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 June 30, 1999
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 July 31, 1999 there were outstanding approximately 71,585,000
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 June 30, 1999
Table of Contents
Part I. Financial Information Page
----
Item 1A. Financial Statements-US Airways Group, Inc.
Condensed Consolidated Statements of Operations
- Three Months and Six Months Ended June 30, 1999 and 1998 1
Condensed Consolidated Balance Sheets
- June 30, 1999 and December 31, 1998 2
Condensed Consolidated Statements of Cash Flows
- Six Months Ended June 30, 1999 and 1998 3
Notes to Condensed Consolidated Financial Statements 4
Item 1B. Financial Statements-US Airways, Inc.
Condensed Consolidated Statements of Operations
- Three Months and Six Months Ended June 30, 1999 and 1998 7
Condensed Consolidated Balance Sheets
- June 30, 1999 and December 31, 1998 8
Condensed Consolidated Statements of Cash Flows
- Six Months Ended June 30, 1999 and 1998 9
Notes to Condensed Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about 22
Market Risk
Part II. Other Information
Item 1.Legal Proceedings 22
Item 4.Submission of Matters to a Vote of Security Holders 23
Item 6.Exhibits and Reports on Form 8-K 24
Signatures 25
US Airways Group, Inc.
Condensed Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 1999 and 1998 (unaudited)
(in millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ---------------
1999 1998 1999 1998
---- ---- ---- ----
Operating Revenues
Passenger transportation $2,063 $2,078 $3,919 $3,936
Cargo and freight 35 42 75 86
Other 188 177 364 337
----- ----- ----- -----
Total Operating Revenues 2,286 2,297 4,358 4,359
Operating Expenses
Personnel costs 813 774 1,615 1,523
Aviation fuel 162 158 292 325
Commissions 130 138 254 261
Aircraft rent 105 111 219 222
Other rent and landing fees 106 93 214 201
Aircraft maintenance 120 114 238 229
Other selling expenses 95 98 195 200
Depreciation and amortization 77 81 158 153
Other 399 356 805 679
----- ----- ----- -----
Total Operating Expenses 2,007 1,923 3,990 3,793
----- ----- ----- -----
Operating Income 279 374 368 566
Other Income (Expense)
Interest income 14 31 29 61
Interest expense (47) (60) (97) (123)
Interest capitalized 9 (18) 17 (13)
Gain on sale of marketable
equity securities 274 - 274 -
Other, net 3 (2) 17 (1)
----- ----- ----- -----
Other Income (Expense), Net 253 (49) 240 (76)
----- ----- ----- -----
Income Before Taxes 532 325 608 490
Provision for Income Taxes 215 131 245 197
----- ----- ----- -----
Net Income 317 194 363 293
----- ----- ----- -----
Preferred Dividend Requirement - - - (7)
----- ----- ----- -----
Earnings Applicable to
Common Stockholders $ 317 $ 194 $ 363 $ 286
===== ===== ===== =====
Earnings per Common Share
Basic $ 4.34 $ 1.99 $ 4.76 $ 2.99
Diluted $ 4.26 $ 1.95 $ 4.67 $ 2.89
Shares Used for Computation (000)
Basic 72,981 97,689 76,205 95,710
Diluted 74,457 99,694 77,671 101,317
See accompanying Notes to Condensed Consolidated Financial Statements.
1
US Airways Group, Inc.
Condensed Consolidated Balance Sheets
June 30, 1999 (unaudited) and December 31, 1998
(in millions)
June 30, December 31,
1999 1998
------- -------
ASSETS
Current Assets
Cash $ 25 $ 29
Cash equivalents 581 583
Short-term investments 549 598
Receivables, net 405 355
Materials and supplies, net 235 228
Deferred income taxes 206 347
Prepaid expenses and other 160 224
----- -----
Total Current Assets 2,161 2,364
Property and Equipment
Flight equipment 5,332 5,188
Ground property and equipment 959 915
Less accumulated depreciation
and amortization (2,747) (2,641)
----- -----
3,544 3,462
Purchase deposits 284 198
----- -----
Total Property and Equipment 3,828 3,660
Other Assets
Goodwill, net 580 593
Other intangibles, net 475 475
Investment in marketable
equity securities - 301
Deferred income taxes 130 -
Other assets, net 479 477
----- -----
Total Other Assets 1,664 1,846
----- -----
$7,653 $7,870
===== =====
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 66 $ 71
Accounts payable 469 430
Traffic balances payable
and unused tickets 873 752
Accrued aircraft rent 195 166
Accrued salaries, wages and vacation 343 329
Other accrued expenses 521 521
----- -----
Total Current Liabilities 2,467 2,269
Noncurrent Liabilities
Long-term debt, net of
current maturities 1,890 1,955
Accrued aircraft rent 277 332
Deferred gains, net 367 337
Postretirement benefits other
than pensions 1,300 1,240
Employee benefit liabilities and other 1,206 1,144
----- -----
Total Noncurrent Liabilities 5,040 5,008
Commitments and Contingencies
Stockholders' Equity
Common stock 101 101
Paid-in capital 2,280 2,283
Retained earnings (deficit) (385) (748)
Common stock held in
treasury, at cost (1,707) (1,069)
Deferred compensation (90) (99)
Accumulated other comprehensive
income, net of income tax effect (53) 125
----- -----
Total Stockholders' Equity 146 593
----- -----
$7,653 $7,870
===== =====
See accompanying Notes to Condensed Consolidated Financial Statements.
2
US Airways Group, Inc.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998 (unaudited)
(in millions)
1999 1998
---- ----
Cash and Cash equivalents at beginning of period $612 $1,094
--- -----
Cash flows from operating activities
Net income 363 293
Adjustments to reconcile net income to net cash
provided by (used for) operating activities
Depreciation and amortization 158 153
Loss (gain) on dispositions of property (5) (4)
Gain on sale of marketable equity securities (274) -
Amortization of deferred gains and credits (15) (14)
Other 31 58
Changes in certain assets and liabilities
Decrease (increase) in receivables (50) (96)
Decrease (increase) in materials and supplies,
prepaid expenses and pension assets 47 (13)
Decrease (increase) in deferred
income taxes (25) 65
Increase (decrease) in traffic balances
payable and unused tickets 121 181
Increase (decrease) in accounts
payable and accrued expenses 241 183
Increase (decrease) in postretirement
benefits other than pensions,noncurrent 60 36
--- -----
Net cash provided by (used for)
operating Activities 652 842
Cash flows from investing activities
Capital expenditures (611) (178)
Proceeds from the sale-leaseback of aircraft 300 -
Proceeds from dispositions of property 38 62
Proceeds from sale of marketable equity securities 307 -
Decrease (increase) in short-term investments 40 (127)
Decrease (increase) in restricted cash and investments - (49)
Other 3 3
--- -----
Net cash provided by (used for)
investing activities 77 (289)
Cash flows from financing activities
Proceeds from issuance of long-term debt 12 -
Principal payments on long-term debt (81) (119)
Issuances of Common Stock - 8
Purchases of Common Stock (670) (407)
Sales of treasury stock 4 3
Dividends paid on preferred stock - (7)
--- ---
Net cash provided by (used for)
financing activities (735) (522)
--- ---
Net increase (decrease) in Cash and
Cash equivalents (6) 31
--- -----
Cash and Cash equivalents at end of period $606 $1,125
=== =====
Noncash investing and financing activities
Conversion of preferred stock
into Common Stock $ - $ 358
Net unrealized (loss) gain on available-
for-sale securities,
net of income tax effect $ (1) $ 80
Supplemental Information
Cash paid during the period
for interest, net of amount capitalized $ 90 $ 123
Net cash paid during the period
for income taxes $ 55 $ 93
See accompanying Notes to Condensed Consolidated Financial Statements.
3
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.'s (US Airways Group or the Company)
and its wholly-owned subsidiaries. These interim period statements should
be read in conjunction with the Consolidated Financial Statements contained
in the Company's and US Airways, Inc. (US Airways, the Company's principal
operating subsidiary) Annual Report to the United States Securities and
Exchange Commission on Form 10-K for the year ended December 31, 1998.
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 1998 amounts have been reclassified to conform with 1999
classifications.
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 by the weighted average number of shares of common
stock outstanding during the period. Diluted EPS reflects the maximum
dilution that would result after giving effect to dilutive stock options.
The following table presents the computation of basic and diluted EPS (in
millions, except per share amounts):
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
---------------- -------------
1999 1998 1999 1998
----- ----- ---- ----
Earnings applicable to common stockholders:
Earnings applicable to common stockholders
(basic) $317 $194 $363 $286
Preferred dividend requirement* - - - 7
---- ---- ---- ----
Earnings applicable to common stockholders
(diluted) $317 $194 $363 $293
==== ==== ==== ====
Common shares:
Weighted average common shares outstanding
(basic) 73 98 76 96
Incremental shares related to outstanding
stock options 1 2 2 2
Incremental shares related to convertible
preferred stock Issuances* - - - 3
---- ---- ---- ----
Weighted average common shares outstanding
(diluted) 74 100 78 101
==== ==== ==== ====
EPS-Basic $4.34 $1.99 $4.76 $2.99
EPS-Diluted $4.26 $1.95 $4.67 $2.89
*Relates to the Company's Series H Preferred Stock, which was retired in
March 1998.
Note: EPS amounts may not recalculate due to rounding.
4
3. Comprehensive Income
Comprehensive income was $118 million and $223 million for the three
months ended June 30, 1999 and 1998, respectively, and $185 million and
$376 million for the six months ended June 30, 1999 and 1998, respectively.
Comprehensive income encompasses net income and "other comprehensive
income," which includes all other non-owner transactions and events that
change stockholders' equity. See Note 6.
4. Operating Segments and Related Disclosures
The Company has two reportable operating segments: US Airways, Inc.
(US Airways) and US Airways Express. The US Airways segment includes the
operations of US Airways (excluding US Airways' wholly-owned subsidiary US
Airways Investment Management Company, Inc.; formerly USAM Corp.) and
Shuttle, Inc. The US Airways Express segment includes the operations of the
Company's three wholly-owned regional airlines and activity resulting from
a marketing agreement with a non-owned US Airways Express air carrier. All
Other (as presented in the table below) reflects the activity of
subsidiaries other than those included in the Company's two reportable
operating segments.
Financial information for each reportable operating segment is set forth
below (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
-------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
Operating Revenues:
US Airways external $2,076 $2,109 $3,966 $4,015
US Airways intersegment 15 16 30 31
US Airways Express external 210 185 391 338
US Airways Express intersegment 8 7 15 14
All Other - 3 1 6
Intersegment Elimination (23) (23) (45) (45)
----- ----- ----- -----
$2,286 $2,297 $4,358 $4,359
===== ===== ===== =====
Income Before Taxes:
US Airways $ 243 $ 288 $ 316 $ 435
US Airways Express 50 46 76 68
All Other (1) 239 (9) 216 (13)
------ ------ ----- -----
$ 532 $ 325 608 490
====== ====== ===== =====
(1) 1999 amounts include a gain on the sale of certain marketable equity
securities. See Note 6.
5. Treasury Stock
The Company held 29.6 million shares and 17.4 million shares of Common
Stock in treasury as of June 30, 1999 and December 31, 1998, respectively.
During March 1999, the Company's Board of Directors authorized an
additional stock purchase program for up to $500 million of the Company's
common stock. The Company had purchased $330 million of its common stock
under this program through June 30, 1999.
6. Investment in Marketable Equity Securities
On May 27, 1999, the Company agreed to sell its ownership interest in
Galileo International, Inc. (Galileo). The transaction, which closed on
June 3, 1999, resulted in cash proceeds of
5
approximately $307 million and a pre-tax gain of approximately $274
million. The ownership interest, 7,000,400 shares of Galileo common stock,
was sold as part of a secondary common stock offering completed by Galileo.
Prior to the sale of this investment, the related unrecognized gain was
presented as a component of other comprehensive income, net of income tax
effect, in Stockholders' Equity.
7. Stockholders' Equity
As a Delaware corporation, the Company is subject to certain
provisions of the Delaware General Corporation Law (Delaware Law),
including the maintenance of a capital surplus, with respect to its ability
to pay dividends on or to purchase shares of its common stock. There are a
number of methods for calculating capital surplus under Delaware Law. As of
June 30, 1999, the Company's capital surplus under Delaware Law was $74
million based on its balance sheets prepared in accordance with generally
accepted accounting principles (assets less liabilities less the par value
of outstanding capital stock).
(this space intentionally left blank)
6
US Airways, Inc.
