive" from "Developing."
Credit ratings issued by such credit rating agencies can have an
effect on a company's ability to issue debt or equity securities
and the effective rate at which such financings are undertaken.
US Airways has agreements with an affiliate of Airbus for the
acquisition of up to 400 Airbus aircraft. The agreements with
Airbus remain subject to US Airways achieving a competitive cost
structure, but obligate US Airways to inform Airbus by September
30, 1997 of whether or not it will proceed with the acquisition of
the aircraft contemplated thereby. If an aircraft acquisition
agreement with Airbus is consummated, the Company's estimate of
short-term and long-term capital expenditures and/or lease
commitments will be materially affected.
As discussed under "US Airways Shuttle" above, the Company is
investigating the purchase of Shuttle, Inc., the owner of the US
Airways Shuttle. The Company's purchase of Shuttle, Inc. would
result in a material capital expenditure.
The Company expects to satisfy all of its short-term liquidity
requirements through a combination of cash on hand and cash
generated from operations. However, the Company remains highly
leveraged. The Company and US Airways 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 short-term credit or receivable sale
facilities. Changes in certain factors that are generally outside
the Company's control, such as an economic downturn, additional
government regulation, intensified competition from low cost, low
fare air carriers or operations (see related discussion above) and
increases in the cost of aviation fuel, could have a material
adverse effect on the Company's liquidity, financial condition and
results of operations. US Airways' high cost structure relative to
its primary competitors results in the Company's results of
operations and financial condition being particularly susceptible
to adverse changes in general economic and market conditions.
As of June 30, 1997, the Company's ratio of current assets to
current liabilities was approximately 0.93 to 1 and the Company's
debt to equity ratio was greater than 100% (and also greater than
100% if the Series A Preferred Stock is considered to be debt) due
to a deficit in stockholders' equity.
(this space intentionally left blank)
22
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
On July 17, 1997, the Air Line Pilots Association ("ALPA"),
the collective bargaining representative of US Airways' pilots,
filed a lawsuit against US Airways in U.S. Federal District Court
for the Western District of Pennsylvania alleging violations of the
Railway Labor Act. ALPA alleges that US Airways violated the
Railway Labor Act by "direct dealing" with the pilots regarding the
terms and conditions of employment, and by implementing the
"efficiency measures" announced in May 1997 (see Part I, Item 2,
Management's Discussion and Analysis of Financial Condition and
Results of Operations," for additional information), allegedly in
retaliation for ALPA's position in ongoing collective bargaining
with US Airways. ALPA is seeking injunctive relief and unspecified
damages. US Airways has denied these allegations. At this
preliminary stage of the litigation, US Airways is unable to
quantify any potential damages and is unable to predict the outcome
of the lawsuit.
Item 4. Submission of Matters to a Vote of Security Holders
US Airways Group's annual meeting of stockholders was held on
May 21, 1997. Proxies for the meeting were solicited by US Airways
Group pursuant to Regulation 14A under the Securities Exchange Act
of 1934.
All of management's nominees for the election to the Board of
Directors as listed in US Airways Group's Proxy Statement for the
meeting were elected without solicitation in opposition. In
addition, the holders of voting securities also voted on the
following proposals with the following results:
1. Management's proposal regarding ratification of the selection
of auditors of the Company for fiscal year 1997.
For 52,608,031 Against 230,157 Abstain 8,919,042
Broker Non-Votes None
2. Stockholder proposal relating to political contributions.
For 1,432,083 Against 37,588,974 Abstain 10,373,651
Broker Non-Votes 12,362,522
3. Stockholder proposal concerning confidential voting.
For 14,285,661 Against 25,884,570 Abstain 9,224,477
Broker Non-Votes 12,362,522
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Designation Description
11 Computation of Primary and Fully Diluted Income (Loss) Per
Common Share for the three month and six month periods ended
June 30, 1997 and June 30, 1996 for US Airways Group.
