FORM 10-Q.--QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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.
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 872-5306
(Registrant's telephone number, including area code)
(Commission file number: 1-8444)
(I.R.S. Employer Identification No: 54-1194634)
US AIRWAYS, INC.
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 872-7000
(Registrant's telephone number, including area code)
(Commission file number: 1-8442)
(I.R.S. Employer Identification No: 53-0218143)
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 April 30, 1998, there were outstanding approximately
100,884,000 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 in the reduced
disclosure format permitted by such Instructions.
US AIRWAYS GROUP, INC.
AND
US AIRWAYS, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 31, 1998
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Page
----
Item 1A. Financial Statements - US Airways Group, Inc.
Condensed Consolidated Statements of Operations
- Three Months Ended March 31, 1998 and 1997 1
Condensed Consolidated Balance Sheets
- March 31, 1998 and December 31, 1997 2
Condensed Consolidated Statements of Cash Flows
- Three Months Ended March 31, 1998 and 1997 3
Condensed Consolidated Statement of Changes in
Stockholders' Equity
- Three Months Ended March 31, 1998 4
Notes to Condensed Consolidated Financial Statements 5
Item 1B. Financial Statements - US Airways, Inc.
Condensed Consolidated Statements of Operations
- Three Months Ended March 31, 1998, and 1997 7
Condensed Consolidated Balance Sheets
- March 31, 1998 and December 31, 1997 8
Condensed Consolidated Statements of Cash Flows
- Three Months Ended March 31, 1998 and 1997 9
Condensed Consolidated Statement of Changes in
Stockholder's Equity
- Three Months Ended March 31, 1998 10
Notes to Condensed Consolidated Financial Statements 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 19
US Airways Group, Inc.
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997 (unaudited)
(in millions, except per share amounts)
1998 1997
---- ----
Operating Revenues
Passenger transportation $1,858 $1,897
Cargo and freight 43 44
Other 162 160
----- -----
Total Operating Revenues 2,063 2,101
Operating Expenses
Personnel costs 749 757
Aviation fuel 167 225
Commissions 124 145
Aircraft rent 111 121
Other rent and landing fees 108 100
Aircraft maintenance 114 97
Depreciation and amortization 72 77
Other, net 426 403
----- -----
Total Operating Expenses 1,871 1,925
----- -----
Operating Income 192 176
Other Income (Expense)
Interest income 30 24
Interest expense (63) (65)
Interest capitalized 5 3
Equity in earnings of affiliates - 13
Other, net 1 14
----- -----
Other Income (Expense), Net (27) (11)
----- -----
Income Before Taxes 165 165
Provision (Credit) for Income Taxes 67 12
----- -----
Net Income 98 153
Preferred Dividend Requirement (6) (21)
----- -----
Earnings Applicable to Common Stockholders $ 92 $ 132
===== =====
Earnings per Common Share
Basic $ 0.98 $ 2.05
Diluted $ 0.96 $ 1.45
Shares Used for Computation
Basic 94 64
Diluted 103 105
See accompanying Notes to Condensed Consolidated Financial
Statements.
1
US Airways Group, Inc.
Condensed Consolidated Balance Sheets
March 31, 1998 (unaudited) and December 31, 1997
(dollars in millions, except per share amount)
March December
31, 31,
1998 1997
---- ----
ASSETS
Current Assets
Cash $ 19 $ 18
Cash equivalents 1,194 1,076
Short-term investments 868 870
Receivables, net 426 300
Materials and supplies, net 223 226
Deferred income taxes 122 147
Prepaid expenses and other 118 140
----- -----
Total Current Assets 2,970 2,777
Property and Equipment
Flight equipment 5,217 5,221
Ground property and equipment 872 876
Less accumulated depreciation
and amortization (2,541) (2,527)
----- -----
3,548 3,570
Purchase deposits 172 155
----- -----
Total Property and Equipment, Net 3,720 3,725
Other Assets
Goodwill, net 611 616
Other intangibles, net 378 371
Investment in marketable equity
securities 268 190
Deferred income taxes 248 270
Other assets, net 475 423
----- -----
Total Other Assets 1,980 1,870
----- -----
$ 8,670 $ 8,372
===== =====
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 482 $ 186
Accounts payable 401 323
Traffic balances payable and unused
tickets 916 707
Accrued aircraft rent 407 509
Accrued salaries, wages and vacation 287 311
Other accrued expenses 498 492
----- -----
Total Current Liabilities 2,991 2,528
Long-Term Debt, Net of Current Maturities 2,031 2,426
Deferred Credits and Other Liabilities
Deferred gains, net 326 333
Postretirement benefits other than
pensions, noncurrent 1,191 1,173
Noncurrent employee benefit liabilities
and other 888 829
----- -----
Total Deferred Credits and Other
Liabilities 2,405 2,335
Commitments and Contingencies
Redeemable Cumulative Convertible Preferred
Stock
Series H, no par value, 358,000 shares
issued and outstanding as of December
31, 1997 - 358
Stockholders' Equity
Common stock, par value $1 per share,
authorized 150,000,000 shares, issued
101,095,000 and 91,482,000 shares,
respectively 101 91
Paid-in capital 2,285 1,906
Retained earnings (deficit) (1,188) (1,280)
Common stock held in treasury, at cost,
39,929 shares as of December 31, 1997 - (3)
Deferred compensation (100) (80)
Accumulated other comprehensive income,
net of income tax effects 145 91
----- -----
Total Stockholders' Equity 1,243 725
----- -----
$ 8,670 $ 8,372
===== =====
See accompanying Notes to Condensed Consolidated Financial
Statements.
2
US Airways Group, Inc.