Condensed Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 1999 and 1998 (unaudited)
(in millions)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
Operating Revenues
Passenger transportation $1,838 $1,870 $3,499 $3,547
US Airways Express
transportation revenues 206 182 382 332
Cargo and freight 34 41 73 83
Other 170 168 334 330
----- ----- ----- -----
Total Operating Revenues 2,248 2,261 4,288 4,292
Operating Expenses
Personnel costs 755 724 1,499 1,421
Aviation fuel 150 146 269 300
Commissions 118 126 230 239
Aircraft rent 90 96 187 193
Other rent and landing fees 97 85 196 184
Aircraft maintenance 95 93 182 185
Other selling expenses 85 89 177 182
Depreciation and amortization 71 74 144 139
US Airways Express
capacity purchases 159 134 305 259
Other 361 328 739 635
----- ----- ----- -----
Total Operating Expenses 1,981 1,895 3,928 3,737
----- ----- ----- -----
Operating Income 267 366 360 555
Other Income (Expense)
Interest income 56 43 105 82
Interest expense (47) (60) (97) (123)
Interest capitalized 4 (20) 8 (18)
Gain on sale of marketable
equity securities 274 - 274 -
Other, net 4 (1) 17 -
----- ----- ----- -----
Other Income (Expense), Net 291 (38) 307 (59)
----- ----- ----- -----
Income Before Taxes 558 328 667 496
Provision for Income Taxes 219 132 261 200
----- ----- ----- -----
Net Income $ 339 $ 196 $ 406 $ 296
===== ===== ===== =====
See accompanying Notes to Condensed Consolidated Financial Statements.
7
US Airways, Inc.
Condensed Consolidated Balance Sheets
June 30, 1999 (unaudited) and December 31, 1998
(in millions)
June 30, December 31,
1999 1998
-------- ---------
ASSETS
Current Assets
Cash $ 22 $ 21
Cash equivalents 580 583
Short-term investments 549 598
Receivables, net 404 351
Receivables from related parties, net 194 169
Materials and supplies, net 208 202
Deferred income taxes 193 291
Prepaid expenses and other 147 174
----- -----
Total Current Assets 2,297 2,389
Property and Equipment
Flight equipment 5,062 4,924
Ground property and equipment 923 886
Less accumulated depreciation
and amortization (2,625) (2,528)
----- -----
3,360 3,282
Purchase deposits 59 -
----- -----
Total Property and Equipment 3,419 3,282
Other Assets
Goodwill, net 446 457
Other intangibles, net 393 391
Investment in marketable equity
securities - 301
Receivable from parent company 305 306
Deferred income taxes 142 -
Other assets, net 565 572
----- -----
Total Other Assets 1,851 2,027
----- -----
$7,567 $7,698
===== =====
LABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Current maturities of long-term debt $ 66 $ 71
Accounts payable 431 379
Traffic balances payable
and unused tickets 873 757
Accrued aircraft rent 188 155
Accrued salaries, wages and vacation 338 323
Other accrued expenses 561 470
----- -----
Total Current Liabilities 2,457 2,155
Noncurrent Liabilities
Long-term debt, net of current
maturities 1,878 1,954
Accrued aircraft rent 277 330
Deferred gains, net 366 335
Postretirement benefits other
than pensions 1,276 1,217
Employee benefit liabilities and other 1,209 1,105
----- -----
Total Noncurrent Liabilities 5,006 4,941
Commitments and Contingencies
Stockholder's Equity
Common stock - -
Paid-in capital 2,431 2,431
Retained earnings (deficit) (449) (855)
Receivable from parent company (1,825) (1,099)
Accumulated other comprehensive income,
net of income tax effect (53) 125
----- -----
Total Stockholder's Equity 104 602
----- -----
$7,567 $7,698
===== =====
See accompanying Notes to Condensed Consolidated Financial Statements.
8
US Airways, Inc.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998 (unaudited)
(in millions)
1999 1998
---- ----
Cash and Cash equivalents at beginning of period $604 $1,092
--- -----
Cash flows from operating activities
Net income 406 296
Adjustments to reconcile net income to net
cash provided by (used for) operating activities
Depreciation and amortization 144 139
Losses (gains) on dispositions of property (5) (4)
Gain on sale of marketable equity securities (274) -
Amortization of deferred gains and credits (14) (13)
Other (42) 28
Changes in certain assets and liabilities
Decrease (increase) in receivables (44) (68)
Decrease increase) in materials and
supplies, prepaid expense and pension assets 13 (15)
Decrease (increase) in deferred income taxes (61) 67
Increase (decrease) in traffic balances
payable and unused tickets 115 181
Increase (decrease) in accounts
payable and accrued expenses 358 193
Increase (decrease) in postretirement
benefits other than pensions, noncurrent 59 35
--- -----
Net cash provided by (used for)
operating activities 655 839
Cash flows from investing activities
Capital expenditures (500) (139)
Proceeds from the sale-leaseback of aircraft 300 -
Proceeds from dispositions of property 38 62
Proceeds from sale of marketable equity
securities 307 -
Decrease (increase) in short-term investments 40 (127)
Decrease (increase) in restricted cash
and investments - (49)
Funding of parent company's common
stock purchases (670) (407)
Funding of parent company's aircraft
purchase deposits (93) (32)
Other 2 2
--- -----
Net cash provided by (used for)
investing activities (576) (690)
Cash flows from financing activities
Principal payments on long-term debt (81) (119)
--- -----
Net cash provided by (used for)
financing activities (81) (119)
--- -----
Net increase (decrease) in Cash and Cash Equivalents (2) 30
--- -----
Cash and Cash equivalents at end of period $602 $1,122
=== =====
Noncash investing and financing activities
Net unrealized (loss) gain on available-
for-sale securities, net of tax effect $ (1) $ 80
Reduction of parent company receivable-
assignment of aircraft purchase rights
by parent company $ 72 $ 61
Supplemental Information
Cash paid during the period for
interest,net of amount capitalized $ 90 $ 123
Net cash paid during the period
for income taxes $ 55 $ 92
See accompanying Notes to Condensed Consolidated Financial Statements.
9
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 US Airways Investment Management Company, Inc. (USIM, formerly
USAM Corp.). US Airways is a wholly-owned subsidiary of US Airways Group,
Inc. (US Airways Group). These interim period statements should be read in
conjunction with the Consolidated Financial Statements contained in
US Airways' Annual Report to the United States Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1998.
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 1998 amounts have been reclassified to conform with 1999
classifications.
2. Comprehensive Income
Comprehensive income was $140 million and $225 million for the three
months ended June 30, 1999 and 1998, respectively, and $229 million and
$379 million for the six months ended June 30, 1999 and 1998, respectively.
Comprehensive income encompasses net income and "other comprehensive
income," which includes all other non-owner transactions and events that
change stockholder's equity. See Note 5.
3. Related Party Transactions
US Airways reflects the receivable from US Airways Group associated
with US Airways Group's common stock purchases as a reduction of
Stockholder's Equity. The receivable is adjusted periodically for accrued
interest. See also Note 5 in US Airways Group's Notes to Condensed
Consolidated Financial Statements on page 5 of this report.
4. Operating Segments and Related Disclosures
US Airways has two reportable operating segments: US Airways and US
Airways Express. The US Airways segment includes the operations of US
Airways (excluding USIM). The US Airways Express segment only includes
certain revenues and expenses related to US Airways Group's three wholly-
owned regional airlines and from a marketing agreement with a non-owned US
Airways Express air carrier.
(this space intentionally left blank)
10
Financial information for each reportable operating segment is set forth
below (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
---------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
Operating Revenues:
US Airways $2,042 $2,079 $3,906 $3,960
US Airways Express 206 182 382 332
----- ----- ----- -----
$2,248 $2,261 $4,288 $4,292
===== ===== ===== =====
Income Before Taxes:
US Airways $ 233 $ 276 $ 309 $ 418
US Airways Express 47 48 78 73
All Other (1) 278 4 280 5
------ ----- ----- -----
$ 558 $ 328 $ 667 $ 496
====== ===== ===== =====
(1) 1999 amounts include a gain on the sale of certain marketable equity
securities. See Note 5.
5. Investments in Marketable Equity Securities
Please refer to Note 6 in US Airways Group's Notes to Condensed
Consolidated Financial Statements on page 5 of this report related to
USIM's sale of its ownership interest in Galileo International, Inc.
6. Stockholder's Equity
As a Delaware corporation, US Airways is subject to certain
provisions of the Delaware General Corporation Law (Delaware Law),
including the maintenance of a capital surplus, with respect to its
ability to pay dividends on or to purchase shares of its common stock.
There are a number of methods for calculating capital surplus under
Delaware Law. As of June 30, 1999, US Airways' capital surplus under
Delaware Law was $104 million based on its balance sheets prepared in
accordance with generally accepted accounting principles (assets less
liabilities less the par value of outstanding capital stock).
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, 1998. The information contained herein is not a
comprehensive discussion 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
11
transportation in the markets in which the Company operates, other
operational matters discussed herein 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 in other factors affecting such estimates.
Financial Overview
For the second quarter of 1999, the Company's operating revenues
were $2.3 billion, operating income was $279 million, net income was
$317 million and diluted earnings per common share (EPS) was $4.26. For
the comparative period in 1998, operating revenues were $2.3 billion,
operating income was $374 million, net income was $194 million and EPS
was $1.95. The Company's financial results for the second quarter of
1999 include certain nonrecurring items as discussed below in "Results
of Operations."
For the first six months of 1999, the Company's operating revenues
were $4.4 billion, operating income was $368 million, net income was
$363 million and EPS was $4.67. For the first six months of 1998,
operating revenues were $4.4 billion, operating income was $566
million, net income was $293 million and EPS was $2.89. As mentioned
above, the Company's financial results for the first six months of 1999
include certain nonrecurring items.
The same factors that influenced the Company's financial
performance in 1998 continue to affect the Company's financial
performance in 1999. These factors include relatively favorable
domestic economic and industry conditions, overall favorable pricing
trends in markets served by the Company's airline subsidiaries, recent
marketing efforts undertaken by the Company and certain revenue-
enhancement and cost-reduction initiatives. However, the Company's
airline subsidiaries experienced an increase in pricing pressures and
competition during the second quarter of 1999. In addition, as
discussed in "Results of Operations," inclement weather, certain
matters involving information systems and pilot training constraints
have negatively affected the Company's financial performance for the
first six months of 1999.
Update on US Airways' Competitive Position
US Airways, the Company's principal subsidiary, continues to
introduce new Airbus single-aisle A320-Family aircraft to its operating
fleet. In 1999, as of the date of this report, August 5, 1999,
US Airways had acquired 17 new A320-Family aircraft. US Airways expects
to take delivery of 16 additional Airbus A320-Family aircraft during
the remainder of 1999. These new single-aisle aircraft are expected to
replace certain older aircraft operated by the Company's airline
subsidiaries. The new Airbus aircraft are more fuel-efficient, less
costly to maintain, have greater range capabilities and are expected to
provide certain customer service benefits over the aircraft they are
intended to replace. The Company currently expects that its airline
subsidiaries will retire 25 aircraft in 1999, including 17 aircraft
operated by US Airways (primarily Douglas DC-9-30 aircraft) and eight
Boeing 727-200 aircraft currently operated by Shuttle, Inc. (Shuttle).
Shuttle, a wholly-owned subsidiary, operates under the trade name
"US Airways Shuttle." New Airbus aircraft are expected to replace the
B727-200 aircraft in conjunction with the Company's rejuvenation of its
US Airways Shuttle product (see below). US Airways' first widebody
Airbus A330-300 aircraft is currently scheduled for delivery in the
first quarter of 2000. Six additional A330-300 aircraft are scheduled
for delivery in 2000 and in early 2001. US Airways plans to use these
aircraft in certain long-haul markets, primarily transatlantic service.
The new Airbus aircraft play an important part in the Company's long-
term strategy of establishing US Airways as a competitive global
airline. See "Liquidity and Capital Resources" for additional
information related to the Company's commitments to purchase flight
equipment and related assets.
12
In July 1999, the Company expanded its US Airways Shuttle product
to encompass certain routes formerly operated by US Airways. The new US
Airways Shuttle service, operated by US Airways, includes hourly
service during certain times between Washington (Reagan Washington
National Airport) and Boston (Logan). Commencing in September 1999,
the new US Airways Shuttle service will also include hourly service
during certain times between Washington (Dulles International Airport)
and both New York (LaGuardia Airport) and Boston (Logan International
Airport). US Airways Shuttle continues to offer hourly service during
certain times between New York (LaGuardia) and Washington (Reagan
National) and between New York (LaGuardia) and Boston (Logan), routes
operated by the Company's Shuttle subsidiary.
MetroJet-US Airways' response to low-cost, low-fare competition-
continues to expand its operational reach. MetroJet was introduced on
June 1, 1998 with an operating fleet of five aircraft. MetroJet
currently operates 41 aircraft and is expected to operate 46 aircraft
by the end of 1999. Although it has grown at a dramatic rate since its
introduction, MetroJet's growth rate is expected to slow until after
the summer of 2000 when additional aircraft become available for
reassignment from US Airways' other operations. MetroJet accounted for
approximately 9.3% of US Airways' capacity (available seat miles) in
the second quarter of 1999. MetroJet's route network is composed of two
primary elements: Florida routes (approximately 75%) and non-Florida
business markets (approximately 25%).
