UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year end December 31, 1997
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
US Airways, Inc. 401(k) Savings Plan
(Full title of the plan)
US Airways Group, Inc.
(Issuer of securities held pursuant to the plan noted above)
2345 Crystal Drive, Arlington, VA 22227
(Address of principal executive offices)
Commission file number: 1-8444
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Financial Statements
and Supplemental Schedules
December 31, 1997 and 1996
(With Independent Auditors'
Report Thereon)
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Table of Contents
-----------------
Page
----
Independent Auditors' Report 1
Financial Statements
Statements of Net Assets Available for Plan
Benefits as of December 31, 1997 and 1996 2
Statements of Changes in Net Assets Available
for Plan Benefits for the years ended
December 31, 1997 and 1996 3
Notes to Financial Statements 4 - 15
Supplemental Schedule I - Item 27a
Schedule of Assets Held for Investment Purposes
as of December 31, 1997 16 - 17
Supplemental Schedule II - Item 27d
Schedule of Reportable Transactions for the year
ended December 31, 1997 18
Signature 19
Exhibit 23
Consent of Independent Auditors 20
Independent Auditors' Report
The Plan Administrator and Participants
US Airways, Inc. 401(k) Savings Plan:
We have audited the accompanying statements of net assets
available for plan benefits of the US Airways, Inc. 401(k)
Savings Plan (the Plan), as of December 31, 1997 and 1996, and
the related statements of changes in net assets available for
plan benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the net assets
available for plan benefits of the Plan as of December 31, 1997
and 1996, and the changes in net assets available for plan
benefits for the years then ended in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
financial statements taken as a whole. The supplemental
schedules of assets held for investment purposes as of December
31, 1997 and reportable transactions for the year ended December
31, 1997 are presented for the purpose of additional analysis and
are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. These
supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to
the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in
all material respects in relation to the basic financial
statements taken as a whole.
Washington, D.C. KPMG Peat Marwick LLP
June 12, 1998
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
----------------------------------------------------
December 31,
--------------------
1997 1996
---- ----
Assets
Investments:
At fair value:
Shares of registered investment
companies:
Fidelity Magellan Fund $ 239,942,434 $ 196,731,304
US Airways Common Stock Fund 207,438,910 72,760,893
Fidelity Equity Income Fund 165,244,527 113,645,244
Fidelity Spartan U.S. Equity
Index Portfolio 73,411,088 38,666,486
Capital Growth Mix Portfolio 45,313,907 35,778,877
Fidelity Retirement Government
Money Market Portfolio 42,444,074 38,186,803
Fidelity Intermediate Bond Fund 21,419,128 18,833,705
Neuberger & Berman Guardian Trust 21,248,359 8,880,099
Moderation Mix Portfolio 13,397,985 8,417,652
Income Mix Portfolio 2,714,770 1,953,338
Participant loans 26,715,794 18,447,842
----------- -----------
859,290,976 552,302,243
At contract value:
Fixed Income Fund 36,141,816 31,401,787
----------- -----------
Total investments 895,432,792 583,704,030
----------- -----------
Receivables:
Participant contributions 4,958,566 2,284,062
Employer contributions 235,042 215,442
----------- -----------
Total receivables 5,193,608 2,499,504
----------- -----------
Total assets 900,626,400 586,203,534
----------- -----------
Liabilities
Accrued expenses 63,237 44,689
----------- -----------
Total liabilities 63,237 44,689
----------- -----------
Net assets available for plan benefits $ 900,563,163 $ 586,158,845
=========== ===========
See accompanying Notes to Financial Statements.