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997 (unaudited)
(in millions)
1998 1997
---- ----
Cash and Cash equivalents at beginning of period $1,094 $951
----- ---
Cash flows from operating activities
Net income 98 153
Adjustments to reconcile net income to net cash
provided by (used for) operating activities
Depreciation and amortization 72 77
Losses (gains) on dispositions of property (3) (14)
Amortization of deferred gains and credits (6) (8)
Other 11 -
Changes in certain assets and liabilities
Decrease (increase) in receivables (126) (114)
Decrease (increase) in materials and
supplies, prepaid expenses and
pension assets (17) (11)
Decrease (increase) in deferred income
tax assets 19 -
Increase (decrease) in traffic balances
payable and unused tickets 209 223
Increase (decrease) in accounts payable
and accrued expenses 20 (333)
Increase (decrease) in postretirement
benefits other than pensions, noncurrent 18 19
----- ---
Net cash provided by (used for)
operating activities 295 (8)
Cash flows from investing activities
Aircraft acquisitions and purchase deposits, net (42) (6)
Additions to other property (46) (38)
Proceeds from dispositions of property 56 41
Decrease (increase) in short-term investments 4 36
Decrease (increase) in restricted cash
and investments (52) 9
Other 1 1
----- ---
Net cash provided by (used for)
investing activities (79) 43
Cash flows from financing activities
Principal payments on long-term debt (99) (29)
Issuances of Common Stock 7 4
Sales of treasury stock 1 1
Dividends paid on preferred stock (6) (93)
----- ---
Net cash provided by (used for)
financing activities (97) (117)
----- ---
Net increase (decrease) in Cash and
Cash equivalents 119 (82)
----- ---
Cash and Cash equivalents at end of period $1,213 $869
===== ===
Noncash investing and financing activities
Conversion of preferred stock into Common Stock $ 358 $ -
Net unrealized gain on available-for-sale
securities, net of income tax effects $ 51 $ -
Treasury stock acquired for tax withholding
on employee stock grants $ - $ 1
Dividends declared on preferred stock, but not
paid during period $ - $ 51
Supplemental Information
Cash paid during the period for interest, net
of amount capitalized $ 80 $ 84
Net cash paid during the period for
income taxes $ 2 $ 1
See accompanying Notes to Condensed Consolidated Financial
Statements.
3
<TABLE> US Airways Group, Inc.
Condensed Consolidated Statement of Changes in Stockholders' Equity
Three Months Ended March 31, 1998 (unaudited)
(dollars in millions, except per share amounts)
<CAPTION>
Accumulated other comprehensive
income, net of income tax effects
----------------------------------
Retained Common Deferred Unrealized gain Adjustment Compre-
Common Paid-in earnings stock held compen- on available-for- for minimum hensive
stock capital (deficit) in treasury sation sale securities pension liability Total income
----- ------- ------- ----------- ------ --------------- ----------------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
December 31, 1997 $91 $1,906 $(1,280) $(3) $ (80) $104 $(13) $725 $ -
Conversion of
358,000 shares of
Series H Preferred
Stock 9 349 - - - - - 358 -
Grant of 16,000
shares of nonvested
stock and 2,300,000
stock options - 25 - - (25) - - - -
Reversion of 38,720
shares of nonvested
stock previously
granted - (1) - - 1 - - - -
Acquisition of 1,226
shares of common
stock from certain
employees - - - - - - - - -
Exercise of 436,465
stock options 1 6 - 3 - - - 10 -
Dividends declared
(preferred stock)
Series H - $18.50
per share - - (6) - - - - (6) -
Amortization of
deferred
compensation - - - - 4 - - 4 -
Unrealized gain on
available-for-sale
securities, net of
income tax effects - - - - - 51 - 51 51
Adjustment for
minimum pension
liability, net of
income tax effects - - - - - - 3 3 3
Net income - - 98 - - - - 98 98
--- ----- ----- --- --- --- -- ----- ---
Balance as of
March 31, 1998 $101 $2,285 $(1,188) $ - $(100) $155 $(10) $1,243
=== ===== ===== === === === == =====
Total comprehensive income for the three months ended March 31, 1998 $152
===
See accompanying Notes to Condensed Consolidated Financial Statements.
4
</TABLE>
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), Shuttle, Inc., Allegheny Airlines, Inc.,
Piedmont Airlines, Inc., PSA Airlines, Inc., US Airways Leasing
and Sales, Inc., US Airways Fuel Corporation and Material
Services Company, Inc.
Management believes that all adjustments necessary for a
fair statement of results have been included in the Condensed
Consolidated Financial Statements for the interim periods
presented, which are unaudited. All significant intercompany
accounts and transactions have been eliminated. The preparation
of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Certain 1997 amounts have been reclassified to conform with
1998 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, 1997.
2. EARNINGS PER COMMON SHARE
Earnings per Common Share (EPS) is presented on both a basic
and diluted basis in accordance with the provisions of Statement
of Financial Accounting Standards No. 128, "Earnings per Share."
Basic EPS is computed by dividing net income, after deducting
preferred stock dividend requirements, by the weighted average
number of shares of common stock outstanding. Diluted EPS
reflects the maximum dilution that would result after giving
effect to dilutive stock options and to the assumed conversion of
any dilutive convertible preferred stock issuance. The following
table presents the computation of basic and diluted EPS (in
millions, except per share amounts):
Three Months Ended
March 31, 1998
------------------
Earnings applicable to common stockholders:
Earnings applicable to common stockholders (basic) $ 92
Preferred dividend requirement 6
-----
Earnings applicable to common stockholders (diluted) $ 98
=====
Common shares:
Weighted average common shares outstanding (basic) 94
Incremental shares related to outstanding stock options 2
Incremental shares related to convertible preferred
stock issuance 7
-----
Weighted average common shares outstanding (diluted) 103
=====
Earnings per Common Share:
Basic $ 0.98
Diluted $ 0.96
Note: The numbers in the table on the preceding page may not
recalculate due to rounding. See Note 4. below related to the
conversion of the Company's Series H Preferred Stock into common
stock.