In May 1999, US Airways entered into an agreement with Chautauqua
Airlines, Inc. (Chautauqua) that permits Chautauqua to operate ten
Embraer 145LR 50-seat regional jet aircraft as part of US Airways
Express. The first two regional jets entered service with US Airways
Express in July and early August 1999 and the remaining eight aircraft
are expected to enter service approximately every other month between
September 1999 and the end of 2000. The Company also entered into an
agreement with Bombardier Inc. for the purchase of nine new de
Havilland Dash-8 turboprop aircraft. These aircraft, all of which have
been purchased and will enter into service in 1999, will be operated by
the Company's regional airline subsidiaries as part of US Airways
Express. In addition, the Company has extended the leases for ten Dash-
8 turboprop aircraft by three years (these leases were originally
scheduled to expire in 1999). The Company's three wholly-owned regional
airline subsidiaries operate as part of the US Airways Express system
along with six airlines, including Chautauqua, that operate as part of
US Airways Express under franchise agreements. Quarter-over-quarter,
capacity generated by the Company's three wholly-owned US Airways
Express air carriers increased 9.3%, revenue passengers increased 7.6%
and revenue passengers connecting to US Airways' mainline service
increased 6.3%.
In March 1999, US Airways announced that it had obtained
commercially viable takeoff and landing slots at London's Gatwick
Airport (Gatwick) that permitted the initiation of the long-awaited
service from Charlotte. US Airways began operating the Charlotte-London
service on June 12, 1999. Also in June 1999, US Airways increased its
service between Philadelphia and Paris to two daily flights, in
addition to the daily Pittsburgh-Paris flight. US Airways has also
filed with the Department of Transportation for authority to serve
London (Gatwick) from Pittsburgh and London's Heathrow Airport
(Heathrow) from Charlotte, Philadelphia, Pittsburgh and Boston.
US Airways anticipates moving its operations at Gatwick to Heathrow
when possible. The availability of operating rights at Heathrow is
currently constrained by the bilateral aviation treaty between the U.S.
and the United Kingdom. US Airways temporarily suspended Philadelphia-
Amsterdam service effective June 12, 1999.
Effects of the Year 2000
The Company has or is currently operating computer software
applications, systems and products that support important business
functions, including reservations, accounting and flight
13
operations systems, that will not properly process dates on or after
January 1, 2000 (commonly referred to as the "Year 2000" or "Y2K"
problem). In order to address this situation, the Company has
implemented a plan that addresses the Company's information technology
and non-information technology arenas. The Company has two teams of
full-time staff in place. One team is coordinating the conversion of
the Company's information technology to systems managed by Sabre, Inc.
(Sabre), including the Y2K compliance for those systems, as further
described below. A second team, headed by the Company's chief
information officer, is coordinating Y2K compliance efforts for non-
information technology systems. This team is reviewing the level of the
Company's Y2K compliance, and recommending such remedial measures as is
necessary.
The Company has a long-term information technology relationship with
Sabre pursuant to which it has been converting many of its information
technology systems to those provided by Sabre. Sabre has reported that a
majority of its primary "host" systems (including systems for
reservations, flight operations and cargo) are already Y2K compliant.
Approximately 97% of the balance of Sabre systems to which the Company
will be converting, as well as all non-Y2K compliant systems that are
covered by the Company's relationship with Sabre, have been claimed to be
Y2K compliant as well. The few remaining systems are in the process of
remediation, with completion dates no later than October 30, 1999.
Sabre has also informed the Company that it is in the process of
communicating with its own third party vendors concerning the Y2K
compliance of their products and services.
The Company operates computer software and systems that are not Y2K
compliant, and that are not covered by the Sabre relationship. This
includes both information technology and non-information technology
systems (such as fax machines, miscellaneous airport devices and aircraft
avionics).
The Company has completed inventory and remediation of non-
discretionary items with possible Y2K problems. The Company had
prioritized these items and has implemented a program to assess,
remediate and test the non-discretionary (including mission critical)
systems based on this prioritization. The Company completed the
assessment of all non-discretionary (including mission critical) items as
of January 31, 1999, and substantially completed the remediation of all
items found to be non-compliant as of July 15, 1999. Such remediation is
expected to be completed by September 30, 1999. The Company is also
working with the U.S. Federal Aviation Administration (FAA) to ensure
full compliance with any FAA Y2K requirements.
The Company also commenced airport and facility reviews in early
1998. This entailed reviewing the Y2K compliance of the systems in those
locations over which the Company has little or no control, such as
certain flight information displays, elevators, security and other
miscellaneous airport devices. The Company completed these reviews as of
December 31, 1998. The Company is also participating in Y2K review
efforts being coordinated on an industry-wide basis by the Airline
Transport Association and the International Air Transport Association
(IATA). In addition, the Company is conducting internal structured Y2K
tests of certain key airports. The Company is in continuous communication
with IATA and Navigation Canada, the Canadian equivalent of the FAA,
concerning the Y2K status of foreign air traffic control systems. Also,
on the evening of December 31, 1999, the Company either will have a
position at the FAA Command Center in Leesburg, Virginia or have
established a direct communication link with its FAA representative at
the Command Center to receive real-time Y2K status of foreign air traffic
control systems.
The Company has identified and prioritized its supplier base, and
has commenced formal contact with these vendors to determine their Y2K
status based on such prioritization, and any possible impact on the
Company. More than 600 mission critical suppliers have been identified,
14
and approximately 99% of these vendors have been contacted and have
responded. Approximately 65% of these vendors have claimed to be Y2K
compliant or that they shall become Y2K compliant in the very near term.
The Company will track the progress of the remaining vendors, and
evaluate its long-term relationship with these vendors based on the
responses it receives.
Although Sabre has notified the Company that it believes that its
Y2K compliance program is on schedule, there can be no assurance that the
compliance program will be completed in a timely manner. The Company
expects to substantially remediate or replace all non-compliant internal
mission critical non-Sabre systems by September 30, 1999. The Company has
comprehensive Y2K compliance monitoring and risk mitigation programs
covering all of its mission critical business partners, including
airports and suppliers of goods and services. Despite these efforts,
there can be no assurance that the Company's own computer software and
systems, those of its suppliers, the airports at which the Company
operates, or the air traffic control system managed by the FAA will be
made Y2K compliant in a timely manner. Any such failures could have a
material adverse effect on the business, financial condition and results
of operations of the Company.
The Company is establishing contingency plans in the event that any
mission critical system is not Y2K compliant by the date required. These
plans will entail finding alternative vendors/suppliers who are Y2K
compliant, purchasing additional products and inventories/supplies and
reverting to manual systems or workarounds, prior to December 31, 1999.
In the event that the Company is required to implement a contingency
plan, it believes that the result may be significant delays in operations
and flight cancellations. In the event that such delays and flight
cancellations occur, it is possible, depending on the extent of the
delays and cancellations, that there could be a material adverse impact
on the Company's financial condition and results of operations.
As of June 30, 1999, aggregate expenses incurred by the Company to
become Y2K compliant, apart from expenses related to the Sabre
relationship, have amounted to approximately $6 million. The Company
expects to spend an additional $4 million, apart from the Sabre
relationship, in order to become fully Y2K compliant. These amounts are
also exclusive of any replacement equipment that may become necessary and
have not yet been identified. With respect to the cost of Sabre's Y2K
compliance program, the Company cannot completely quantify the costs for
Y2K compliance on its information technology systems because such costs
have been incorporated into the costs of the broader conversion plan to
Sabre systems. However, the Company anticipates incurring aggregate
expenses of $32 million for Sabre services which are related solely to
Y2K compliance efforts on the systems, unrelated to the broader
conversion plan. As of June 30, 1999, the Company paid Sabre $27.5
million in aggregate expenses for these services, and expects to pay
Sabre an additional $4.5 million during the remainder of 1999 for these
services. Overall, the Company believes that the cost of becoming Y2K
compliant is not expected to have a material adverse effect on the
business, financial condition or results of operations of the Company.
Other Information
On May 28, 1999, the United States Court of Appeals for the District
of Columbia issued a unanimous opinion invalidating the certification of
the Communication Workers of America as the collective bargaining
representative of US Airways' passenger service employees (approximately
9,500 employees). The Court found that US Airways was denied its
constitutional right of free speech when it was prohibited by the
National Mediation Board (NMB) from communicating its views to these
employees during the union election process. Following the court's
decision, the NMB ordered a rerun election. On July 16, 1999, as
prescribed by the NMB, US Airways mailed ballots to its passenger service
employees to again vote on union representation.
On April 1, 1999, US Airways' fleet service employees, who are
represented by the International Association of Machinists and Aerospace
Workers (IAMAW), ratified an initial labor contract. The new contract,
which covers approximately 6,000 employees, is based on pay parity
15
with other major domestic airlines. In addition, on May 3, 1999, US
Airways' flight crew training instructors (approximately 125 employees)
ratified a new collective bargaining agreement. On July 29, 1999, US
Airways' flight dispatchers (approximately 195 employees) ratified a new
collective bargaining agreement.
US Airways is in negotiations over amendable labor agreements with
the Association of Flight Attendants covering flight attendants and with
the IAMAW covering mechanics and related employees. A tentative agreement
was previously reached with the mechanics and related employees' IAMAW
negotiating committee, but was rejected by the membership. The Company
is unable to determine the timing of when these negotiations will be
concluded and amended contracts established, or the final terms and
conditions of amended contracts.
On May 27, 1999, US Airways Investment Management Company, Inc.
(USIM, formerly USAM Corp.), a wholly-owned subsidiary of US Airways,
agreed to sell its ownership interest in Galileo International, Inc.
(Galileo). The transaction, which closed on June 3, 1999, resulted in
cash proceeds of approximately $307 million and a pre-tax gain of
approximately $274 million. USIM's interest, 7,000,400 shares of Galileo
common stock, was sold as part of a secondary common stock offering
completed by Galileo.
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 below are for scheduled service only.
Three Months Ended June 30, 1999
Compared with the
Three Months Ended June 30, 1998
Operating Revenues-Passenger transportation revenues were relatively
unchanged as a decrease in revenues attributable to US Airways'
operations were substantially offset by an increase in revenues generated
by the Company's other airline subsidiaries. See "Selected US Airways
Operating and Financial Statistics" for additional information related
to US Airways' passenger transportation revenues. Cargo and freight
revenues decreased due primarily to less mail volume (competitive
pressures). Other operating revenues increased 6.2% related primarily to
increased sales of capacity (ASMs) generated by a non-owned US Airways
Express air carrier in certain markets and higher revenues associated
with the Company's Dividend Miles frequent traveler program. The increase
in revenues from the capacity sales is partially offset by increases in
expenses recognized in the Other operating expenses category related to
purchases of the capacity (see below).
Operating Expenses-The Company's results for the second quarter of 1999
include certain activity categorized as nonrecurring items. The table on
the following page shows where these nonrecurring items were recorded in
the Company's Condensed Consolidated Statements of Operations (dollars in
millions). The items recognized in Operating Expenses were credits to the
respective expense line item.
(this space intentionally left blank)
16
Operating Expenses
Aircraft rent $ 11
Aircraft maintenance 1
Depreciation and amortization 4
---
16
---
Other Income (Expense)
Gain on sale of marketable equity securities 274
---
274
---
Amount reflected in Income Before Taxes $290
===
The credits to Aircraft rent and Aircraft maintenance reflect a
partial reversal of previously accrued lease obligations and lease return
provisions, respectively, related to US Airways' nonoperating BAe-146
aircraft. The credit to Depreciation and amortization reflects the partial
reversal of an accrual related to the abandonment of a maintenance
facility-US Airways was able to sell certain leasehold improvements at the
facility for an amount higher than anticipated when the accrual was
established. All of these expense credits are considered nonrecurring items
because they relate to nonrecurring items disclosed in prior periods,
principally 1994 for the BAe-146 activity and 1997 for the facilities-
related credit. The gain on the sale of marketable equity securities
resulted from USIM's sale of its common stock investment in Galileo (See
"Other Information" above).
The Company's Personnel costs increased 5.0% due primarily to an
increase in full-time equivalent employees, wage increases for certain
employee groups that became effective during the quarter and the effects of
a lower discount rate used to calculate certain pension and benefit plan
liabilities in 1999. Commissions decreased 5.8% due primarily to rate
factors. Excluding nonrecurring items, Aircraft rent increased 4.5% in
conjunction with an increase in the number of leased aircraft (see also
"Liquidity and Capital Resources"). Other rent and landing fees increased
14.0% primarily related to the timing of when certain periodic adjustments
were received from certain government-owned facilities and an increase in
departures/landings in 1999. Excluding nonrecurring items, Depreciation and
amortization was relatively unchanged. Other operating expenses increased
12.1% due primarily to expenses associated with US Airways' information
services management contract with Sabre (see also "Effects of the Year
2000"), expenses associated with purchases of capacity from a non-owned US
Airways Express air carrier (see Other operating revenues above) and
expenses associated with US Airways' frequent traveler marketing
relationship with American Airlines, Inc. (American).
Other Income (Expense)-Interest income decreased as the average balance of
cash equivalents and short-term investments was substantially lower in the
second quarter of 1999 (see also "Liquidity and Capital Resources").