27.1 Financial Data Schedule - US Airways Group.
23
<PAGE>
27.2 Financial Data Schedule - US Airways, Inc.
27.3 Restated Financial Data Schedules for US Airways, Inc. as of
March 31, 1996, June 30, 1996, September 30, 1996, December
31, 1996 and March 31, 1997.
27.4 Restated Financial Data Schedules for US Airways, Inc. as of
December 31, 1994, March 31, 1995, June 30, 1995, September
30, 1995 and December 31, 1995.
B. Reports on Form 8-K
Date of Report Subject of Report
May 22, 1997 On May 19, 1997 US Airways Group, Inc. exercised
its right of first offer to purchase from British
Airways Plc 9,919.8 shares of the Series T-2
Preferred Stock. Also on May 19, 1997, US Airways
Group, Inc. agreed to purchase all of its Series
T-1 Preferred Stock and 1,940.6 shares of its
Series F Preferred Stock from British Airways Plc.
The purchases took place on May 22, 1997.
August 6, 1997 USAM Corp., a wholly-owned subsidiary of US
Airways, Inc., disclosed the proceeds it received
from the sale of its interest in the Apollo Travel
Services Partnership and from a sell-down of its
interest in Galileo International, Inc. and the
pre-tax gains associated with both sales.
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.
US Airways Group, Inc. (Registrant)
Date: August 8, 1997 By: /s/ James A. Hultquist
-----------------------------
James A. Hultquist
Controller
(Chief Accounting Officer)
US Airways, Inc. (Registrant)
Date: August 8, 1997 By: /s/ James A. Hultquist
-----------------------------
James A. Hultquist
Controller
(Chief Accounting Officer)
24
<PAGE>
<TABLE>
US Airways Group, Inc.
Exhibit 11
Computation of Primary and Fully Diluted Earnings Per Share
(unaudited)
(in thousands, except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
------ ------ ------ ------
Adjustments to Net Income
- -------------------------
<S> <C> <C> <C> <C>
Net income $205,586 $200,775 $358,244 $168,482
Preferred dividend requirement (23,507) a) (22,522) (44,371) a) (44,796)
------- ------- ------- -------
Net income applicable to common
stock and common stock equivalents
used for primary computation 182,079 178,253 313,873 123,686
Fully diluted adjustments
Assume conversion of all preferred stock:
Preferred dividend requirement 23,507 a) 22,522 44,371 a) 44,796 b)
------- ------- ------- -------
Adjusted net income applicable to
common stock assuming full dilution $205,586 $200,775 $358,244 $168,482
======= ======= ======= =======
Adjustments to common stock shares outstanding
- ----------------------------------------------
Weighted average number of shares of
common stock outstanding 71,887 64,008 68,171 63,813
Primary adjustments
Incremental shares from outstanding stock
options (treasury stock method) 2,262 1,855 1,825 1,453
------- ------- ------- -------
Total weighted average number of common
and common equivalent shares used for
primary computation 74,149 65,863 69,996 65,266
======= ======= ======= =======
Weighted average number of shares of
common stock outstanding 71,887 64,008 68,171 63,813
Fully diluted adjustments
Incremental shares from outstanding stock
options (treasury stock method) 2,463 1,855 2,463 1,719
Assume conversion of all preferred stock 30,570 c) 39,156 34,839 c) 39,156 b)
------- ------- ------- -------
Total weighted average number of
common shares outstanding
after full conversion 104,920 105,019 105,473 104,688
======= ======= ======= =======
Income Per Common Share
- -----------------------
Primary income per common share $2.46 $2.71 $4.48 $1.90
==== ==== ==== ====
Fully diluted income per common share $1.96 $1.91 $3.40 $1.61
==== ==== ==== ====
a) Includes redemption premiums of $5.2 million and $0.8 million on 1,940.636 shares of Series F Preferred Stock and the
Series T Preferred Stock, respectively (May 22, 1997 redemption date). See also c) below.
b) The effects of assuming conversion of the Series A Preferred Stock are antidilutive, but included for purposes of this
calculation in accordance with Regulation S-K, Item 601(b)(11).