5
3. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130),
effective January 1, 1998. SFAS 130 establishes standards for the
reporting and presentation of comprehensive income and its
components in financial statements. Comprehensive income
encompasses net income and "other comprehensive income," which
includes all other non-owner transactions and events which change
stockholders' equity.
As presented in the accompanying Condensed Consolidated
Statement of Changes in Stockholders' Equity, the Company
recognized comprehensive income of $152 million for the three
months ended March 31, 1998, including net income of $98 million
and other comprehensive income of $54 million, as detailed in the
table below (millions):
Before Tax Net
tax effects of tax
effects (expense) effects
------- ------- -------
Unrealized gain on available-for-sale
securities:
Unrealized gains arising during
the period $78 $(27) $51
Reclassification adjustment for
gains/losses included in net
income during the period - - -
--- ---- ---
Net unrealized gains 78 (27) 51
Adjustment for minimum pension liability - 3 3
--- ---- ---
Other comprehensive income $78 $(24) $54
=== ===== ===
The Company's other comprehensive income for the three months
ended March 31, 1997 was immaterial.
4. REDEEMABLE PREFERRED STOCK
The Company paid dividends totaling $6.6 million on its
Series H Preferred Stock during 1998 prior to the holders
converting those shares into 9.2 million shares of the Company's
Common Stock on March 12, 1998. The Company subsequently retired
its Series H Preferred Stock.
5. SUBSEQUENT EVENTS
In September 1997, The Boeing Company (Boeing) filed suit
against US Airways in state court in King County, Washington
seeking unspecified damages, estimated at approximately $220
million, for alleged breach of two aircraft purchase agreements
concerning, respectively, eight B757-200 aircraft and 40 B737-
Series aircraft. On October 31, 1997, US Airways filed an answer
and counterclaims to Boeing's complaint denying liability and
seeking recovery from Boeing of approximately $35 million in
equipment purchase deposits. On April 23, 1998 the parties
reached a settlement terminating all obligations with respect to
both purchase agreements. Pursuant to the settlement, the
litigation has been dismissed with prejudice as to both Boeing's
claims and US Airways' counterclaims.
6
US Airways, Inc.
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997 (unaudited)
(in millions)
1998 1997
---- ----
Operating Revenues
Passenger transportation $1,677 $1,753
US Airways Express transportation revenues 149 145
Cargo and freight 42 43
Other 163 149
----- -----
Total Operating Revenues 2,031 2,090
Operating Expenses
Personnel costs 697 716
Aviation fuel l54 213
Commissions 113 136
Aircraft rent 96 106
Other rent and landing fees 99 96
Aircraft maintenance 92 81
Depreciation and amortization 65 73
US Airways Express capacity purchases 125 121
Other, net 401 374
----- -----
Total Operating Expenses 1,842 1,916
----- -----
Operating Income 189 174
Other Income (Expense)
Interest income 39 24
Interest expense (63) (67)
Interest capitalized 3 3
Equity in earnings of affiliates - 13
Other, net 1 14
----- -----
Other Income (Expense), Net (20) (13)
----- -----
Income Before Taxes 169 161
Provision (Credit) for Income Taxes 68 17
----- -----
Net Income $ 101 $ 144
===== =====
See accompanying Notes to Condensed Consolidated Financial
Statements.
7
US Airways, Inc.
Condensed Consolidated Balance Sheets
March 31, 1998 (unaudited) and December 31, 1997
(dollars in millions, except per share amount)
March December
31, 31,
1998 1997
---- ----
ASSETS
Current Assets
Cash $ 18 $ 17
Cash equivalents 1,193 1,075
Short-term investments 868 870
Receivables, net 420 296
Receivables from related parties, net 196 195
Materials and supplies, net 199 200
Deferred income taxes 124 150
Prepaid expenses and other 112 132
----- -----
Total Current Assets 3,130 2,935
Property and Equipment
Flight equipment 4,961 4,968
Ground property and equipment 845 851
Less accumulated depreciation
and amortization (2,438) (2,429)
----- -----
3,368 3,390
Purchase deposits 70 70
----- -----
Total Property and Equipment, Net 3,438 3,460
Other Assets
Goodwill, net 469 473
Other intangibles, net 291 283
Investment in marketable equity securities 268 190
Receivable from parent company 214 210
Deferred income taxes 198 221
Other assets, net 566 493
----- -----
Total Other Assets 2,006 1,870
----- -----
$ 8,574 $ 8,265
===== =====
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Current maturities of long-term debt $ 482 $ 186
Accounts payable 383 297
Traffic balances payable and unused tickets 912 702
Accrued aircraft rent 405 496
Accrued salaries, wages and vacation 281 306
Other accrued expenses 467 463
----- -----
Total Current Liabilities 2,930 2,450
Long-Term Debt, Net of Current Maturities 2,030 2,425
Deferred Credits and Other Liabilities
Deferred gains, net 324 330
Postretirement benefits other than
pensions, noncurrent 1,169 1,152
Noncurrent employee benefit liabilities
and other 864 806
----- -----
Total Deferred Credits and Other
Liabilities 2,357 2,288
Commitments and Contingencies
Stockholder's Equity
Common stock, par value $1 per share,
authorized 1,000 shares, issued and
outstanding 1,000 shares - -
Paid-in capital 2,425 2,425
Retained earnings (deficit) (1,313) (1,414)
Accumulated other comprehensive income,
net of income tax effects 145 91
----- -----
Total Stockholder's Equity 1,257 1,102
----- -----
$ 8,574 $ 8,265
===== =====
See accompanying Notes to Condensed Consolidated Financial
Statements.
8
US Airways, Inc.