Interest expense decreased due to less outstanding long-term debt. The
Company's outstanding long-term debt (including current maturities) has
decreased $507 million since June 30, 1998. The increase in Interest
capitalized reflects US Airways' write-off of capitalized interest on
equipment purchase deposits with The Boeing Company in the second quarter
of 1998 (related to the settlement of litigation between the two companies)
and an increase in equipment purchase deposits for new Airbus aircraft.
Sale of certain marketable equity securities reflects the gain recognized
upon the sale of the Company's common stock interest in Galileo (see
"Other Information" above for additional information).
Provision for Income Taxes-An increase in pre-tax income for the second
quarter of 1999 was the major factor contributing to the higher provision.
Earnings per Common Share-The results were affected by higher earnings
applicable to common stockholders, including the effects of certain
nonrecurring items (see above) and fewer shares of common stock outstanding
(see "Liquidity and Capital Resources" related to the Company's retirement
of its Series H Preferred Stock and purchases of its common stock).
17
Six Months Ended June 30, 1999
Compared with the
Six Months Ended June 30, 1998
Operating Revenues-Passenger transportation revenues were relatively
unchanged. Passenger transportation revenues attributable to the Company's
three wholly-owned regional airlines increased $26 million or 8.5% due
primarily to a 7.5% increase in capacity (ASMs), largely offsetting a
decline in passenger transportation revenues from US Airways' operations.
See "Selected US Airways Operating and Financial Statistics" for
additional information related to US Airways' passenger transportation
revenues. Cargo and freight revenues decreased due primarily to less mail
volume (competitive pressures). Other operating revenues increased 8.0%
related primarily to increased sales of capacity (ASMs) generated by a non-
owned US Airways Express air carrier in certain markets and higher revenues
associated with the Company's Dividend Miles frequent traveler program. The
increase in revenues from these capacity sales is partially offset by
increases in expenses recognized in the Other operating expenses category
related to purchases of the capacity (see below).
Operating Expenses-The Company recognized certain activity categorized as
nonrecurring items in the second quarter of 1999. These nonrecurring items
included credits to certain operating expense line items totaling $16
million (see table above). The Company's Personnel costs increased 6.0% due
primarily to weather factors, certain matters related to information
systems (see Selected US Airways Operating and Financial Statistics), both
primarily related to first quarter 1999 activity, an increase in full-time
equivalent employees, wage increases for certain employee groups that
became effective during the second quarter of 1999 and the effects of a
lower discount rate used to calculate certain pension and benefit plan
liabilities in 1999. Aviation fuel decreased significantly linked to lower
average fuel prices in 1999. Other rent and landing fees increased 6.5%
related to the timing of when certain periodic adjustments were received
from certain government-owned facilities and an increase in
departures/landings in 1999. Excluding nonrecurring items, Depreciation and
amortization increased 5.9% due to an increase in amortization of
capitalized software costs (related primarily to information systems
provided by Sabre) and higher depreciation expenses associated with
reducing the remaining depreciable life of certain DC-9-30 aircraft. Other
operating expenses increased significantly due to expenses associated with
US Airways' information services management contract with Sabre (see also
"Effects of the Year 2000"), expenses associated with purchases of
capacity from a non-owned US Airways Express air carrier (see Other
operating revenues above), expenses associated with US Airways' frequent
traveler marketing arrangement with American and weather-related factors
(e.g., aircraft de-icing, interrupted trips expenses, etc.). The weather
factors were most evident during the first quarter of 1999.
Other Income (Expense)-Interest income decreased as the average balance of
cash equivalents and short-term investments was substantially lower in 1999
(see also "Liquidity and Capital Resources"). Interest expense decreased
due to less long-term debt outstanding. The increase in Interest
capitalized reflects US Airways' write-off of capitalized interest on
equipment purchase deposits with The Boeing Company in the second quarter
of 1998 (related to the settlement of litigation between the two companies)
and an increase in equipment purchase deposits for new Airbus aircraft. As
discussed above, Sale of certain marketable equity securities reflects the
gain recognized upon the Company's sale of its interest in Galileo. Other,
net includes a $9.9 million gain which resulted from US Airways' sale of
approximately 30% of its interest in Equant n.v., an international data
network service provider (the interest was held through US Airways'
interest in SOCIETE Internationale de Telecommunications Aeronatiqies), in
the first quarter of 1999.
Provision for Income Taxes-An increase in pre-tax income for the first six
months of 1999 was the major factor contributing to the higher provision.
18
Preferred Dividend Requirement-The amount disclosed for 1998 activity was
related to the Company's Series H Preferred Stock, which was retired in
March 1998.
Earnings per Common Share-The results were affected by higher earnings
applicable to common stockholders, including the effects of certain
nonrecurring items (see above) and fewer shares of common stock outstanding
(see related discussion below in "Liquidity and Capital Resources").
SELECTED US AIRWAYS OPERATING AND FINANCIAL STATISTICS (Note 1)
(UNAUDITED)
Three Months
Ended June 30, Increase
-------------
1999 1998 (Decrease)
---- ---- ----------
Revenue passengers (thousands)* 14,755 15,302 (3.6) %
Total RPMs (millions) (Note 2) 10,910 10,916 (0.1) %
RPMs (millions)* 10,886 10,881 - %
Total ASMs (millions) (Note 3) 14,846 14,179 4.7 %
ASMs (millions)* 14,817 14,138 4.8 %
Passenger load factor* (Note 4) 73.5 % 77.0 % (3.5) pts.
Break-even load factor (Note 5) 65.7 % 66.8 % (1.1) pts.
Yield* (Note 6) 16.88 c 17.18 c (1.7) %
Passenger revenue per ASM* (Note 7) 12.40 c 13.22 c (6.2) %
Revenue per ASM (Note 8) 13.75 c 14.66 c (6.2) %
Cost per ASM (Note 9) 12.37 c 12.42 c (0.4) %
Average passenger journey (miles)* 738 711 3.8 %
Average stage length (miles)* 612 596 2.7 %
Revenue aircraft miles (millions)* 110 105 4.8 %
Cost of aviation fuel per gallon (Note 10) 52.40 c 52.35 c 0.1 %
Cost of aviation fuel per gallon, excluding
fuel taxes (Note 11) 46.22 c 46.35 c (0.3) %
Gallons of aviation fuel consumed (millions) 286 278 2.9 %
Schedule completion factor* 97.6 % 98.5 % (0.9) pts.
Number of aircraft in operating fleet at period-end 382 370 3.2 %
Full-time equivalent employees at period-end 39,599 38,276 3.5 %
Six Months
Ended June 30, Increase
-------------
1999 1998 (Decrease)
---- ---- ----------
Revenue passengers (thousands)* 27,752 28,610 (3.0) %
Total RPMs (millions) (Note 2) 20,483 20,397 0.4 %
RPMs (millions)* 20,439 20,326 0.6 %
Total ASMs (millions) (Note 3) 28,980 27,913 3.8 %
ASMs (millions)* 28,924 27,831 3.9 %
Passenger load factor* (Note 4) 70.7 % 73.0 % (2.3) pts.
Break-even load factor (Note 5) 65.4 % 65.4 % - pts.
Yield* (Note 6) 17.12 c 17.45 c (1.9) %
Passenger revenue per ASM* (Note 7) 12.10 c 12.74 c (5.0) %
Revenue per ASM (Note 8) 13.48 c 14.19 c (5.0) %
Cost per ASM (Note 9) 12.55 c 12.46 c 0.7 %
Average passenger journey (miles)* 736 710 3.7 %
Average stage length (miles)* 613 594 3.2 %
Revenue aircraft miles (millions)* 215 208 3.4 %
Cost of aviation fuel per gallon (Note 10) 47.92 c 54.96 c (12.8) %
Cost of aviation fuel per gallon, excluding
fuel taxes (Note 11) 41.78 c 48.94 c (14.6) %
Gallons of aviation fuel consumed (millions) 561 545 2.9 %
Schedule completion factor* 96.8 % 98.4 % (1.6) pts.
Number of aircraft in operating fleet at period-end 382 370 3.2 %
Full-time equivalent employees at period-end 39,599 38,276 3.5 %
* Scheduled service only (excludes charter service).
c cents
Note 1. Operating statistics include US Airways' "mainline" operations as
well as the operations of its low-cost product, MetroJet. Operating
statistics include free frequent travelers and the related miles they
flew. Certain nonrecurring items and 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 for better
comparability between periods.
Note 2. Revenue passenger miles-Revenue passengers multiplied by the number
of miles they flew.
Note 3. Available seat miles-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 Company's financial results for the first six months of 1999 were
adversely affected by inclement weather (snow/ice storms) in the eastern
United States, the recent conversion of certain of the Company's
information systems (including reservations, airport customer services and
flight tracking systems) to those provided by Sabre, competitive pressures
and operational difficulties. The effects on US Airways' operations of the
inclement weather, compounded by the systems conversions, were
particularly acute during the first quarter of 1999. The new systems
resulted in changes to many basic work processes-temporarily affecting
the efficiency at which certain
19
processes were performed (including increasing employee overtime). In the
first quarter of 1999, US Airways was forced to cancel approximately 5.6%
of its flights. In contrast, US Airways flight cancellation rate averaged
2.5% in the first quarters of 1998 and 1997. The unusually large number of
cancellations of planned flights increased US Airways' unit cost (cost per
ASM) since it was geared to operate a larger schedule. As US Airways
cancelled flights, its costs did not decrease proportionally-only
expenses such as aviation fuel, landing fees and commissions were avoided.
At the same time, US Airways lost a portion of the revenue from the
cancelled flights. The information systems difficulties lingered into the
second quarter of 1999. In addition, pilot training constraints negatively
affected the Company's financial results for the second quarter of 1999.
These factors stem from certain structural transformations, including the
integration of new Airbus aircraft into US Airways' operating fleet, the
growth of MetroJet (i.e., the need to reconfigure aircraft), the
retirement of certain older aircraft and the planned replacement of
Shuttle's B727-200 aircraft with Airbus aircraft. These factors have
contributed to an increase in cancellations of planned flights; US
Airways' cancellation rate averaged 3.2% in the second quarter of 1999
compared to an average rate of 2.5% in the second quarter of 1998 and 1.6%
in the second quarter of 1997. The Company is unable to precisely
determine the timing of when these factors will be resolved.
Compared with the second quarter of 1998, US Airways' unit revenue
for the second quarter of 1999 decreased 6.2% and its unit cost for the
same comparable period decreased 0.4%. Compared with the first six months
of 1998, US Airways' unit revenue for the first six months of 1999
decreased 5.0% and its unit cost for the same comparable period increased
0.7%. The Company's airline subsidiaries experienced an increase in
pricing pressures and competition during the second quarter of 1999. See
the previous paragraph for related information and "Results of
Operations" for information related to changes in particular revenue and
expense categories.
US Airways' capacity is expected to increase approximately 5.0% for
full-year 1999 compared to full-year 1998. The year-over-year increase in
capacity will be driven largely by MetroJet, which will contribute
approximately 4 percentage points of the expected increase, with
transatlantic operations making up the majority of the remainder of the
increase. The capacity growth estimates for US Airways for the remainder
of 1999 and full-year 1999 are lower than previously disclosed estimates
primarily due to pilot training constraints and delays in returning
aircraft to service from scheduled maintenance visits.
For the balance of the year, US Airways expects to experience
continued revenue pressures. In this regard, third quarter revenues and
unit cost are being negatively impacted by lower than expected completion
of scheduled flights. The passenger dissatisfaction resulting from this
circumstance is also anticipated to have a continuing negative impact.
Liquidity and Capital Resources
As of June 30, 1999, the Company's Cash, Cash equivalents and Short-
term investments totaled $1.2 billion and the ratio of the Company's
current assets to its current liabilities ("current ratio") was 0.9 (the
Company's Condensed Consolidated Balance Sheets are contained in Part I,
Item 1A of this report). As of December 31, 1998, the Company's Cash, Cash
equivalents and Short-term investments totaled $1.2 billion and the
Company's current ratio was 1.0. The Company's debt to equity ratio was
13.4 and 3.4 as of June 30, 1999 and December 31, 1998, respectively. The
decrease in the current ratio is primarily attributable to a decrease in
Cash equivalents and Short-term investments associated with the Company's
purchases of its common stock (see below) offset by the cash generated
from the Company's sale of its ownership interest in Galileo. The increase
in the debt to equity ratio primarily reflects the decrease in
Stockholder's Equity resulting from an increase in shares of common stock
held in treasury partially offset by net income for the first six months
of 1999 (a majority of the after-tax gain associated with the Company's
sale of its interest
20
in Galileo was already included in Stockholder's Equity as a component of
Accumulated other comprehensive income, net of income tax effect).
For the first six months of 1999, the Company's operating activities
provided net cash of $652 million (as presented in the Company's Condensed
Consolidated Statements of Cash Flows, which are contained in Part I, Item
1A of this report) compared to $842 million for the first six months of
1998. Operating cash flows during the first six months of 1999 were
affected by the same factors that negatively affected financial results
during that period (see discussion above in "Result of Operations").