2
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Statements of Changes in Net Assets Available for Plan Benefits
---------------------------------------------------------------
Years ended December 31,
------------------------
1997 1996
---- ----
Additions to net assets attributable to:
Net appreciation in fair value
of investments $ 203,502,580 $ 35,546,979
Investment income 33,223,449 44,104,565
Interest income on participant
loans 1,847,899 1,291,764
Participant contributions 82,058,710 73,059,151
Employer contributions 5,757,899 5,344,839
Rollover contributions 227,185 230,745
----------- -----------
Total additions 326,617,722 159,578,043
----------- -----------
Deductions from net assets attributable to:
Benefits paid to participants 11,984,242 9,492,170
Administrative expenses 227,155 180,669
----------- -----------
Total deductions 12,211,397 9,672,839
----------- -----------
Net increase 314,406,325 149,905,204
Net assets available for plan benefits:
Beginning of year 586,158,845 436,268,249
Transfer to the US Airways, Inc.
Employee Savings Plan (2,007) (14,608)
----------- -----------
End of year $ 900,563,163 $ 586,158,845
=========== ===========
See accompanying Notes to Financial Statements.
3
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
1. Description of Plan
The following description of the US Airways, Inc. 401(k)
Savings Plan (the Plan), formerly the USAir 401(k) Savings
Plan, provides only general information. Participants should
refer to the Plan document for a more complete description of
the Plan's provisions.
(a) General
The Plan is a defined contribution plan intended to be a
qualified cash or deferred compensation arrangement under
Section 401(k) of the Internal Revenue Code (IRC), as amended
and to qualify under Section 401(a) of the IRC. The Plan was
established effective September 1, 1988 to provide retirement
income to employees of US Airways, Inc. (US Airways or the
Company). In general, employees of US Airways, who are
covered by a collective bargaining agreement which provides
for their participation in the Plan, with at least 90 days of
service, are eligible to participate except for those
individuals not covered under the United States income tax
laws and those individuals who are participants in another
401(k) plan sponsored by US Airways. The Plan is subject to
the provisions of the Employee Retirement Income Security Act
of 1974, as amended.
US Airways, the plan administrator, is responsible for the
content and issuance of the Plan's financial statements. US
Airways Group, Inc. (Group), is the issuer of certain common
stock securities held pursuant to the Plan.
(b) Contributions
Eligible US Airways employees electing to participate in the
Plan make contributions to the Plan via payroll deductions.
Each year Plan participants may contribute up to 15 percent
of pre-tax annual compensation, as defined in the Plan,
unless the participant is classified as a highly compensated
employee, as defined by the IRC. The contribution percentage
may not exceed a certain percentage of pre-tax annual
compensation as determined by the plan administrator, if the
participant is a highly compensated employee. The amount of
contribution that may be made by a participant to the Plan
shall be a whole percentage of a participant's compensation.
Individual participant contributions for 1997 and 1996 could
not exceed the statutory limit of $9,500 per year.
The Company will make a 50% matching contribution each
payroll period, up to two percent of compensation for those
participants who are represented by the International
Association of Machinists and Aerospace Workers (the IAM).
4
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
(c) Vesting
Participants are immediately vested in their contributions,
plus actual earnings thereon. The Company's matching
contributions, plus actual earnings thereon, become 100
percent vested after two years of continuous service.
(d) Investment Options
The Company selects the number and type of investment options
available. Fidelity Institutional Retirement Services
Company, the Plan's Recordkeeper, is responsible for
maintaining an account balance for each participant.
Fidelity Management Trust Company is the Plan Trustee. Each
participant instructs the Recordkeeper how to allocate their
participant and Company contributions. Participants may
invest their contributions in any combination among the
investment options available in increments of five percent.
If a participant fails to instruct the Recordkeeper on how to
allocate the contributions, then their contributions will be
invested in a cash equivalent fund, such as the Fidelity
Retirement Government Money Market Portfolio.
The Recordkeeper values account balances daily. Each account
balance is based on the value of the underlying investments
in each account. Generally, participants may elect to change
how future contributions are allocated or may transfer
current account balances among investment options.