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997 (unaudited)
(in millions)
1998 1997
---- ----
Cash and Cash equivalents at beginning
of period $1,092 $ 950
Cash flows from operating activities
Net income 101 144
Adjustments to reconcile net income to net
cash provided by (used for) operating
activities
Depreciation and amortization 65 73
Losses (gains) on dispositions of property (3) (14)
Amortization of deferred gains and credits (7) (7)
Other (14) (1)
Changes in certain assets and liabilities
Decrease (increase) in receivables (112) (119)
Decrease (increase) in materials and
supplies, prepaid expenses and pension
assets (20) (16)
Decrease (increase) in deferred income
tax assets 21 -
Increase (decrease) in traffic balances
payable and unused tickets 210 223
Increase (decrease) in accounts payable
and accrued expenses 35 (402)
Increase (decrease) in postretirement
benefits other than pensions,
noncurrent 17 20
----- -----
Net cash provided by (used for)
operating activities 293 (99)
Cash flows from investing activities
Aircraft acquisitions and purchase
deposits, net (21) (6)
Additions to other property (45) (36)
Proceeds from dispositions of property 56 40
Decrease (increase) in short-term investments 4 36
Decrease (increase) in restricted cash and
investments (52) 9
Funding of parent company's aircraft purchase
deposits (17) -
Other - 2
----- -----
Net cash provided by (used for)
investing activities (75) 45
Cash flows from financing activities
Principal payments on long-term debt (99) (29)
----- -----
Net cash provided by (used for)
financing activities (99) (29)
----- -----
Net increase (decrease) in Cash and Cash
equivalents 119 (83)
----- -----
Cash and Cash equivalents at end of period $1,211 $ 867
===== =====
Noncash investing and financing activities
Net unrealized gain on available-for-sale
securities, net of income tax effects $ 51 $ -
Supplemental Information
Cash paid during the period for interest,
net of amount capitalized $ 80 $ 84
Net cash paid during the period for income
taxes $ 1 $ 1
See accompanying Notes to Condensed Consolidated Financial
Statements.
9
<TABLE>
US Airways, Inc.
Condensed Consolidated Statement of Changes in Stockholder's Equity
Three Months Ended March 31, 1998 (unaudited)
(in millions)
<CAPTION>
Accumulated other comprehensive
income, net of income tax effects
-----------------------------------
Retained Unrealized gain Adjustment Compre-
Common Paid-in earnings on available-for- for minimum hensive
stock capital (deficit) sale securities pension liability Total income
------ ------- -------- ----------------- ----------------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1997 $ - $ 2,425 $ (1,414) $ 104 $ (13) $ 1,102 $ -
Unrealized gain on
available-for-sale securities,
net of income tax effects - - - 51 - 51 51
Adjustment for minimum
pension liability, net of
income tax effects - - - - 3 3 3
Net income - - 101 - - 101 101
----- ------ ------- ------ ------ ------ -----
Balance as of March 31, 1998 $ - $ 2,425 $ (1,313) $ 155 $ (10) $ 1,257
===== ====== ======= ====== ====== ======
Total comprehensive income for the three months ended March 31, 1998 $ 155
=====
See accompanying Notes to Condensed Consolidated Financial Statements.
(this space intentionally left blank)
10
</TABLE>
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).
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 1997 amounts have been reclassified to conform with
1998 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, 1997.
2. COMPREHENSIVE INCOME
US Airways adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130),
effective January 1, 1998. SFAS 130 establishes standards for the
reporting and presentation of comprehensive income and its
components in financial statements. Comprehensive income
encompasses net income and "other comprehensive income," which
includes all other non-owner transactions and events which change
stockholder's equity.
As presented in the accompanying Condensed Consolidated
Statement of Changes in Stockholder's Equity, US Airways
recognized comprehensive income of $155 million for the three
months ended March 31, 1998, including net income of $101 million
and other comprehensive income of $54 million, as detailed in the
table below (millions):
Before Tax Net
tax effects of tax
effects (expense) effects
------- --------- -------
Unrealized gain on available-
for-sale securities:
Unrealized gains arising
during the period $ 78 $ (27) $ 51
Reclassification adjustment
for gains/losses included
in net income during the
period - - -
----- ----- -----
Net unrealized gains 78 (27) 51
Adjustment for minimum pension
liability - 3 3
----- ----- -----
Other comprehensive income $ 78 $ (24) $ 54
===== ===== =====
US Airways' other comprehensive income for the three months
ended March 31, 1997 was immaterial.
11
3. SUBSEQUENT EVENTS
Please refer to Note 5. in US Airways Group's Notes to
Condensed Consolidated Financial Statements on page 6 of this
report.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
General Information
Part I, Item 2 of this report should be read in conjunction
with Part II, 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, 1997. 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 herein 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. Specific factors
that could cause actual results to differ materially from those
set forth in the forward-looking information include: economic
conditions, labor costs, aviation fuel costs, competitive
pressures on product pricing-particularly from lower-cost
competitors, weather conditions, government legislation, consumer
perceptions of the Company's products, demand for air
transportation in the markets in which the Company operates and
other risks and uncertainties 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 operating subsidiary, accounting for approximately 91%
of the Company's consolidated operating revenues for the first
three months of 1998. US Airways' financial results include the
financial results of its wholly-owned subsidiary USAM Corp.
(USAM).
Financial Overview
For the first quarter of 1998, the Company's operating
revenues were $2.06 billion, operating income was $192.1 million,
net income was $98.3 million and earnings per common share (EPS)
was $0.98 for basic and $0.96 for diluted. For the comparative
period in 1997, the Company's operating revenues were $2.10
billion, operating income was $175.6 million, net income was
$152.7 million and EPS was $2.05 for basic and $1.45 for diluted.