The net cash provided by investing activities during the first six
months of 1999 was $77 million. The comparable amount for 1998 was a net
use of cash of $289 million. Investing activities during the first six
months of 1999 included cash outflows of $611 million related to capital
expenditures and cash inflows of $338 million related to asset
dispositions. Capital expenditures included $545 million for aircraft and
aircraft-related assets, including the purchase of eleven new Airbus A320-
Family aircraft, the purchase of eight aircraft that were previously
leased (including five nonoperating BAe-146 aircraft which were
immediately sold) and purchase deposits related to new Airbus aircraft
scheduled for future delivery. US Airways completed sale-leaseback
transactions for nine of the new Airbus aircraft purchased in the first
six months of 1999 generating proceeds of $300 million (sale-leaseback
transactions for two of the new Airbus aircraft were completed in early
July 1999). During the first six months of 1998, the Company's capital
expenditures included purchase deposits for new Airbus flight equipment,
the purchase of two Boeing B767-200ER aircraft at the expiration of their
operating lease and costs associated with the purchase of other assets
(most notably costs associated with information systems provided by
Sabre). Asset dispositions during the first six months of 1998 included
proceeds of $47 million from US Airways' sale of substantially all of its
information systems and related assets to Sabre and proceeds of $6 million
from US Airways' sale of four nonoperating aircraft. As discussed above,
the Company sold its common stock interest in Galileo during the second
quarter of 1999. The transaction generated proceeds of $307 million.
Net cash used for financing activities during the first six months of
1999 was $735 million, including $670 million related to the Company's
purchase of 12 million shares of its common stock. The Company' Board of
Directors authorized a fifth common stock purchase program in March 1999
for the purchase of $500 million of the Company's common stock. From
January 1998, when the Company's first common stock purchase program was
authorized, through June 30, 1999, the Company had purchased a total of
30.4 million shares of its common stock at a total cost of $1.75 billion.
As of June 30, 1999, the Company had purchased $330 million of its common
stock under the fifth program. As discussed in Note 7 to the Company's
Notes to Condensed Consolidated Financial Statements, the Company is
subject to certain provisions of Delaware General Corporate Law with
respect to its ability to pay dividends on or purchase shares of its
common stock. Besides normal debt repayments, US Airways retired early
certain debt with a principal amount of $46 million during the first six
months of 1999. Financing activity during the first six months of 1998
included the March 12, 1998 conversion of Company's Series H Preferred
Stock into 9.2 million shares of Common Stock (and the Series H Preferred
Stock was retired). The Company paid dividends of $7 million to holders of
its Series H Preferred Stock in 1998 prior to the retirement of that
series.
The Company's agreements to acquire new Airbus aircraft, accompanying
jet engines and ancillary assets increase the Company's financing needs
and result in a significant increase in its financial obligations and debt
burden. As of the date of this report, August 5, 1999, the Company had
orders for 377 Airbus A320-Family aircraft, including 105 aircraft on firm
order, 112 aircraft on order subject to reconfirmation prior to scheduled
delivery and options to acquire another 160 Airbus aircraft. In addition,
the Company has orders for 30 Airbus widebody aircraft, including
21
seven aircraft on firm order, seven aircraft subject to reconfirmation
prior to delivery and options for 16 additional widebody aircraft.
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. US Airways continues to address its
cost structure, primarily by replacing certain older aircraft with new
Airbus aircraft and expanding its MetroJet product.
The Company expects to satisfy its short-term liquidity requirements,
including obligations related to the acquisition of new aircraft and
related equipment, through a combination of third-party financing, cash on
hand and cash generated from operations. The Company expects to finance a
substantial portion of the cost of new aircraft with a combination of
enhanced equipment trust certificates, or similar debt and/or leveraged
leases. US Airways has used cash to purchase all of its new Airbus
aircraft and continues to complete sale-leaseback transactions for each
aircraft soon after delivery. The Company has commitments or letters of
intent that it believes will provide financing for at least 25% of the
anticipated purchase price of all of its firm-order Airbus 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 training simulators, 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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the second quarter of 1999, the Company sold its common stock
interest in Galileo International, Inc. The transaction generated cash
proceeds of approximately $307 million and a pre-tax gain of approximately
$274 million (see Part I, Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," for additional
information). As disclosed in the Annual Report of US Airways Group and US
Airways to the SEC on Form 10-K for the year ended December 31, 1998 (the
"Company's 1998 Form 10-K"), the Company was subject to certain market
risks associated with this investment prior to its sale, most notably
equity price risk.
There have been no other material changes to the Company's
disclosures related to certain market risks as reported under Part II,
Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," in
the Company's 1998 Form 10-K.
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
US Airways is involved in legal proceedings arising out of an
aircraft accident in September 1994 near Pittsburgh in which 127
passengers and five crew members lost their lives. With respect to this
accident, the NTSB held hearings in January and November 1995, and held a
final hearing in March 1999, at which it issued the final accident
investigation report. The report concluded that the probable cause of the
accident involved a malfunction of the aircraft's rudder system. Wrongful
death cases are pending in a consolidated multi-district litigation in
the U.S. District Court for the Western District of Pennsylvania and in
state court in Cook County Illinois. Although US Airways has settled
approximately 90% of the cases and claims arising from the Pittsburgh
accident, it expects that it will be at least a year before all the
settlements and/or
22
related litigation are concluded. A trial has been set for November 1999
in the Illinois litigation. US Airways is fully insured with respect to
this litigation and, therefore, believes that the litigation will not
have a material adverse effect on the Company's financial condition or
results of operations.
In May 1995, the Company, US Airways and the Retirement Income Plan
for Pilots of US Airways, Inc. ("Retirement Income Plan") were sued in the
Federal District Court for the District of Columbia by 481 active and
retired pilots alleging that defendants had incorrectly interpreted the
Retirement Income Plan provisions and erroneously calculated benefits
under the Retirement Income Plan. The plaintiffs sought damages in excess
of $70 million. In May 1996, the court issued a decision granting our
Motion to Dismiss the majority of the complaint for lack of jurisdiction,
deciding that the dispute must be resolved through the arbitration process
under the Railway Labor Act because the Retirement Income Plan was
collectively bargained. The court retained jurisdiction over one count of
the complaint alleging a violation of a disclosure requirement under
ERISA. The plaintiffs attempted to appeal the district court's dismissal
before the U.S. Court of Appeals for the District of Columbia. In January
of 1998, the Court of Appeals dismissed plaintiffs' appeal for lack of
jurisdiction because the lower court order was not final. The plaintiffs
moved for an order certifying the lower court order as final. The district
court granted the motion to certify and the plaintiffs appealed to the
U.S. Court of Appeals for the District of Columbia. In February 1999, the
U.S. Court of Appeals upheld the district court's decision originally
granted in May 1998 in our favor. In May 1999, the plaintiffs filed a
petition for certiorari with the U.S. Supreme Court. In July 1999, the
Company filed a brief in opposition to the plaintiff's petition for
certiorari with the U.S. Supreme Court.
The City and County of San Francisco have sued a number of San
Francisco International Airport tenants for the recovery of approximately
$18 million of costs incurred with respect to the characterization and
cleanup of soil and groundwater contamination at the airport. US Airways
has been identified by the City and County of San Francisco as a
potentially responsible party. US Airways and the City and County of San
Francisco have entered into an agreement to resolve this matter, which is
subject to approval by the Court in August 1999.
Also, the Company and US Airways have been named as defendants in
three lawsuits recently filed in U.S. District Court for the Eastern
District of Michigan. Northwest Airlines is also named as a defendant in
each action, while Delta Air Lines and the Airlines Reporting Corporation
are named as defendants in two of the cases. The complaints purport to be
brought on behalf of a class of airline passengers who originated or
terminated their trips at the defendant carriers' respective hubs. These
passengers have made allegations that they have paid excessive fares by
reason of the respective airline's enforcement of ticketing rules which
prohibit the use of a connecting segment coupon which is part of a
through-fare ticket where the passenger does not fly or intend to fly the
entire ticketed itinerary. Plaintiffs allege monopolization and restraint
of trade in violation of the federal antitrust laws. They seek recovery
of unquantified treble-damages and an injunction prohibiting future
enforcement of the rules at issue. The Company believes the claims
against it to be without merit and intends to impose a vigorous defense.
The cases are respectively styled Keystone Business Machines, Inc., etc.
v. US Airways Group, Inc., et al. (E.D. Mich. Case No. 99-72474); BLT
Contracting, Inc., etc. v. US Airways Group, Inc., et al. (E.D. Mich. Case
No. 99-72998); and Volk, etc. v. Delta Air Lines, Inc., et al. (E.D. Mich.
Case No. 99-72987).
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
US Airways Group's annual meeting of stockholders was held on May 19,
1999. Proxies for the meeting were solicited by US Airways Group pursuant to
Regulation 14A under the Securities Exchange Act of 1934.
23
All of management's nominees for the election to the Board of Directors as
listed in US Airways Group's Proxy Statement for the meeting were elected. In
addition, the stockholders also voted on the following proposals with the
following results:
1. Management's proposal regarding ratification of the selection of auditors
of the Company for fiscal year 1999.
For: 66,442,907 Against: 457,519 Abstain: 298,238 Broker Non-Votes: None
2. Management's proposal regarding approval of the US Airways Group, Inc. Long-
Term Incentive Plan.
For: 63,019,913 Against: 3,843,023 Abstain: 335,728 Broker Non-Votes: None
3. Management's proposal regarding approval of the US Airways Group, Inc.
Nonemployee Directors Stock Purchase Plan
For: 63,091,67 Against: 3,724,938 Abstain: 382,049 Broker Non-Votes: None
4. Stockholder proposal concerning confidential voting.
For: 19,040,360 Against: 29,946,249 Abstain: 516,762 Broker Non-Votes:
17,695,293
5. Stockholder proposal concerning cumulative voting in the election of
directors.
For: 9,282,945 Against: 36,382,775 Abstain: 406,514 Broker Non-Votes:
21,126,430
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
DESIGNATION DESCRIPTION
10.1 US Airways Group, Inc. Nonemployee Directors Stock Purchase Plan
(incorporated by reference to Exhibit A to US Airways Group's Proxy
Statement dated May 19, 1999).
10.2 US Airways Group, Inc. Long-Term Incentive Plan (incorporated by
reference to Exhibit B to US Airways Group's Proxy Statement dated
May 19, 1999).
10.3 Employment Agreement between US Airways Group and US Airways and the
Senior Vice President-Finance and Chief Financial Officer of both
companies.
10.4 Employment Agreement between US Airways and its Senior Vice
President-Human Resources.
10.5 Agreement between US Airways and its Senior Vice President-Finance
and Chief Financial Officer providing supplemental retirement
benefits
27.1 Financial Data Schedule-US Airways Group
27.2 Financial Data Schedule-US Airways
(this space intentionally left blank)
24
B. REPORTS ON FORM 8-K
DATE OF REPORT SUBJECT OF REPORT
July 21, 1999 News release disclosing the results of operations for
both US Airways Group and US Airways for the three
months and six months ended June 30, 1999, and selected
operating and financial statistics for US Airways for
the same periods.
July 14, 1999 Certain forward-looking information was provided by US
Airways to the investment community related to aircraft
fleet and selected operating and financial statistics.
June 7, 1999 Certain forward-looking information was provided by US
Airways to the investment community related to aircraft
fleet, second quarter 1999 earnings and selected
operating and financial statistics.
May 27, 1999 The sale of ownership interest in Galileo by USIM. The
transaction, which closed on June 3, 1999, resulted in
cash proceeds of approximately $307 million and a pre-
tax gain of approximately $274 million. USIM's interest,
7,000,400 shares of Galileo common stock, was sold as
part of a secondary common stock offering completed by
Galileo.
May 17, 1999 Certain forward-looking information was provided by US
Airways to the investment community related to aircraft
fleet and selected operating and financial statistics.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
US Airways Group, Inc. (Registrant)
Date: August 5, 1999 By: /s/ ANITA P. BEIER
----------------------
Anita P. Beier
Vice President and Controller
(Chief Accounting Officer)
US Airways, Inc. (Registrant)
Date: August 5, 1999 By: /s/ ANITA P. BEIER
------------------
Anita P. Beier
Vice President and Controller
(Chief Accounting Officer)
(this space intentionally left blank)
25
Exhibit 10.3
EMPLOYMENT AGREEMENT
---------------------
Agreement dated as of November 16, 1998, between US Airways, Inc., a
Delaware corporation, having a place of business at Crystal Park Four, 2345
Crystal Drive, Arlington, Virginia, 22227 (the "Company") and Thomas A.
Mutryn, residing at 8411 Rapley Ridge Lane, Potomac, Maryland 20854 (the
"Executive").