As of December 31, 1997, the Company offered eleven
investment options in the form of eight individual investment
options and three diversified portfolio mixes, which are pre-
selected combinations of mutual funds. The eleven options
available to participants are as follows:
Fidelity Magellan Fund - The fund primarily invests in common
stocks and securities of both well-known and lesser known
companies with potentially above-average growth potential.
Securities may be of foreign, domestic and multinational
companies.
US Airways Common Stock Fund - A fund comprised primarily of
US Airways Group, Inc. common stock purchased on the open
market or directly from Group at market prices. A small
percentage of the fund is invested in short-term liquid
investments. Company contributions cannot be invested in this
fund, in accordance with the Plan document. In addition,
officers of the Company are not permitted to invest their
contributions in this Fund. Effective November 28, 1997
participants who exchange out of this fund to other investment
options cannot exchange into the fund for a period of 30
calendar days.
5
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
Fidelity Equity Income Fund - The fund normally invests at
least 80% of its assets in income-producing common and
preferred stocks with the remaining 20% generally invested in
debt securities, like bonds.
Fidelity Spartan U.S. Equity Index Portfolio - The portfolio
seeks growth and income by matching the composition and total
return of the Standard & Poor's Daily Stock Price Index of 500
common stocks.
Capital Growth Mix Portfolio - A diversified portfolio mix
comprised of 80% equity securities and 20% fixed income
securities. The equity securities are invested 25% in the
Fidelity Equity Income Fund, approximately 19% in the Fidelity
OTC Portfolio, approximately 37% in the Fidelity Magellan Fund
and approximately 19% in the Fidelity Overseas Fund. The
fixed income securities are invested in the Fidelity
Intermediate Bond Fund.
Fidelity Retirement Government Money Market Portfolio -
Investments are made in obligations issued or guaranteed as to
principal and interest by the U.S. government, its agencies or
instrumentalities.
Fidelity Intermediate Bond Fund - Investments are made
primarily in investment-grade fixed income securities,
including bonds, notes, mortgage securities, government and
government agency obligations and convertible securities. The
average maturity ranges from three to ten years.
Neuberger & Berman Guardian Trust - The fund primarily invests
in stocks of established, high-quality companies considered to
be undervalued.
Moderation Mix Portfolio - A diversified portfolio mix
comprised of 60% equity securities and 40% fixed income
securities. The equity securities are invested approximately
33% in the Fidelity Equity Income Fund, approximately 33% in
the Fidelity Spartan U.S. Equity Index Portfolio, 25% in the
Fidelity Magellan Fund and approximately 9% in the Fidelity
Overseas Fund. The fixed income securities are invested
approximately 38% in the Fidelity Short-Term Bond Fund and
approximately 62% in the Fidelity Intermediate Bond Fund.
Income Mix Portfolio - A diversified portfolio mix comprised
of 20% equity securities and 80% fixed income securities. The
equity securities are invested 50% in the Fidelity Equity
Income Fund and 50% in the Fidelity Spartan U.S. Equity Index
Portfolio. The fixed income securities are invested
approximately 19% in the Fidelity Retirement Government Money
Market Portfolio, approximately 44% in the Fidelity Short-Term
Bond Fund and approximately 37% in the Fidelity Intermediate
Bond Fund.
6
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
Fixed Income Fund - The fund buys high-quality investment
contracts, a type of investment product offered to retirement
and savings plans by insurance companies, banks, and other
financial institutions. Money transferred out of the Fixed
Income Fund cannot be invested in the Fidelity Retirement
Government Money Market Portfolio, the Fidelity Intermediate
Bond Fund or the Income Mix Portfolio for a period of 90 days
because these funds are considered competitive by the
insurance industry.
(e) Participant Withdrawals
All participants can borrow from their account, but may have
only one loan outstanding at any given point in time.