c) For the time they were outstanding during the period, the effects of assuming conversion of the shares of Series F
Preferred Stock prior to their redemption are antidilutive, but included for purposes of this calculation in
accordance with Regulation S-K, Item 601(b)(11). See also a) above.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0000701345
<NAME>US AIRWAYS GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,135,750
<SECURITIES> 482,118
<RECEIVABLES> 408,077<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 238,065
<CURRENT-ASSETS> 2,404,581
<PP&E> 6,413,105
<DEPRECIATION> 2,599,954
<TOTAL-ASSETS> 7,514,295
<CURRENT-LIABILITIES> 2,587,716
<BONDS> 2,546,146
358,000
213,128
<COMMON> 80,111
<OTHER-SE> (372,473)
<TOTAL-LIABILITY-AND-EQUITY> 7,514,295
<SALES> 0
<TOTAL-REVENUES> 4,313,688
<CGS> 0
<TOTAL-COSTS> 3,822,516
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128,685
<INCOME-PRETAX> 397,338
<INCOME-TAX> 39,094
<INCOME-CONTINUING> 358,244
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 358,244
<EPS-PRIMARY> 4.48
<EPS-DILUTED> 3.37
<FN>
<F1>Receivables are presented net of allowances.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,134,728
<SECURITIES> 482,118
<RECEIVABLES> 406,154<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 207,200
<CURRENT-ASSETS> 2,406,615
<PP&E> 6,158,559
<DEPRECIATION> 2,505,043
<TOTAL-ASSETS> 7,435,793
<CURRENT-LIABILITIES> 2,544,154
<BONDS> 2,545,231
0
0
<COMMON> 1
<OTHER-SE> 260,259
<TOTAL-LIABILITY-AND-EQUITY> 7,435,793
<SALES> 0
<TOTAL-REVENUES> 4,298,820
<CGS> 0
<TOTAL-COSTS> 3,865,742
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 132,166
<INCOME-PRETAX> 396,111
<INCOME-TAX> 50,696
<INCOME-CONTINUING> 345,415
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 345,415
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>EPS calculations are not relevant because US Airways, Inc. is a wholly-owned
subsidiary of US Airways Group, Inc.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 3-MOS YEAR 9-MOS 6-MOS
3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1996 DEC-31-1996
DEC-31-1996
<PERIOD-END> MAR-31-1997 DEC-31-1996 SEP-30-1996 JUN-30-1996
MAR-31-1996
<CASH> 867,204 950,134 653,893 774,358
782,712
<SECURITIES> 595,408 635,839 631,114 464,071
45,487
<RECEIVABLES> 444,193<F1><F3> 325,478<F1><F3> 402,366<F1><F3>
413,954<F1><F3> 434,030<F1><F3>
<ALLOWANCES> 0<F1> 0<F1> 0<F1>
0<F1> 0<F1>
<INVENTORY> 201,495 211,184 217,535 206,632
213,359
<CURRENT-ASSETS> 2,259,795<F3> 2,252,015<F3> 2,029,299<F3>
1,985,852<F3> 1,596,235<F3>
<PP&E> 6,124,047 6,137,671 6,177,189 6,118,053
6,078,765
<DEPRECIATION> 2,425,649 2,381,844 2,377,058 2,315,086
2,259,371
<TOTAL-ASSETS> 7,340,515<F3> 7,392,533<F3> 7,274,320<F3>
7,211,186<F3> 6,846,804<F3>
<CURRENT-LIABILITIES> 2,710,133<F3> 2,983,430<F3> 2,929,614<F3>
3,009,949<F3> 2,734,378<F3>
<BONDS> 2,577,058 2,614,818 2,624,801 2,639,219
2,657,587
0 0 0 0
0
0 0 0 0
0
<COMMON> 1 1 1 1
1
<OTHER-SE> 58,473 (85,156) (177,489) (205,536)
(366,104)
<TOTAL-LIABILITY-AND-EQUITY> 7,340,515<F3> 7,392,533<F3> 7,274,320<F3>
7,211,186<F3> 6,846,804<F3>
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 2,090,353 7,704,057 5,657,269 3,733,212
1,739,615
<CGS> 0 0 0 0
0
<TOTAL-COSTS> 1,916,216 7,335,389 5,362,845 3,535,555
1,748,525
<OTHER-EXPENSES> 0 0 0 0
0
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 67,250 283,936 213,323 142,068
71,447
<INCOME-PRETAX> 160,886 191,043 149,125 109,432
(54,638)
<INCOME-TAX> 17,257 7,811 15,440 3,794
292
<INCOME-CONTINUING> 143,629 183,232 133,685 105,638
(54,930)
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 143,629 183,232 133,685 105,638
(54,930)
<EPS-PRIMARY> 0<F2> 0<F2> 0<F2>
0<F2> 0<F2>
<EPS-DILUTED> 0<F2> 0<F2> 0<F2>
0<F2> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F3>This amount was restated to conform with current classifications.