WITNESSETH
-------------
WHEREAS, the Executive has assumed duties of a responsible nature to
the benefit of the Company and to the satisfaction of its Board of
Directors (the "Board"); and
WHEREAS, the Board believes it to be in the best interests of the
Company to enter into this Agreement to assure Executive's continuing
services to the Company including, but not limited to, under circumstances
in which there is a possible, threatened or actual Change of Control (as
defined below) of the Company; and
WHEREAS, the Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of
Control and to encourage the Executive's full attention and dedication to
the Company currently and in the event of any threatened or pending Change
of Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the compensation
and benefits expectations of the Executive will be satisfied and which are
competitive with those of other corporations. Therefore, in order to
accomplish all the above objectives, the Board has caused the Company to
enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the Company and the Executive hereby agree as follows:
1. Certain Definitions.
-------------------
(a) The "Effective Date" shall mean the date hereof.
(b) The "Change of Control Date" shall mean the first date during the
Change of Control Period (as defined in Section 1(c)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to
the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated or the Executive
ceases to be an officer of the Company prior to the date on which the
Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment or cessation of status as an
officer (i) was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control or (ii) otherwise
arose in connection with or anticipation of the Change of Control, then for
all purposes of this Agreement the "Change of Control Date" shall mean the
date immediately prior to the date of such termination of employment or
cessation of status as an officer.
(c) The "Change of Control Period" shall mean the period commencing on
the Effective Date and ending on the earlier to occur of (i) the third
anniversary of the Effective Date or (ii) the first day of the month next
following the Executive's 65th birthday ("Normal Retirement Date");
provided, however, that commencing on the date one year after the Effective
Date, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), the Change of Control Period shall be automatically extended so as
to terminate on the earlier of (x) three years from such Renewal Date or
(y) the Executive's Normal Retirement Date, unless at least 30 days prior
to the Renewal Date the Company shall give notice to the Executive that the
Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a
-----------------
"Change of Control" or "Change in Control" shall mean:
(a) The acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company's
parent, US Airways Group, Inc. ("Group") (the "Outstanding Group Common
Stock") or (ii) the combined voting power of the then outstanding voting
securities of Group entitled to vote generally in the election of directors
(the "Outstanding Group Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change of Control: (w) any
acquisition directly from Group, (x) any acquisition by Group or any of its
subsidiaries, (y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Group or any of its subsidiaries or (z)
any acquisition by any corporation with respect to which, following such
acquisition, more than 85% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors, is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were beneficial owners,
respectively of the Outstanding Group Common Stock and Outstanding Group
Voting Securities in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding Group Common
Stock and Outstanding Group Voting Securities, as the case may be; or
(b) Individuals who, as of the date hereof, constitute Group's Board
of Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Group Board of Directors; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by Group's shareholders, was approved
by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents; or
(c) Approval by the shareholders of Group of a reorganization, merger
or consolidation, in each case, with respect to which all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Group Common Stock and Outstanding Group
Voting Securities immediately prior to such reorganization, merger or
consolidation, beneficially own, directly or indirectly, less than 85% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such reorganization, merger or consolidation in
substantially the same proportions as their ownership, immediately prior to
such reorganization, merger or consolidation of the Outstanding Group
Common Stock and the Outstanding Group Voting Securities, as the case may
be; or
(d) Approval by the shareholders of Group of (i) a complete
liquidation or dissolution of Group or (ii) the sale or other disposition
of all or substantially all of the assets of Group, other than to a
corporation, with respect to which following such sale or other
disposition, more than 85% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Group
Common Stock and Outstanding Group Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of
the Outstanding Group Common Stock and Outstanding Group Voting Securities,
as the case may be; or
(e) The acquisition by an individual, entity or group of beneficial
ownership of 20% or more of the then outstanding securities of Group,
including both voting and non-voting securities; provided, however, that
such acquisition shall only constitute a change of control in the event
that such individual, entity or group also obtains the power to elect by
class vote, cumulative voting or otherwise to appoint 20% or more of the
total number of directors to the Board of Directors of Group.
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company, for the period commencing on the Change of Control
Date and ending on the earlier to occur of (a) the third anniversary of
such date, or (b) the Executive's Normal Retirement Date (hereinafter the
"Employment Period").
4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and
reporting relationships), authority, duties and
responsibilities shall be at least commensurate in all
material respects with the most significant of those
held, exercised and assigned at any time during the 90-
day period immediately preceding the Change of Control
Date and (B) the Executive's services shall be performed
at the location where the Executive was employed
immediately preceding the Change of Control Date, the
Company's headquarters, or a location where a
substantial activity for which the Executive has
responsibility is located.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the
business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to
the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the
Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate,
civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal
investments, so long as such activities do not
significantly interfere with the performance of the
Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is also
expressly understood and agreed that to the extent that
such activities have been conducted by the Executive
prior to the Change of Control Date, the continued
conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the
Change of Control Date shall not thereafter be deemed to
interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the Company
-----------
shall pay the Executive a base salary (x) for the first
12 months of such period at a rate not less than his
base salary in effect immediately preceding the Change
of Control Date, and (y) during each succeeding 12
months at a rate not less than his base salary in effect
on the last day of the preceding 12-month period.
During the Employment Period, base salary shall be
reviewed at least annually and shall be increased at any
time and from time to time as shall be substantially
consistent with increases in base salary awarded in the
ordinary course of business to other key employees of
the Company and its subsidiaries. Any increase in base
salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Base
salary shall not be reduced after any such increase.
Base salary under Section 4(b)(i) shall hereinafter be
referred to as the "Base Salary".
(ii) Annual Bonus. In addition to Base Salary, the Executive
------------
shall be awarded, for each fiscal year during the
Employment Period, an annual bonus as shall be
determined by the Board or its Human Resources Committee
in accordance with the Incentive Compensation Plan of
Group approved by the Group Board of Directors
("Incentive Plan") or otherwise. The annual bonus under
Section 4(b)(ii) shall hereinafter be referred to as the
"Annual Bonus."
(iii) Incentive, Savings and Retirement Plans. In addition to
---------------------------------------
Base Salary and Annual Bonus payable as hereinabove
provided, the Employee shall be entitled to participate
during the Employment Period in all incentive, savings
and retirement plans, practices, policies and programs
applicable to other key employees of the Company and its
subsidiaries (including but not limited to the employee
benefit plans listed on Exhibit A hereto), in each case
providing benefits which are the economic equivalent to
those in effect on the Effective Date or as subsequently
amended.
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company
and its subsidiaries (including, without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death
and travel accident insurance plans and programs) at
least as favorable as the most favorable of such plans,
practices, policies and programs in effect at any time
during the 90-day period immediately preceding the
Change of Control Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at
any time thereafter with respect to other key employees
of the Company and its subsidiaries.
(v) Fringe Benefits. During the Employment Period, the
---------------
Executive shall be entitled to fringe benefits, including
but not limited to pass privileges for non-revenue
transportation, in accordance with the most favorable
plans, practices, programs and policies of the Company
and its subsidiaries applicable at any time on or after
the Effective Date to other key employees of the Company
and its subsidiaries.
Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the
Company and its subsidiaries as in effect on or after
the Effective Date with respect to other key employees
of the Company and its subsidiaries.
5. Termination.
-----------
(a) Mutual Agreement. During the Employment Period, the Executive's
----------------
employment hereunder may be terminated at any time by mutual agreement on
terms to be negotiated at the time of such termination.
(b) Death or Disability. This Agreement shall terminate automatically
-------------------
upon the Executive's death. If, during the Employment Period, the Company
determines in good faith that the Disability of the Executive has occurred
(pursuant to the definition of "Disability" set forth below), it may give
to the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 90th day after receipt by the
Executive of such notice given at any time after a period of six
consecutive months of Disability and while such Disability is continuing
(the "Disability Effective Date"), provided that, within the 90 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" means disability which, at least six months after its
commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or
the Executive's legal representative (such agreement as to acceptability
not to be withheld unreasonably). During such six-month period and until
the Disability Effective Date, Executive shall be entitled to all
compensation provided for under Section 4 hereof.
(c) Cause. During the Employment Period, the Company may terminate
the
-----
Executive's employment for "Cause." For purposes of this Agreement,
"Cause" means (i) an act or acts of personal dishonesty taken by the
Executive and intended to result in substantial personal enrichment of the
Executive at the expense of the Company, (ii) repeated violations by the
Executive of the Executive's obligations under Section 4(a) of this
Agreement which are demonstrably willful and deliberate on the Executive's
part and which are not remedied in a reasonable period of time after
receipt of written notice from the Company or (iii) the conviction of the
Executive of a felony.
(d) Good Reason. During the Employment Period, the Executive's
-----------
employment hereunder may be terminated by the Executive for Good Reason.
For purposes of this Agreement, "Good Reason" means:
(i) the assignment to the Executive of any duties
inconsistent in any respect with Executive's position
(including status, offices, titles and reporting
relationships), authority, duties or responsibilities as
contemplated by Section 4(a)(i) or (ii) of this
Agreement, or any other action by the Company which
results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
(ii) (x) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than
an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given
by the Executive or (y) after the Change of Control
Date, any failure of the Company to pay Base Salary or
Annual Bonus in accordance with Sections 4(b)(i) and
(ii), respectively, and any failure by the Company to
maintain or provide the plans, programs, policies and
practices, and benefits described in Sections 4(b)(iii)
- - (viii) on the most favorable basis such plans
programs, policies and practices were maintained and
benefits provided during the 90-day period immediately
preceding the Change of Control Date, or if more
favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter with respect
to other key employees of the Company and its
subsidiaries;
(iii) the Company's requiring the Executive to be based at any
office or location other than that described in Sections
4(a)(i)(B) or 4(a)(ii) (B) hereof, except for travel
reasonably required in the performance of the
Executive's responsibilities;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(d), any good faith determination of
"Good Reason" made by the Executive on or after the Change of Control Date
shall be conclusive.
(e) Notice of Termination. Any termination by the Company for Cause
or
---------------------
by the Executive for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section
12(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below) is other
that the date of receipt of such notice, specifies the termination date
(which date shall be not more than fifteen (15) days after the giving of
such notice). The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(f) Date of Termination. "Date of Termination" means the date of
receipt
-------------------
of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that (i) if the Executive's employment is
-------- -------
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive
of such termination and (ii) if the Executive's employment is terminated by
reason of death or Disability, the Date of Termination shall be the date of
death of the Executive or the Disability Effective Date, as the case may
be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Death. If the Executive's employment is terminated by reason of
the
-----
Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement,
other than those obligations accrued or earned and vested (if applicable)
by the Executive as of the Date of Termination, including, for this purpose
(i) the Executive's full Base Salary through the Date of Termination at the
rate in effect on the Date of Termination, disregarding any reduction in
Base Salary in violation of this Agreement (the "Highest Base Salary"),
(ii) the product of the Annual Bonus paid to the Executive for the last
full fiscal year and a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365 and (iii) any compensation previously deferred
by the Executive (together with any accrued interest thereon) and not yet
paid by the Company and any accrued vacation pay not yet paid by the
Company (such amounts specified in clauses (i), (ii) and (iii) are
hereinafter referred to as "Accrued Obligations"). All such Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding,
the Executive's family shall be entitled to receive benefits at least equal
to the most favorable benefits provided by the Company and any of its
subsidiaries to surviving families of employees of the Company and such
subsidiaries under such plans, programs, practices and policies relating to
family death benefits, if any, in accordance with the most favorable plans,
programs, practices and policies of the Company and its subsidiaries in
effect on or after the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect on the date of the
Executive's death with respect to other key employees of the Company and
its subsidiaries and their families.
(b) Disability. If the Executive's employment is terminated by reason
of
----------
the Executive's Disability, this Agreement shall terminate without further
obligations to the Executive, other than those obligations accrued or
earned and vested (if applicable) by the Executive as of the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination. Anything in this Agreement to
the contrary notwithstanding, the Executive shall be entitled after the
Disability Effective Date to receive disability and other benefits at least
equal to the most favorable of those provided by the Company and its
subsidiaries to disabled employees and/or their families in accordance with
such plans, programs, practices and policies relating to disability, if
any, in accordance with the most favorable plans, programs, practices and
policies of the Company and its subsidiaries in effect on or after the
Effective Date or, if more favorable to the Executive and /or the
Executive's family, as in effect at any time thereafter with respect to
other key employees of the Company and its subsidiaries and their families.
(c) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause, this Agreement shall terminate without
further obligations to the Executive (other than the obligation to pay to
the Executive the Highest Base Salary through the Date of Termination plus
the amount of any accrued vacation pay not yet paid by the Company and any
compensation previously deferred by the Executive (together with accrued
interest thereon). If the Executive terminates his employment other than
for Good Reason, this Agreement shall terminate without further obligations
to the Executive, other than those obligations accrued or earned and vested
(if applicable) by the Executive through the Date of Termination, including
for this purpose, the Highest Base Salary through the Date of Termination
plus the amount of any accrued vacation pay not yet paid by the Company and
any compensation previously deferred by the Executive (together with
accrued interest thereon) and any obligations provided for in an agreement,
if any, between the Company and the Executive pursuant to Section 5(a).