Participants may borrow from their accounts a minimum of
$1,000 up to a maximum amount equal to the lesser of $50,000
(reduced by the highest outstanding loan balance from the
Plan or any other plan maintained by the Company during the
preceeding twelve month period) or 50 percent of their vested
separate account balance as of the date of the loan. Loan
transactions are treated as transfers between the investment
funds and participant loans receivable. Loan terms cannot
exceed five years, except for the purchase of a primary
residence. The loans are secured by the balance in the
participant's account and bear interest at a rate
commensurate with local prevailing market rates for loans
made under similar circumstances. Principal and interest are
paid ratably through payroll deductions.
Upon approval by the plan administrator, a participant may
withdraw his or her contributions from the account if it is
determined that the withdrawal is necessary to meet an
immediate and heavy financial need of the participant under
the deemed hardship standards set forth in the Plan.
(f) Payment of Benefits
Upon termination of service due to death, disability,
retirement or other termination of employment, distributions
to a participant or beneficiary is made as soon as reasonably
practicable. If the participant's account balance is less
than $3,500, a lump sum distribution is automatic upon
separation. If the participant's account balance is greater
than $3,500, the distribution can be deferred or provided in
cash as a lump sum distribution.
(g) Forfeited Accounts
Forfeited nonvested accounts are used by the Company to
reduce future employer contributions. During 1997 employer
contributions were reduced by $344 from forfeited nonvested
accounts.
7
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
(h) Administrative expenses
Certain administrative expenses of the Plan are paid by US
Airways.
2. Summary of Accounting Policies
(a) Basis of Accounting
The financial statements of the Plan are prepared under the
accrual method of accounting.
(b) Investment Valuation and Income Recognition
The assets of the US Airways Common Stock Fund, Capital
Growth Mix Portfolio, Moderation Mix Portfolio, Income Mix
Portfolio and Fixed Income Fund are commingled with certain
assets of other defined contribution plans sponsored by US
Airways. The Plan's Recordkeeper separately identifies the
assets of each plan participant who has an interest in the
commingled funds.
Fair values for assets were determined by quoted market
values, when available. The Plan presents in the statement
of changes in net assets the net appreciation (depreciation)
in the fair value of its investments, which consists of the
realized gains or losses and the unrealized appreciation
(depreciation) on those investments. The Plan's investments
in guaranteed investment contracts (GICs) are stated at
contract value (See Note 4). Purchases and sales of
investments are recorded on a trade-date basis.
The value of a participant's investment in the US Airways
Common Stock Fund is represented by units credited to the
participant's account. The unit values were determined by the
trustee. The units and unit values (rounded to the nearest
whole unit and cent) of the US Airways Common Stock Fund as of
the close of each quarter during 1997 and 1996 were as
follows:
1997 Number of Units Unit Value
- ----------- --------------- ----------
March 31 1,793,129 $ 38.44
June 30 1,976,072 52.69
September 30 2,186,809 61.08
December 31 2,289,865 90.59
(table continued on next page)
8
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
1996 Number of Units Unit Value
- ----------- --------------- ----------
March 31 1,124,679 $ 28.84
June 30 1,568,339 28.32
September 30 1,859,303 25.97
December 31 1,986,917 36.62
(c) Payment of Benefits
Benefits are recorded as deductions when paid.
(d) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual
results may differ from those estimates.