The Company's results for the first quarter of 1998 include the
results of Shuttle, Inc. (Shuttle), which the Company acquired on
December 30, 1997, and the effects of a significant change in the
Company's income tax position, as discussed under "Results of
Operations" below.
The same factors which contributed to the Company's record
financial performance for 1997 continued into the first quarter
of 1998, including relatively favorable domestic economic and
industry conditions, overall favorable capacity and pricing
trends in markets served by the Company's airline subsidiaries,
improved operating performance, recent marketing efforts
12
undertaken by the Company and the positive influence of certain
revenue enhancement and cost-reduction initiatives. See "Results
of Operations" below for additional information.
Update on US Airways' Competitive Position
On April 23, 1998, US Airways and American Airlines, Inc.
(American) announced an innovative marketing relationship that
will give customers of both companies important new benefits,
including combined access to both frequent traveler programs: US
Airways' Dividend Miles and American's AAdvantage. The marketing
relationship permits air travelers to take advantage of US
Airways' strong East Coast presence and American's strength in
other domestic markets and in international markets. Under the
alliance, members who belong to both Dividend Miles and
AAdvantage will be able to combine miles from both to claim an
award for travel on either airline. AAdvantage members will be
able to use their miles to claim awards on US Airways and
likewise, Dividend Miles members will be able to use their
program miles to claim awards on American. AAdvantage members
will also be able to earn AAdvantage miles as well as Dividend
Miles on certain US Airways Shuttle flights. The two airlines
also have agreed to allow reciprocal access to both airlines'
airport clubs-US Airways Clubs and American's Admirals Club. Both
US Airways and American expect to implement the linkages between
their frequent traveler programs by late Summer 1998.
The two airlines also believe that "code-sharing" on certain
flights will be beneficial to their customers, employees and
shareholders. Because certain types of code-sharing are subject
to provisions in the labor contracts of both companies, the issue
will be addressed in further discussions between US Airways and
its pilots and American and its pilots. Code-sharing on the
regional air carriers of both airlines, US Airways Express and
American Eagle, is expected to be implemented shortly on certain
flight segments.
The level of low cost, low fare competition confronting the
Company's airline subsidiaries increased marginally versus the
level reported in the Company's Form 10-K for the year ended
December 31, 1997. Southwest Airlines Co. expanded its operations
at Baltimore/Washington International Airport (BWI) in April 1998
and will begin operations at Manchester (New Hampshire) during
June 1998. Delta Express, the low cost, low fare product offered
by Delta Air Lines, Inc., increased its operating fleet by 3
aircraft to 28 aircraft effective May 1, 1998. Delta Express
operates in primarily Eastern U.S. markets.
US Airways' competitive response to low cost, low fare
competition, "MetroJet," commences operations on June 1, 1998.
MetroJet operations will be centered at BWI initially with five
dedicated aircraft, with service to Cleveland, Providence, Ft.
Lauderdale and Manchester. MetroJet will begin operating between
BWI and Tampa-St. Petersburg, Miami and Jacksonville (Florida) on
July 6, 1998 and between BWI and Orlando on August 3, 1998. The
Company's growth plans for MetroJet include MetroJet operating up
to 20 aircraft by the end of 1998.
US Airways added additional transatlantic service during
April 1998, including Philadelphia-London (Gatwick Airport) and
Philadelphia-Amsterdam. US Airways has announced that it will
begin Pittsburgh-Paris service on October 1, 1998. US Airways
continues to seek approval from Italian authorities to operate
Philadelphia-Milan service and has filed with the U.S. Department
of Transportation (DOT) for authority to serve London's Heathrow
Airport (Heathrow) from Boston, Charlotte, Philadelphia and
Pittsburgh. US Airways anticipates moving its operations at
Gatwick Airport to Heathrow at the earliest possible convenience
(the availability of operating rights at Heathrow is currently
constrained by the bilateral aviation treaty between the U.S. and
the United Kingdom).
On April 22, 1998, US Airways announced that it had
postponed its service to London's Gatwick Airport from Charlotte,
citing "unlawful" behavior by the U.K. in refusing to grant
13
commercially viable landing rights for the flight, which was
scheduled to begin May 7, 1998. US Airways has a formal complaint
pending before the DOT over the landing rights issue, noting that
the bilateral aviation agreement between the U.S. and the U.K.
guarantees U.S. air carriers a "fair and equal opportunity to
compete" with U.K. air carriers. The Company does not believe
that US Airways' postponement of its Charlotte-London service
will have a material adverse impact on the Company's results of
operations or financial condition. US Airways is unable to
predict the outcome of this matter, including the timing of its
resolution.
Other Information
In September 1997, The Boeing Company (Boeing) filed suit
against US Airways in state court in King County, Washington
seeking unspecified damages, estimated at approximately $220
million, for alleged breach of two aircraft purchase agreements
concerning, respectively, eight B757-200 aircraft and 40 B737-
Series aircraft. On October 31, 1997, US Airways filed an answer
and counterclaims to Boeing's complaint denying liability and
seeking recovery from Boeing of approximately $35 million in
equipment purchase deposits. On April 23, 1998 the parties
reached a settlement terminating all obligations with respect to
both purchase agreements. Pursuant to the settlement, the
litigation has been dismissed with prejudice as to both Boeing's
claims and US Airways' counterclaims.
Results of Operations
The following section pertains to activity included in the
Company's Condensed Consolidated Statements of Operations (which
are contained in Part I, Item 1A. of this report) and in selected
US Airways operating and financial statistics. Except where
noted, operating statistics referred to in this section are for
scheduled service only.
Three Months Ended March 31, 1998
Compared with the
Three Months Ended March 31, 1997
As mentioned above, the Company purchased Shuttle on
December 30, 1997. Because the Company's acquisition of Shuttle
was accounted for using the "purchase method," only Shuttle's
financial results post-acquisition are included in the Company's
results of operations. On an unconsolidated basis, Shuttle's
operating revenues were approximately $40 million for the first
quarter of 1998. Shuttle operates under the trade name "US
Airways Shuttle."