All such Accrued Obligations shall be paid to paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
(d) Good Reason; Other Than for Cause or Disability.
-----------------------------------------------
(1) If, during the Employment Period, the Company shall terminate
the Executive's employment other than for Cause, Disability, or
death, or if the Executive shall terminate his employment for
Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. to the extent not theretofore paid, the
Executive's Highest Base Salary through the Date of
Termination; and
B. the product of (x) the Annual Bonus paid to
the Executive for the last full fiscal year ending
during the Employment Period or, if higher, the Annual
Bonus paid to the Executive during the last full fiscal
year ending during the Employment Period or, if higher,
a constructive annual bonus calculated to be equal to
the bonus that would have been payable to the Executive
from the Company for the last full fiscal year ending
prior to the Date of Termination (regardless of whether
the Executive was employed in an officer position for
all or any part of such fiscal year) as if Group had
achieved the "target level of performance" under the
Incentive Plan set at the level for the fiscal year
immediately preceding the Change of Control Date and
assuming the Executive's "target percentage" under the
Incentive Plan equals such target percentage assigned
to the Executive immediately preceding the Change of
Control Date (the highest Annual Bonus determined under
this clause (x) shall hereinafter be referred to as the
"Recent Bonus") and (y) a fraction, the numerator of
which is the number of days in the current fiscal year
through the Date of Termination and the denominator of
which is 365; and
C. the product of (x) three and (y) the sum of
(i) the Highest Base Salary and (ii) the Recent Bonus;
and
D. in the case of compensation previously
deferred by the Executive, all amounts previously
deferred (together with any accrued interest thereon)
and not yet paid by the Company, and any accrued
vacation pay not yet paid by the Company; and
(ii) (A) for the remainder of the Employment Period or
such longer period as any plan, program, practice or
policy may provide, the Company shall continue benefits
to the Executive and/or the Executive's family at least
equal to those which would have been provided to them
in accordance with the plans, programs, practices and
policies described in Sections 4(b)(iii)(with respect
to any retirement plans), (iv) and (vi) of this
Agreement if the Executive's employment had not been
terminated, including health insurance and life
insurance, in accordance with the most favorable plans,
practices, programs or policies of the Company and its
subsidiaries in effect on or after the Effective Date
or, if more favorable to the Executive, as in effect at
any time thereafter with respect to other key employees
and their families and for purposes of eligibility for
retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be
considered to have remained employed until the end of
the Employment Period and to have retired on the last
day of such period; and
(B) at the expiration of the Employment Period,
the Company shall continue to provide the Executive
with health insurance and on-line travel privileges on
the same basis such benefits were provided to the
Executive on the last day of the Employment Period,
with such benefits to continue for the life of the
Executive; provided, however, that if the Executive
becomes eligible for health insurance through a
subsequent employer, the Company's provision of such
benefits shall be secondary to the benefit coverage of
the subsequent employer.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
-------------------------
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices,
provided by Group, the Company or any of its subsidiaries and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect
such rights as the Executive may have under any stock option, restricted
stock or other agreements with Group, the Company of any of its
subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program
of Group, the Company or any of its subsidiaries at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy
practice or program.
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defence or other claim, right or action which the Company may have against
the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this
Agreement. The Company agrees to pay, to the full extent permitted by law,
all legal fees and expenses, as incurred by the Company, the Executive and
others, which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any contest by the Executive about the amount of any payment pursuant of
Section 9 of this Agreement), plus in each case interest at the applicable
Federal rate provided for in Section 7872(f)(2) of the Internal Revenue
Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon
Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment, shall be made
by the firm of independent public accountants selected by Group to audit
its financial statements (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of
Control, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid to the Executive within 5 days of the receipt
of the Accounting Firm's determination. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on
the Executive's applicable federal income tax return would not result in
the imposition of a negligence or a similar penalty. Any determination by
the Accounting Firm shall be binding upon the Company and the Executive.
As a result of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-up Payments which will not have been
made by the Company should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 9(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the
Executive knows of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of the
thirty-day period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim,
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax,
including interest and penalties with respect thereto, imposed as
a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue
or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect
to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension
of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly
pay to the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 9(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of thirty days after such determination,
then such advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to Group, the Company
or any of their subsidiaries, and their respective businesses, which shall
have been obtained by the Executive's employment by the Company or any of
its subsidiaries and which shall not be or become public knowledge (other
than by acts by Executive or his representatives in violation of this
Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. Notwithstanding
the foregoing, the Executive or his representatives may disclose any such
information if such information is compelled by legal process, provided
that if Executive is so compelled, he shall provide the Company with prompt
notice so that it may seek a protective order or other remedy. In any
event, Executive shall furnish only that portion of the confidential
information that is legally required to be
11. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
12. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed
by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: If to the Company:
------------------- -----------------
Thomas A. Mutryn US Airways, Inc.
8411 Rapley Ridge Lane Crystal Park Four
Potomac, Maryland 20854 2345 Crystal Drive
Arlington, VA 22227
Attention: General Counsel
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or
any other provision thereof.
(f) Words or terms used in this Agreement which connote the masculine
gender are deemed to apply equally to female executives.
(g) This Agreement supersedes any prior employment agreement between
the Company and the Executive and contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
EXECUTIVE US AIRWAYS, INC.
- ---------------------------- By: -------------------------------
Thomas A. Mutryn Michelle V. Bryan
Vice President, Deputy General
Counsel and Secretary
EXHIBIT A
---------
US Airways, Inc. Employee Savings Plan
US Airways, Inc. Employee Pension Plan
US Airways, Inc. Supplemental Executive Defined Contribution Plan
1996 Stock Incentive Plan of US Airways Group, Inc.
1997 Stock Incentive Plan of US Airways Group, Inc.
Incentive Compensation Plan of US Airways Group, Inc.
US Airways Group, Inc. Long Term Incentive Plan
Restricted Stock Agreements with certain officers of US Airways, Inc.
Supplemental Executive Retirement Plan ("SERP") agreements with certain
officers of US Airways, Inc.
Exhibit 10.4
EMPLOYMENT AGREEMENT
Agreement dated as of January 25, 1999, between US Airways,
Inc., a Delaware corporation, having a place of business at
Crystal Park Four, 2345 Crystal Drive, Arlington, Virginia, 22227
(the "Company") and Michelle V. Bryan, residing at 5629 Newington
Road, Bethesda, Maryland 20816 (the "Executive").
WITNESSETH
----------
WHEREAS, the Executive has assumed duties of a responsible
nature to the benefit of the Company and to the satisfaction of
its Board of Directors (the "Board"); and
WHEREAS, the Board believes it to be in the best interests of
the Company to enter into this Agreement to assure Executive's
continuing services to the Company including, but not limited to,
under circumstances in which there is a possible, threatened or
actual Change of Control (as defined below) of the Company; and
WHEREAS, the Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change
of Control and to encourage the Executive's full attention and
dedication to the Company currently and in the event of any
threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and which are
competitive with those of other corporations. Therefore, in order
to accomplish all the above objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the Company and the Executive hereby agree as
follows:
1. Certain Definitions.
(a) The "Effective Date" shall mean the date hereof.
(b) The "Change of Control Date" shall mean the first date
during the Change of Control Period (as defined in Section 1(c))
on which a Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary notwithstanding, if a
Change of Control occurs and if the Executive's employment with
the Company is terminated or the Executive ceases to be an officer
of the Company prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment or cessation of status as an
officer (i) was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control or
(ii) otherwise arose in connection with or anticipation of the
Change of Control, then for all purposes of this Agreement the
"Change of Control Date" shall mean the date immediately prior to
the date of such termination of employment or cessation of status
as an officer.
(c) The "Change of Control Period" shall mean the period
commencing on the Effective Date and ending on the earlier to
occur of (i) the third anniversary of the Effective Date or (ii)
the first day of the month next following the Executive's 65th
birthday ("Normal Retirement Date"); provided, however, that
commencing on the date one year after the Effective Date, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), the Change of Control Period shall be
automatically extended so as to terminate on the earlier of (x)
three years from such Renewal Date or (y) the Executive's Normal
Retirement Date, unless at least 30 days prior to the Renewal Date
the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2
2. Change of Control. For the purpose of this Agreement, a
"Change of Control" or "Change in Control" shall mean:
(a) The acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of the Company's parent, US
Airways Group, Inc. ("Group") (the "Outstanding Group Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of Group entitled to vote generally in the
election of directors (the "Outstanding Group Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (w) any acquisition directly from
Group, (x) any acquisition by Group or any of its subsidiaries,
(y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Group or any of its subsidiaries
or (z) any acquisition by any corporation with respect to which,
following such acquisition, more than 85% of, respectively, the
then outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
beneficial owners, respectively of the Outstanding Group Common
Stock and Outstanding Group Voting Securities in substantially the
same proportions as their ownership, immediately prior to such
acquisition, of the Outstanding Group Common Stock and Outstanding
Group Voting Securities, as the case may be; or
(b) Individuals who, as of the date hereof, constitute
Group's Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Group Board of
3
Directors; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by Group's shareholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act) or other actual or threatened solicitation of
proxies or consents; or
(c) Approval by the shareholders of Group of a
reorganization, merger or consolidation, in each case, with
respect to which all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Group Common Stock and Outstanding Group Voting
Securities immediately prior to such reorganization, merger or
consolidation, beneficially own, directly or indirectly, less than
85% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Group
Common Stock and the Outstanding Group Voting Securities, as the
case may be; or
(d) Approval by the shareholders of Group of (i) a complete
liquidation or dissolution of Group or (ii) the sale or other
disposition of all or substantially all of the assets of Group,
other than to a corporation, with respect to which following such
sale or other disposition, more than 85% of, respectively, the
then outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially
4
all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Group Common Stock and
Outstanding Group Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of
the Outstanding Group Common Stock and Outstanding Group Voting
Securities, as the case may be; or
(e) The acquisition by an individual, entity or group of
beneficial ownership of 20% or more of the then outstanding
securities of Group, including both voting and non-voting
securities; provided, however, that such acquisition shall only
constitute a change of control in the event that such individual,
entity or group also obtains the power to elect by class vote,
cumulative voting or otherwise to appoint 20% or more of the total
number of directors to the Board of Directors of Group.
3. Employment Period. The Company hereby agrees to continue
the Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company, for the period commencing on
the Change of Control Date and ending on the earlier to occur of
(a) the third anniversary of such date, or (b) the Executive's
Normal Retirement Date (hereinafter the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
relationships), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time
during the 90-day period immediately preceding the Change of
Control Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately
preceding the Change of Control Date, the Company's headquarters,
or a location where a substantial activity for which the Executive
has responsibility is located.
5
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of
the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is also expressly understood
and agreed that to the extent that such activities have been
conducted by the Executive prior to the Change of Control Date,
the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the
Change of Control Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the
Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Company
shall pay the Executive a base salary (x) for the first 12 months
of such period at a rate not less than his base salary in effect
immediately preceding the Change of Control Date, and (y) during
each succeeding 12 months at a rate not less than his base salary
in effect on the last day of the preceding 12-month period.
During the Employment Period, base salary shall be reviewed at
least annually and shall be increased at any time and from time to
time as shall be substantially consistent with increases in base
salary awarded in the ordinary course of business to other key
employees of the Company and its subsidiaries. Any increase in
base salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Base salary
shall not be reduced after any such increase. Base salary under
Section 4(b)(i) shall hereinafter be referred to as the "Base
Salary".
(ii) Annual Bonus. In addition to Base Salary, the
Executive shall be awarded, for each fiscal year during the
Employment Period, an annual bonus as shall be determined by the
Board or its Human Resources Committee in accordance with the
Incentive Compensation Plan of Group approved by the Group Board
of Directors ("Incentive Plan") or otherwise. The annual bonus
under Section 4(b)(ii) shall hereinafter be referred to as the
"Annual Bonus."
(iii) Incentive, Savings and Retirement Plans. In addition
to Base Salary and Annual Bonus payable as hereinabove provided,
the Employee shall be
6
entitled to participate during the Employment Period in all
incentive, savings and retirement plans, practices, policies and
programs applicable to other key employees of the Company and its
subsidiaries (including but not limited to the employee benefit
plans listed on Exhibit A hereto), in each case providing benefits
which are the economic equivalent to those in effect on the
Effective Date or as subsequently amended.
(iv) Welfare Benefit Plans. During the Employment Period,
the Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its subsidiaries (including,
without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death
and travel accident insurance plans and programs) at least as
favorable as the most favorable of such plans, practices, policies
and programs in effect at any time during the 90-day period
immediately preceding the Change of Control Date or, if more
favorable to the Executive and/or the Executive's family, as in
effect at any time thereafter with respect to other key employees
of the Company and its subsidiaries.
(v) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including but not
limited to pass privileges for non-revenue transportation, in
accordance with the most favorable plans, practices, programs and
policies of the Company and its subsidiaries applicable at any
time on or after the Effective Date to other key employees of the
Company and its subsidiaries.