(this space intentionally left blank)
9
<TABLE>
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
3. Investment Activity
The following table represents the investment funds' and participant loans' activities, for the years ended
December 31, 1997 and 1996:
<CAPTION>
Fidelity Fidelity
Retirement Fidelity Spartan Income
Fixed Government Fidelity Fidelity Equity U.S. Equity Mix
Income Money Market Magellan Intermediate Income Index Port-
Fund 1) Portfolio 1) Fund 1) Bond Fund 1) Fund 1) Portfolio 1) folio 1)
----------- ----------- ------------ ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $28,440,801* $32,743,408* $196,204,255* $18,922,917 $ 74,022,540* $19,969,296 $1,102,889
Investment income 1,714,944 1,712,337 31,652,464 1,246,109 6,765,745 835,532 -
Net appreciation (depreciation)
in fair value - - (10,230,018) (598,733) 11,151,344 5,054,629 113,978
Interest income on participant loans - - - - - - -
Contributions 2,952,486 5,941,850 33,650,019 2,756,042 13,700,838 4,907,702 353,717
Net exchanges between investment funds (846,667) (914,433) (51,366,024) (3,049,978) 9,725,242 8,461,956 426,761
Administrative expenses (37,000) (5,844) (78,740) (1,165) (6,735) (630) (863)
Benefits paid to participants (823,911) (1,384,078) (3,066,540) (430,985) (1,699,405) (561,321) (43,144)
Transfers from (to) other plans 1,134 93,563 (34,112) (10,502) (14,325) (678) -
----------- ----------- ------------ ----------- ------------ ----------- ----------
Net Change in Investment Funds 2,960,986 5,443,395 527,049 (89,212) 39,622,704 18,697,190 850,449
----------- ----------- ------------ ----------- ------------ ----------- ----------
Balance at December 31, 1996 31,401,787* 38,186,803* 196,731,304* 18,833,705 113,645,244* 38,666,486* 1,953,338
Investment income 2,118,731 2,226,126 15,596,680 1,217,334 8,931,367 1,544,508 -
Net appreciation (depreciation)
in fair value 31,517 (180,363) 34,872,182 175,074 28,422,885 14,752,325 230,105
Interest income on participant loans - - - - - - -
Contributions 2,927,801 5,712,128 27,310,282 2,385,700 17,517,629 8,645,886 376,513
Net exchanges between investment funds 689,818 (1,525,105) (30,946,817) (603,177) (715,569) 10,580,735 248,087
Administrative expenses (36,261) (7,271) (71,927) (1,106) (10,950) (2,005) (1,280)
Benefits paid to participants (991,308) (2,069,612) (3,491,621) (587,727) (2,527,534) (771,412) (91,993)
Transfers from (to) other plans (269) 101,368 (57,649) (675) (18,545) (5,435) -
----------- ----------- ------------ ----------- ------------ ----------- ----------
Net Change in Investment Funds 4,740,029 4,257,271 43,211,130 2,585,423 51,599,283 34,744,602 761,432
----------- ----------- ------------ ----------- ------------ ----------- ----------
Balance at December 31, 1997 $36,141,816 $42,444,074 $239,942,434* $21,419,128 $165,244,527* $73,411,088* $2,714,770
=========== =========== ============ =========== ============ =========== ==========
(table continued on next page)
10
</TABLE>
<TABLE>
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
<CAPTION>
Capital US Airways Neuberger
Growth Moderation Common & Berman
Mix Mix Stock Guardian Participant
Portfolio 1) Portfolio 1) Fund 1) Trust Loans Other Total
----------- ----------- ------------ ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $21,889,133* $ 4,954,946 $ 22,642,988* $ - $12,791,796 $2,583,280 $436,268,249
Investment income - - - 177,434 - - 44,104,565
Net appreciation in fair value 3,907,487 832,852 24,634,441 680,999 - - 35,546,979
Interest income on participant loans - - - - 1,291,764 - 1,291,764
Contributions 7,861,283 2,082,230 3,285,287 1,269,707 - (126,426) 78,634,735
Net exchanges between investment funds 2,481,780 627,180 22,871,103 6,793,413 4,789,667 - -
Administrative expenses (15,399) (3,397) (23,707) (5,150) - (2,039) (180,669)
Benefits paid to participants (323,042) (54,763) (644,605) (34,991) (425,385) - (9,492,170)
Transfers from (to) other plans (22,365) (21,396) (4,614) (1,313) - - (14,608)
----------- ----------- ------------ ----------- ----------- ---------- ------------
Net Change in Investment Funds 13,889,744 3,462,706 50,117,905 8,880,099 5,656,046 (128,465) 149,890,596