Operating Revenues-Passenger transportation decreased $39.3
million or 2.1%, which included a $76.5 million decrease
attributable to US Airways' operations (see discussion under
"Selected US Airways Operating and Financial Statistics")
partially offset by the effects of including Shuttle's financial
results for the first quarter of 1998. Other operating revenues
increased marginally primarily as the result of higher revenues
from partners in US Airways' Dividend Miles program offset by
lower aviation fuel sales by Material Services Corp. to
franchised US Airways Express air carriers.
Operating Expenses-US Airways' Personnel costs decreased $18.5
million or 2.6% linked primarily to a decrease in full-time
equivalent employees, including the late December 1997 transfer
of approximately 670 US Airways employees to The Sabre Group
(TSG) as a result of US Airways' information services management
agreement with TSG (see also Other operating expenses below). The
inclusion of Shuttle's personnel costs for the first quarter of
1998 partially offset the personnel costs decrease at US Airways.
Aviation fuel decreased significantly due to lower average fuel
prices and a slight decrease in gallons of aviation fuel
consumed. Commissions also decreased significantly reflecting the
revised commission rate structure the Company established in
September 1997. Aircraft rent decreased $10.0 million or 8.3% due
primarily to a
14
rent expense adjustment US Airways recorded during the first
quarter of 1997 related to certain F28-4000 aircraft. Aircraft
maintenance increased $17.3 million or 17.8%. US Airways entered
into a ten-year maintenance agreement with Rolls Royce Canada
Limitee during December 1997 covering US Airways' jet engines
originally manufactured by Rolls Royce Plc. Because the new
contract is based on a per-flight-hour cost (as opposed to the
cost of time and materials when the jet engines are actually
serviced), the timing of certain expenses related to the
maintenance of these jet engines also changed. Depreciation and
amortization decreased $5.0 million or 6.5% reflecting
US Airways' sale of information systems and related assets to TSG
in early January 1998 as part of its information services
management agreement with TSG. Other, net increased $22.3 million
or 5.5% due primarily to expenses associated with US Airways'
information services management contract with TSG. The Company
continues to experience costs associated with the conversion of
the information technologies services previously provided by US
Airways on its own behalf to similar services provided by TSG. In
addition, the Company's Other, net operating expenses for first
quarter 1998 also reflect certain expenses which were recognized
in Personnel costs and Depreciation and amortization prior to US
Airways' arrangement with TSG (see Personnel costs and
Depreciation and amortization above).
Other Income (Expense)- The decrease in Equity in earnings of
affiliates results from USAM discontinuing the equity method of
accounting for certain investments in July 1997. The increase in
Interest capitalized reflects activity related to the Company's
aircraft acquisition agreement with a subsidiary of Airbus
Industrie G.I.E. (Airbus). Other, net activity during first
quarter 1997 included gains totaling $16.6 million related to
US Airways' sale of nine B737-200 and one F28-4000 aircraft.
Provision (Credit) for Income Taxes-The Company's effective
income tax rate for financial reporting purposes increased
substantially as the result of the Company recognizing certain
income tax benefits during the fourth quarter of 1997. However,
the effective tax rate at which the Company expects to pay income
taxes continues to be approximately 25%.
Preferred Dividend Requirement-The Company paid dividends
totaling $6.6 million on its Series H Preferred Stock (formerly
the Series A Preferred Stock) during 1998 prior to the holders
converting those shares into 9.2 million shares of the Company's
Common Stock on March 12, 1998. In addition to dividends on the
Series H Preferred Stock, the preferred dividend requirement of
$20.9 million for the first quarter of 1997 reflects dividend
requirements for the Company's Series F and Series T Preferred
Stock, both of which were retired during May 1997, and its Series
B Preferred Stock, which was retired during September 1997.
Earnings per Common Share-As mentioned above, the Series H
Preferred Stock was converted into Common Stock during March
1998. On a weighted average basis, this transaction had the
effect of increasing common shares outstanding by 2.1 million
shares for the first quarter of 1998. The Company's EPS amounts
for the first quarter of 1997 have been restated to conform with
Statement of Financial Accounting Standards No. 128, "Earnings
Per Share," which the Company adopted during fourth quarter 1997.
(this space intentionally left blank)
15
Selected US Airways
Operating and Financial Statistics (see Note 1 below)
(unaudited)
Three Months
Ended March 31, Increase
1998 1997 (Decrease)
------- ------- --------
Revenue passengers (thousands)* 13,308 13,867 (4.0) %
Total RPMs (millions) (Note 2) 9,481 9,948 (4.7) %
RPMs (millions)* 9,445 9,900 (4.6) %
Total ASMs (millions) (Note 3) 13,734 14,539 (5.5) %
ASMs (millions)* 13,692 14,481 (5.4) %
Passenger load factor* (Note 4) 69.0 % 68.4 % 0.6 pts.
Break-even load factor (Note 5) 63.8 % 64.0 % (0.2) pts.
Yield* (Note 6) 17.75 c 17.71 c 0.2 %
Passenger revenue per
ASM* (Note 7) 12.25 c 12.11 c 1.2 %
Revenue per ASM (Note 8) 13.70 c 13.38 c 2.4 %
Cost per ASM (Note 9) 12.50 c 12.35 c 1.2 %
Average passenger journey (miles)* 710 714 (0.6) %
Average stage length (miles)* 591 587 0.7 %
Revenue aircraft miles (millions)* 102 108 (5.6) %
Cost of aviation fuel per
gallon (Note 10) 57.66 c 75.44 c (23.6) %
Cost of aviation fuel per
gallon, excluding fuel
taxes (Note 11) 51.63 c 69.04 c (25.2) %
Gallons of aviation fuel
consumed (millions) 267 282 (5.3) %
Number of aircraft in operating
fleet at period-end 371 391 (5.1) %
Full-time equivalent employees
at period-end 38,625 40,308 (4.2) %
* Scheduled service only (excludes charter service).
c cents.