<F2>EPS calculations are not relevant because US Airways, Inc. is a wholly-owned
subsidiary of US Airways Group, Inc.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> YEAR 9-MOS 6-MOS 3-MOS
YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-31-1995
DEC-31-1994
<PERIOD-END> DEC-31-1995 SEP-30-1995 JUN-30-1995 MAR-31-1995
DEC-31-1994
<CASH> 879,613 864,316 756,635 415,858
428,925
<SECURITIES> 19,831 0 0 22,469
22,133
<RECEIVABLES> 312,143<F1><F3> 448,400<F1><F3> 422,337<F1><F3>
436,686<F1><F3> 317,321<F1><F3>
<ALLOWANCES> 0<F1> 0<F1> 0<F1>
0<F1> 0<F1>
<INVENTORY> 222,245 226,120 230,773 231,112
238,481
<CURRENT-ASSETS> 1,531,754<F3> 1,640,179<F3> 1,500,803<F3>
1,205,814<F3> 1,083,971<F3>
<PP&E> 6,091,252 6,131,050 6,130,509 6,236,526
6,150,806
<DEPRECIATION> 2,222,814 2,166,818 2,103,569 2,061,677
2,006,041
<TOTAL-ASSETS> 6,813,915<F3> 7,015,797<F3> 6,949,139<F3>
6,811,166<F3> 6,667,269<F3>
<CURRENT-LIABILITIES> 2,566,520<F3> 2,662,019<F3> 2,573,351<F3>
2,519,882<F3> 2,309,169<F3>
<BONDS> 2,741,932 2,830,662 2,831,383 2,882,960
2,849,488
0 0 0 0
0
0 0 0 0
0
<COMMON> 1 1 1 1
1
<OTHER-SE> (311,174) (273,765) (290,364) (375,010)
(273,186)
<TOTAL-LIABILITY-AND-EQUITY> 6,813,915<F3> 7,015,797<F3> 6,949,139<F3>
6,811,166<F3> 6,667,269<F3>
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 6,984,876 5,259,755 3,516,949 1,664,490
6,578,593
<CGS> 0 0 0 0
0
<TOTAL-COSTS> 6,750,225 5,109,042 3,432,534 1,714,794
7,095,565
<OTHER-EXPENSES> 0 0 0 0
0
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 301,923 225,526 149,595 73,105
285,846
<INCOME-PRETAX> 37,398 2,786 (17,178) (101,824)
(716,183)
<INCOME-TAX> 4,408 3,365 0 0
0
<INCOME-CONTINUING> 32,990 (579) (17,178) (101,824)
(716,183)
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 32,990 (579) (17,178) (101,824)
(716,183)
<EPS-PRIMARY> 0<F2> 0<F2> 0<F2>
0<F2> 0<F2>
<EPS-DILUTED> 0<F2> 0<F2> 0<F2>
0<F2> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F3>This amount was restated to conform with current classifications.
<F2>EPS calculations are not relevant because US Airways, Inc. is a wholly-oned
subsidiary of US Airways Group, Inc.
</FN>
</TABLE>