----------- ----------- ------------ ----------- ----------- ---------- ------------
Balance at December 31, 1996 35,778,877* 8,417,652 72,760,893* 8,880,099 18,447,842 2,454,815 586,158,845
Investment income - - - 1,588,703 - - 33,223,449
Net appreciation in fair value 7,131,298 1,994,646 115,383,065 689,846 - - 203,502,580
Interest income on participant loans - - - - 1,847,899 - 1,847,899
Contributions 8,568,605 2,591,523 5,755,017 3,558,606 - 2,694,104 88,043,794
Net exchanges between investment funds (5,918,600) 797,768 13,946,804 6,620,545 6,825,511 - -
Administrative expenses (17,844) (4,610) (36,727) (18,626) - (18,548) (227,155)
Benefits paid to participants (226,363) (382,066) (368,196) (70,952) (405,458) - (11,984,242)
Transfers from (to) other plans (2,066) (16,928) (1,946) 138 - - (2,007)
----------- ----------- ------------ ----------- ----------- ---------- ------------
Net Change in Investment Funds 9,535,030 4,980,333 134,678,017 12,368,260 8,267,952 2,675,556 314,404,318
----------- ----------- ------------ ----------- ----------- ---------- ------------
Balance at December 31, 1997 $45,313,907* $13,397,985 $207,438,910* $21,248,359 $26,715,794 $5,130,371 $900,563,163
=========== =========== ============ =========== =========== ========== ============
* Investment fund balance represents greater than five percent of net assets available for plan benefits.
1) Party in interest.
11
</TABLE>
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
4. Investment Contracts with Insurance Companies
The Plan had an interest in a portfolio of GICs with certain
insurance companies of $36,141,816 and $31,401,787 at
December 31, 1997 and 1996, respectively. The GICs are
benefit responsive because they provide reasonable access by
Plan participants to invested funds. Therefore, in
accordance with the American Institute of Certified Public
Accountant's Statement of Position 94-4, "Application of
Fair Value and Contract Value Reporting for Defined
Contribution Plan Investments," the interest in these
contracts is disclosed in the financial statements at
contract value which equals contributions made, plus accrued
interest at the specified rate, less plan withdrawals and
administrative expenses. The portfolio's contract value at
December 31, 1997 and 1996 was $85,983,442 and $79,111,397.
The average portfolio crediting interest rate was
approximately 6.0% and 5.8% at December 31, 1997 and 1996,
respectively. The portfolio average yield was approximately
6.1% for the years ended December 31, 1997 and 1996.
For GICs with variable rates (approximately 49% of the
portfolio, as measured by contract values), crediting rates
are reset either quarterly or bi-annually. Crediting rates
are determined based upon the yields to maturity of the
underlying assets, net of certain origination fees.
No valuation reserves were recognized related to the
portfolio as all insurance companies in the portfolio had
received an investment grade rating from nationally
recognized rating agencies as of December 31, 1997 and 1996.
The fair value of the portfolio was $85,243,181 and
$79,347,056 at December 31, 1997 and 1996.
5. Plan Termination
Although it has not expressed any intent to do so, the
Company reserves the right to terminate the Plan at any
time. Upon termination of the Plan, participants will
become 100 percent vested in their accounts. In addition
the following actions shall be taken for the benefit of
participants:
(a) As of the termination date, each investment fund shall
be valued. In determining the net worth of the
investment funds there shall be included as a liability
such amounts as shall be necessary to pay all expenses
in connection with the termination of the investment
funds and the liquidation and distribution of the
property of the funds, as well as other expenses,
whether or not accrued, and shall include as an asset
all accrued income.
12
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
(b) All participant accounts must be disposed of in the
forms of payment available under the Plan, unless the
participant's spouse consents to another form of
distribution.
6. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for
plan benefits per the financial statements to the Form 5500:
December 31,
-------------------
1997 1996
---- ----
Net assets available for plan
benefits per the financial
statements $900,563,163 $586,158,845
Amounts allocated to withdrawing
participants (213,984) (164,172)
----------- -----------
Net assets available for plan
benefits per the Form 5500 $900,349,179 $585,994,673
=========== ===========
The following is a reconciliation of benefits paid to
participants per the financial statements to the Form 5500:
Year Ended
December 31, 1997
-----------------
Benefits paid to participants per the
financial statements $11,984,242
Add: Amounts allocated to withdrawing
participants at December 31, 1997 213,984
Less: Amounts allocated to withdrawing
participants at December 31, 1996 (164,172)
----------
Benefits paid to participants per the
Form 5500 $12,034,054
==========
Amounts allocated to withdrawing participants are recorded
on the Form 5500 for benefit claims that have been processed
and approved for payment prior to December 31 but not yet
paid as of that date.
13
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
7. Tax Status
The Internal Revenue Service has determined and informed the
Company by a letter dated July 22, 1995, that the Plan and
related trust are designed in accordance with applicable
sections of the IRC. The Plan has been amended since
receiving the determination letter. However, the Plan
administrator and the Plan's legal counsel believe that the
Plan is designed and is currently being operated in
compliance with the applicable requirements of the IRC.
8. Legal Proceedings
During the fourth quarter of 1995, the Association of Flight
Attendants (AFA) filed a grievance against US Airways
contending that the Company had violated certain sections of
the collective bargaining agreement between the AFA and US
Airways. US Airways' flight attendants are eligible to
participate in the Plan pursuant to their collective
bargaining agreement with the Company. The AFA maintained
that US Airways' flight attendants were entitled to receive
company matching contributions based on certain provisions of
their collective bargaining agreement. On May 5, 1998, the
arbitrator in this grievance issued a preliminary opinion
providing that flight attendants are not entitled to receive
matching contributions. Once final, this opinion eliminates
potential for any past contributions owed to the Plan
pursuant to this grievance.
14
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Notes to Financial Statements
-----------------------------
(Continued)
9. Arbitration Remedy Settlement
As the result of a decision and award by an arbitrator who
ruled that the Company was required to match 401(k)
contributions made by mechanics and related personnel
represented by the IAM as of September 30, 1995, the Company
entered into an agreement with the IAM with respect to US
Airways employees whose coverage in this Plan is provided
pursuant to a collective bargaining agreement with the IAM.
Key points in this agreement are as follows: (i) in December
1995, the Company made a special one-time contribution of
$9.4 million to the accounts of IAM employees who were
covered under the agreement as of September 30, 1995 and who
made payroll contributions to the Plan during the period
April 1, 1993 through September 30, 1995 equal to 50% of such
contributions up to a maximum of two percent of the employees
compensation for each payroll period; (ii) during the first
quarter of 1996, the Company made another special one-time
contribution of $1.1 million to the accounts of IAM employees
who made payroll contributions to the Plan during the period
October 1, 1995 through December 31, 1995 equal to 50% of
such contributions up to a maximum of two percent of
compensation for each payroll period; and (iii) effective
January 1, 1996, the Company amended the Plan to provide for
50% company matching contributions each payroll period up to
two percent of compensation for IAM employee participants.
10. Transfers to the US Airways, Inc. Employee Savings Plan
Transfers to the US Airways, Inc. Employee Savings Plan
represent the correction of a recordkeeping error.