Note 1. Operating statistics include free frequent travelers
and the related miles they flew. Revenues and expenses
associated with US Airways' capacity purchase
arrangements with certain affiliated airlines have been
excluded from US Airways' financial results for
purposes of financial statistical calculations.
Note 2. Revenue passenger miles (RPMs)-Revenue passengers
multiplied by the number of miles they flew.
Note 3. Available seat miles (ASMs)-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).
The number of revenue passengers carried by US Airways
decreased 4.0%, but US Airways' passenger load factor increased
0.6 percentage points as the effects of the decrease in revenue
passengers were more than offset by the effects of a 5.4%
decrease in ASMs. With respect to pricing trends, US Airways'
yield increased marginally quarter-over-quarter. US Airways
selectively increased fares in certain markets up to 5% during
both March and September 1997.
Unit costs (operating costs per ASM) increased 1.2% despite
a 3.9% decrease in US Airways' operating expenses due primarily
to the decrease in total ASMs. The decrease in ASMs stems from
certain efficiency measures US Airways implemented during third
quarter 1997, which included
16
grounding certain aircraft and ceasing operations on certain
unprofitable routes. US Airways' unit costs are expected to
increase approximately 2.5% for the second quarter of 1998
compared to the second quarter of 1997 and increase approximately
1% - 1.5% for full-year 1998 compared to full-year 1997. The unit
cost estimates include aviation fuel expenses (including fuel
taxes) of 54.00 cents per gallon for second quarter 1998 and
57.20 cents per gallon for full-year 1998.
Liquidity and Capital Resources
As of March 31, 1998, the Company's Cash, Cash equivalents
and Short-term investments totaled $2.08 billion and the ratio of
the Company's current assets to its current liabilities ("current
ratio") was 0.99. As of December 31, 1997, the Company's Cash,
Cash equivalents and Short-term investments totaled $1.96 billion
and the Company's current ratio was 1.10. The Company's debt to
equity ratio was 2.02 and 3.60 as of March 31, 1998 and
December 31, 1997, respectively (calculations exclude amounts
related to outstanding preferred stock). The improvement in the
Company's debt to equity ratio reflects a $358 million increase
in Stockholders' Equity which resulted from the conversion of the
Series H Preferred Stock into Common Stock as well as the
Company's net income for the first three months of 1998. For
additional balance sheet related information, see the Company's
Condensed Consolidated Balance Sheets which are contained in Part
I, Item 1A. of this report.
For the first three months of 1998, the Company's operating
activities provided net cash of $295 million, as presented in the
Company's Condensed Consolidated Statements of Cash Flows (which
are also contained in Part I, Item 1A of this report). For the
first three months of 1997, the Company's operating activities
used net cash of $8 million. Operating cash flows during the
first quarter of 1997 were adversely affected by profit sharing
payments totaling $129.1 million and the effects of remitting
ticket taxes collected from passengers of approximately $180
million to the federal government. The profit sharing payments
the Company made to employees during first quarter 1997 ended the
Company's obligation for profit sharing under its 1992 Salary
Reduction Plan (the liability had been accrued for prior to first
quarter 1997). The ticket tax remittances resulted from ticket
taxes collected during 1996. The ticket tax was not in effect
during the majority of the first quarter 1997. In addition,
exercises of stock appreciation rights (SARs) resulted in cash
outflows of $12.9 million during the first quarter of 1997, but
less than $5 million during the first quarter of 1998. As of
April 30, 1998, fewer than 2,000 SARs granted under the Company's
1992 Stock Option Plan remained outstanding (approximately
180,700 SARs were outstanding as of December 31, 1997).
Investing activities during the first three months of 1998
included cash outflows of $96.6 million for the acquisition of
assets and cash inflows of $56 million related to asset
dispositions. US Airways' cash outflows related to asset
acquisitions included $37.7 million for aircraft and aircraft-
related assets, including the purchase of a B767-200ER aircraft
at lease expiry. In addition, the Company paid purchase deposits
of $17.4 million during the quarter to Airbus. The remaining cash
outflows for the acquisition of assets included the purchase of
computer equipment and software (including certain costs
associated with US Airways' information services management
agreement with TSG), other ground equipment and miscellaneous
assets. Asset dispositions included proceeds of $46.5 million
from US Airways' sale of substantially all of its information
systems and related assets to TSG and proceeds from US Airways'
sale of four nonoperating aircraft. Restricted cash and
investments increased $51.7 million due primarily to US Airways'
return to cash to collateralize letters of credit for workers'
compensation policies (US Airways previously collateralized such
policies with certain owned flight equipment). The net cash used
for investing activities during the first three months of 1998
was $79 million.
Net cash used for financing activities during the first
three months of 1998 was $97 million. The Company paid dividends
totaling $6.6 million to holders of its Series H Preferred Stock
during the first three months of 1998. On March 12, 1998, the
holders of the Company's Series H Preferred
17
Stock exercised their right to convert those shares into shares
of the Company's Common Stock. As a result of the conversion
transactions, the Company issued 9.2 million shares of Common
Stock and retired its Series H Preferred Stock. Annual dividend
requirements for the Series H Preferred Stock were $33.1 million.
The Company had previously retired its Series F, T and B
Preferred Stock issuances in May 1997, May 1997 and September
1997, respectively. US Airways retired early debt with a face
amount of $81.6 million during the first quarter of 1998.
The Company expects to satisfy all of its short-term
liquidity requirements through a combination of cash on hand and
cash generated from operations. The Company continues to be
highly leveraged, as evidenced by the Company's high debt burden.
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. The Company's agreements to acquire up to
400 new Airbus aircraft and accompanying jet engines will
increase the Company's financing needs and result in a
significant increase in its financial obligations and debt
burden. Adverse changes in certain factors that are generally
outside the Company's control, such as an economic downturn,
additional government regulation, intensified competition from
lower-cost competitors or increases in the cost of aviation fuel,
could have a material adverse effect on the Company's results of
operations, financial condition and future prospects. The
Company's results of operations and financial condition are
particularly susceptible to adverse changes in general economic
and market conditions due to US Airways' high cost structure
relative to its major competitors.
The Company anticipates using cash on hand for purchase
deposits due within the next year and has commitments or letters
of intent which it believes will provide financing for at least
25% of the anticipated purchase price of firm-order aircraft.
However, further financing or internally-generated funds will be
needed to satisfy the Company's capital commitments for the
balance of the aircraft purchase price and for other aircraft-
related expenditures. Other capital expenditures, such as for
rotables and other aircraft components, are also expected to
increase in conjunction with the acquisition of the new aircraft
and jet engines. There can be no assurance that sufficient
financing will be available for all aircraft and other capital
expenditures not covered by committed financing.
On April 15, 1998, Standard & Poor's (S&P) raised its credit
ratings of US Airways Group and US Airways and removed all
ratings from CreditWatch, where they were placed on October 1,
1997. S&P cited "sharply improved operating performance" among
other factors for its decision to raise the credit ratings. On
April 23, 1998, Moody's Investors Service (Moody's) also raised
its credit ratings of the Company and US Airways. Credit ratings
issued by agencies such as S&P and Moody's affect a company's
ability to issue debt or equity securities and the effective rate
at which such financings are undertaken.
Part II. Other Information
Item 1. Legal Proceedings
In September 1997, The Boeing Company (Boeing) filed suit
against US Airways in state court in King County, Washington
seeking unspecified damages, estimated at approximately $220
million, for alleged breach of two aircraft purchase agreements
concerning, respectively, eight B757-200 aircraft and 40 B737-
Series aircraft. On October 31, 1997, US Airways filed an answer
and counterclaims to Boeing's complaint denying liability and
seeking recovery from Boeing of approximately $35 million in
equipment purchase deposits. On April 23, 1998 the parties
reached a settlement terminating all obligations with respect to
both purchase agreements. Pursuant to the settlement, the
litigation has been dismissed with prejudice as to both Boeing's
claims and US Airways' counterclaims.
18
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Designation Description
11 Computation of basic and diluted earnings per common share
of US Airways Group, Inc. for the three months ended
March 31, 1998 and 1997.
27.1 Financial Data Schedule - US Airways Group, Inc.
27.2 Financial Data Schedule - US Airways, Inc.
B. Reports on Form 8-K
Date of Report Subject of Report
April 22, 1998 Consolidated statements of operations for both
US Airways Group, Inc. and US Airways, Inc.
for the three months ended March 31, 1998, and
select operating and financial statistics for
US Airways for the same period.
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: May 11, 1998 By: /s/ James A. Hultquist
--------------------------
James A. Hultquist
Controller
(Chief Accounting Officer)
US Airways, Inc. (Registrant)
Date: May 11, 1998 By: /s/ James A. Hultquist
--------------------------
James A. Hultquist
Controller
(Chief Accounting Officer)
(this space intentionally left blank)
19
US Airways Group, Inc.
Exhibit 11
Computation of Basic and Diluted Earnings Per Common Share
(unaudited)
(in millions, except per share amounts)
Three Months Ended March 31,
----------------------------
1998 1997
---- ----
Adjustments to Net Income
- -------------------------
Net income $ 98 $ 153
Preferred dividend requirement (6) (21)
---- ----
Earnings applicable to common stock
used for basic computation 92 132
Diluted adjustments
Assume conversion of all preferred stock:
Preferred dividend requirement 6 21
---- ----
Adjusted net earnings applicable to common
stock used for diluted computation $ 98 $ 153
==== ====
Adjustments to common stock shares outstanding
- ----------------------------------------------
Weighted average number of shares of common
stock outstanding used for basic computation 94 64
Diluted adjustments
Incremental shares from outstanding stock
options (treasury stock method) 2 2
Assume conversion of all preferred stock 7 39
---- ----
Total weighted average number of common
shares outstanding used for diluted
computation 103 105
==== ====
Earnings per Common Share
- -------------------------
Basic $0.98 $2.05
==== ====
Diluted $0.96 $1.45
==== ====
Note: Numbers may not calculate due to rounding.
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<ARTICLE> 5
<CIK> 0000701345
<NAME> US AIRWAYS GROUP, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,213
<SECURITIES> 868
<RECEIVABLES> 426<F1>
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<BONDS> 2,031
0
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<COMMON> 101
<OTHER-SE> 1,142
<TOTAL-LIABILITY-AND-EQUITY> 8,670
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<TOTAL-REVENUES> 2,063
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<LOSS-PROVISION> 0
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<CHANGES> 0
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<FN>
<F1>Receivables are presented net of allowances.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,211
<SECURITIES> 868
<RECEIVABLES> 616<F1>
<ALLOWANCES> 0<F1>
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<CURRENT-ASSETS> 3,130
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<TOTAL-ASSETS> 8,574
<CURRENT-LIABILITIES> 2,930
<BONDS> 2,030
0
0
<COMMON> 0
<OTHER-SE> 1,257
<TOTAL-LIABILITY-AND-EQUITY> 8,574
<SALES> 0
<TOTAL-REVENUES> 2,031
<CGS> 0
<TOTAL-COSTS> 1,842
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63
<INCOME-PRETAX> 169
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</FN>
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