(this space intentionally left blank)
15
<TABLE>
Supplemental Schedule I
US AIRWAYS, INC. Page 1 of 2
401(k) SAVINGS PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
----------------------------------------------------------
December 31, 1997
<CAPTION>
Identity Description Current
of Issue of Investment Cost Value
-------- ------------- ---- -------
<S> <C> <C> <C>
Fidelity Magellan Fund* Shares in registered $195,800,786 $239,942,434
investment company
US Airways Common Stock Common stock of employer's 122,525,388 207,438,910
Fund* parent company, US Airways
Group, Inc., and short-
term investments
Fidelity Equity Shares in registered 122,853,856 165,244,527
Income Fund* investment company
Fidelity Spartan U.S. Shares in registered 53,951,536 73,411,088
Equity Index Portfolio* investment company
Capital Growth Mix Shares in registered 35,452,199 45,313,907
Portfolio* investment companies
Fidelity Retirement Shares in money 42,444,074 42,444,074
Government Money market fund
Market Portfolio*
Fidelity Intermediate Shares in registered 21,456,499 21,419,128
Bond Fund* investment company
Neuberger & Berman Shares in registered 20,957,533 21,248,359
Guardian Trust investment companies
(table continued on next page)
16
</TABLE>
<TABLE>
Supplemental Schedule I
US AIRWAYS, INC. Page 2 of 2
401(k) SAVINGS PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
----------------------------------------------------------
(Continued)
December 31, 1997
<CAPTION>
Identity Description Current
of Issue of Investment Cost Value
-------- ------------- ---- -------
<S> <C> <C> <C>
Moderation Mix Portfolio* Shares in registered 11,056,888 13,397,985
investment companies
Income Mix Portfolio* Shares in registered 2,514,084 2,714,770
investment companies
Participant Loans Interest rates range - 26,715,794
from 7% to 11%
per annum
Fixed Income Fund* Guaranteed Investment 36,141,816 36,141,816
Contracts, interest rates
range from 4.05% to 8.28%
per annum
------------ ------------
Total Investments $665,154,659 $895,432,792
============ ============
*Party in interest.
17
</TABLE>
<TABLE>
Supplemental Schedule II
US AIRWAYS, INC.
401(k) SAVINGS PLAN
Item 27d - Schedule of Reportable Transactions
----------------------------------------------
Year Ended December 31, 1997
Aggregate transactions during the year ended December 31, 1997, with securities of the same issue,
accounting for greater than five percent of the value of Plan assets at the beginning of the period
were as follows:
<CAPTION>
Total Number of Total Number Realized
Purchases Purchases Sales of Sales Gain
------------ --------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
Fidelity Magellan Fund* $105,447,551 253 $ 97,117,418 253 $ 9,393,571
Fidelity Equity 107,093,563 253 83,916,728 253 7,647,066
Income Fund*
US Airways Common Stock 414,993,694 253 395,498,712 253 49,333,730
Fund*
Fidelity Spartan U.S. 75,141,050 253 55,149,846 251 3,838,619
Equity Index Portfolio*
Fidelity Retirement 210,967,853 256 206,710,581 253 -
Government Money
Market Portfolio*
Capital Growth 24,656,372 253 22,255,194 250 2,864,917
Mix Portfolio*
Fixed Income Fund* 87,213,109 256 82,473,081 252 -
Neuberger & Berman 34,396,280 253 22,719,646 243 1,026,519
Guardian Trust
Fidelity Intermediate 16,757,491 256 14,347,026 248 (61,850)
Bond Fund*
*Party in interest.
18
</TABLE>
Signature
Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the
employee benefit plan) have duly caused this annual report to be
signed on their behalf by the undersigned hereunto duly
authorized.
US Airways, Inc.
401(k) Savings Plan
By: /s/ James A. Hultquist
----------------------
James A. Hultquist
Controller
US Airways Group, Inc.
June 26, 1998
19
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
US Airways Group, Inc.:
We consent to the use of our report dated June 12, 1998, on the
statements of net assets available for plan benefits as of
December 31, 1997 and 1996, and the related statements of changes
in net assets available for plan benefits for the years then
ended for the US Airways, Inc. 401(k) Savings Plan (the Plan)
included in the Annual Report on Form 11-K relating to the Plan
filed by US Airways Group, Inc. for the years ended December 31,
1997 and 1996, and to the incorporation by reference of such
report in the Registration Statement, as amended, on Form S-8
pertaining to the Plan (File No. 33-44835).
KPMG Peat Marwick LLP
Washington, D.C.
June 26, 1998
20