(vi) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company
and its subsidiaries as in effect on or after the Effective Date
with respect to other key employees of the Company and its
subsidiaries.
5. Termination.
(a) Mutual Agreement. During the Employment Period, the
Executive's employment hereunder may be terminated at any time by
mutual agreement on terms to be negotiated at the time of such
termination.
(b) Death or Disability. This Agreement shall terminate
automatically upon the Executive's death. If, during the
Employment Period, the Company determines in good faith that the
Disability of the Executive has occurred (pursuant to the
definition of "Disability" set forth below), it may
7
give to the Executive written notice of its intention to terminate
the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 90th
day after receipt by the Executive of such notice given at any
time after a period of six consecutive months of Disability and
while such Disability is continuing (the "Disability Effective
Date"), provided that, within the 90 days after such receipt, the
Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability"
means disability which, at least six months after its
commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
During such six-month period and until the Disability Effective
Date, Executive shall be entitled to all compensation provided for
under Section 4 hereof.
(c) Cause. During the Employment Period, the Company may
terminate the Executive's employment for "Cause." For purposes of
this Agreement, "Cause" means (i) an act or acts of personal
dishonesty taken by the Executive and intended to result in
substantial personal enrichment of the Executive at the expense of
the Company, (ii) repeated violations by the Executive of the
Executive's obligations under Section 4(a) of this Agreement which
are demonstrably willful and deliberate on the Executive's part
and which are not remedied in a reasonable period of time after
receipt of written notice from the Company or (iii) the conviction
of the Executive of a felony.
(d) Good Reason. During the Employment Period, the
Executive's employment hereunder may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good
Reason" means:
(i) the assignment to the Executive of any duties
inconsistent in any respect with Executive's position (including
status, offices, titles and reporting
8
relationships), authority, duties or responsibilities as
contemplated by Section 4(a)(i) or (ii) of this Agreement, or any
other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(ii) (x) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive or (y) after the
Change of Control Date, any failure of the Company to pay Base
Salary or Annual Bonus in accordance with Sections 4(b)(i) and
(ii), respectively, and any failure by the Company to maintain or
provide the plans, programs, policies and practices, and benefits
described in Sections 4(b)(iii) - (viii) on the most favorable
basis such plans programs, policies and practices were maintained
and benefits provided during the 90-day period immediately
preceding the Change of Control Date, or if more favorable to the
Executive and/or the Executive's family, as in effect at any time
thereafter with respect to other key employees of the Company and
its subsidiaries;
(iii) the Company's requiring the Executive to be based at
any office or location other than that described in Sections
4(a)(i)(B) or 4(a)(ii) (B) hereof, except for travel reasonably
required in the performance of the Executive's responsibilities;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(d), any good faith
determination of "Good Reason" made by the Executive on or after
the Change of Control Date shall be conclusive.
(e) Notice of Termination. Any termination by the Company
for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to
9
provide a basis for termination of the Executive's employment
under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other that the date of receipt
of such notice, specifies the termination date (which date shall
be not more than fifteen (15) days after the giving of such
notice). The failure by the Executive to set forth in the Notice
of Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the Executive
hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
(f) Date of Termination. "Date of Termination" means the
date of receipt of the Notice of Termination or any later date
specified therein, as the case may be; provided, however, that (i)
if the Executive's employment is terminated by the Company other
than for Cause or Disability, the Date of Termination shall be the
date on which the Company notifies the Executive of such
termination and (ii) if the Executive's employment is terminated
by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment is terminated by
reason of the Executive's death, this Agreement shall terminate
without further obligations to the Executive's legal
representatives under this Agreement, other than those obligations
accrued or earned and vested (if applicable) by the Executive as
of the Date of Termination, including, for this purpose (i) the
Executive's full Base Salary through the Date of Termination at
the rate in effect on the Date of Termination, disregarding any
reduction in Base Salary in violation of this Agreement (the
"Highest Base Salary"), (ii) the product of the Annual Bonus paid
to the Executive for the last full fiscal year and a fraction, the
numerator of which is the number of days in the current fiscal
year through the Date of
10
Termination, and the denominator of which is 365 and (iii) any
compensation previously deferred by the Executive (together with
any accrued interest thereon) and not yet paid by the Company and
any accrued vacation pay not yet paid by the Company (such amounts
specified in clauses (i), (ii) and (iii) are hereinafter referred
to as "Accrued Obligations"). All such Accrued Obligations shall
be paid to the Executive's estate or beneficiary, as applicable,
in a lump sum in cash within 30 days of the Date of Termination.
Anything in this Agreement to the contrary notwithstanding, the
Executive's family shall be entitled to receive benefits at least
equal to the most favorable benefits provided by the Company and
any of its subsidiaries to surviving families of employees of the
Company and such subsidiaries under such plans, programs,
practices and policies relating to family death benefits, if any,
in accordance with the most favorable plans, programs, practices
and policies of the Company and its subsidiaries in effect on or
after the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect on the date of the
Executive's death with respect to other key employees of the
Company and its subsidiaries and their families.
(b) Disability. If the Executive's employment is terminated
by reason of the Executive's Disability, this Agreement shall
terminate without further obligations to the Executive, other than
those obligations accrued or earned and vested (if applicable) by
the Executive as of the Date of Termination, including for this
purpose, all Accrued Obligations. All such Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30
days of the Date of Termination. Anything in this Agreement to
the contrary notwithstanding, the Executive shall be entitled
after the Disability Effective Date to receive disability and
other benefits at least equal to the most favorable of those
provided by the Company and its subsidiaries to disabled employees
and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in
accordance with the most favorable plans, programs, practices and
policies of the Company
11
and its subsidiaries in effect on or after the Effective Date or,
if more favorable to the Executive and /or the Executive's family,
as in effect at any time thereafter with respect to other key
employees of the Company and its subsidiaries and their families.
(c) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause, this Agreement shall
terminate without further obligations to the Executive (other than
the obligation to pay to the Executive the Highest Base Salary
through the Date of Termination plus the amount of any accrued
vacation pay not yet paid by the Company and any compensation
previously deferred by the Executive (together with accrued
interest thereon). If the Executive terminates his employment
other than for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than those obligations
accrued or earned and vested (if applicable) by the Executive
through the Date of Termination, including for this purpose, the
Highest Base Salary through the Date of Termination plus the
amount of any accrued vacation pay not yet paid by the Company and
any compensation previously deferred by the Executive (together
with accrued interest thereon) and any obligations provided for in
an agreement, if any, between the Company and the Executive
pursuant to Section 5(a). All such Accrued Obligations shall be
paid to paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
(d) Good Reason; Other Than for Cause or Disability.
(1) If, during the Employment Period, the Company shall
terminate the Executive's employment other than for Cause,
Disability, or death, or if the Executive shall terminate his
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum
in cash within 30 days after the Date of Termination the aggregate
of the following amounts:
A. to the extent not theretofore paid, the
Executive's Highest Base Salary through the Date of Termination;
and
12
B. the product of (x) the Annual Bonus paid to the
Executive for the last full fiscal year ending during the
Employment Period or, if higher, the Annual Bonus paid to the
Executive during the last full fiscal year ending during the
Employment Period or, if higher, a constructive annual bonus
calculated to be equal to the bonus that would have been payable
to the Executive from the Company for the last full fiscal year
ending prior to the Date of Termination (regardless of whether the
Executive was employed in an officer position for all or any part
of such fiscal year) as if Group had achieved the "target level of
performance" under the Incentive Plan set at the level for the
fiscal year immediately preceding the Change of Control Date and
assuming the Executive's "target percentage" under the Incentive
Plan equals such target percentage assigned to the Executive
immediately preceding the Change of Control Date (the highest
Annual Bonus determined under this clause (x) shall hereinafter be
referred to as the "Recent Bonus") and (y) a fraction, the
numerator of which is the number of days in the current fiscal
year through the Date of Termination and the denominator of which
is 365; and
C. the product of (x) three and (y) the sum of (i)
the Highest Base Salary and (ii) the Recent Bonus; and
D. in the case of compensation previously deferred
by the Executive, all amounts previously deferred (together with
any accrued interest thereon) and not yet paid by the Company, and
any accrued vacation pay not yet paid by the Company; and
(ii) (A) for the remainder of the Employment Period or
such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Executive
and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs,
practices and policies described in Sections 4(b)(iii)(with
respect to any retirement plans), (iv) and (vi) of this Agreement
if the Executive's employment had not been terminated, including
health insurance and life insurance, in accordance with the most
favorable plans, practices, programs or policies of the Company
and its subsidiaries in effect on or after the Effective Date or,
if more favorable to the Executive, as in effect at any time
thereafter with respect to other key employees and their families
and for purposes of eligibility for retiree benefits pursuant to
such plans, practices, programs and policies, the Executive shall
be considered to have remained employed until the end of the
Employment Period and to have retired on the last day of such
period; and
13
(B) at the expiration of the Employment Period, the
Company shall continue to provide the Executive with health
insurance and on-line travel privileges on the same basis such
benefits were provided to the Executive on the last day of the
Employment Period, with such benefits to continue for the life of
the Executive; provided, however, that if the Executive becomes
eligible for health insurance through a subsequent employer, the
Company's provision of such benefits shall be secondary to the
benefit coverage of the subsequent employer.
7. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plans,
programs, policies or practices, provided by Group, the Company or
any of its subsidiaries and for which the Executive may qualify,
nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any stock option, restricted stock or
other agreements with Group, the Company of any of its
subsidiaries. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy,
practice or program of Group, the Company or any of its
subsidiaries at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy practice or program.
8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defence or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement.
The Company agrees to pay, to the full extent permitted by law,
all legal fees and expenses, as incurred by the Company, the
Executive and others, which the Executive may reasonably incur as
a result of any contest (regardless of the outcome thereof) by the
Company or others of the validity or enforceability of, or
liability under,
14
any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive
about the amount of any payment pursuant of Section 9 of this
Agreement), plus in each case interest at the applicable Federal
rate provided for in Section 7872(f)(2) of the Internal Revenue
Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code or
any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax, imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including
whether a Gross-Up Payment is required and the amount of such
Gross-Up Payment, shall be made by the firm of independent public
accountants selected by Group to audit its financial statements
(the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by
15
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees
and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid to the Executive within 5 days of the
receipt of the Accounting Firm's determination. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that failure to
report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or a
similar penalty. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-up Payments which will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later
than ten business days after the Executive knows of such claim and
shall apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive shall
not pay such claim prior to
16
the expiration of the thirty-day period following the date on
which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim,
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest
and shall indemnify and hold the Executive harmless, on an after-
tax basis, for any Excise Tax or income tax, including interest
and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive,
on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
17
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 9(c), a determination is made that the Executive shall not
be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty
days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-
Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to Group, the
Company or any of their subsidiaries, and their respective
businesses, which shall have been obtained by the Executive's
employment by the Company or any of its subsidiaries and which
shall not be or become public knowledge (other than by acts by
Executive or his representatives in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it.
Notwithstanding the foregoing, the Executive or his
representatives may disclose any such information if such
information is compelled by legal process, provided that if
Executive is so compelled, he shall provide the Company with
prompt notice so that it may seek a protective order or other
remedy. In any event, Executive shall furnish only that portion
of the confidential
18
information that is legally required to be
11. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable
by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As
used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested,
19
postage prepaid, addressed as follows:
If to the Executive: If to the Company:
------------------- -----------------
Michelle V. Bryan US Airways, Inc.
5629 Newington Road Crystal Park Four
Bethesda, Maryland 20816 2345 Crystal Drive
Arlington, VA 22227
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(e) The Executive's failure to insist upon strict compliance
with any provision hereof shall not be deemed to be a waiver of
such provision or any other provision thereof.
(f) Words or terms used in this Agreement which connote the
masculine gender are deemed to apply equally to female executives.
(g) This Agreement supersedes any prior employment agreement
between the Company and the Executive and contains the entire
understanding of the Company and the Executive with respect to the
subject matter hereof.
20
IN WITNESS WHEREOF, the Executive has hereunto set her hand
and, pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name
on its behalf, all as of the day and year first above written.
EXECUTIVE US AIRWAYS, INC.
By:
- --------------------------- ---------------------------
Michelle V. Bryan Jennifer C. McGarey
Secretary and
Assistant General Counsel
21
EXHIBIT A
---------
US Airways, Inc. Employee Savings Plan
US Airways, Inc. Employee Pension Plan
US Airways, Inc. Supplemental Executive Defined Contribution Plan
1996 Stock Incentive Plan of US Airways Group, Inc.
1997 Stock Incentive Plan of US Airways Group, Inc.
Incentive Compensation Plan of US Airways Group, Inc.
US Airways Group, Inc. Long Term Incentive Plan
Restricted Stock Agreements with certain officers of US Airways,
Inc.
22
Exhibit 10.5
November 16, 1998
Mr. Thomas A. Mutryn
8411 Rapley Ridge Lane
Potomac, Maryland 20854
Dear Mr. Mutryn:
This letter, when countersigned by you, will constitute an agreement
between you and US Airways, Inc. ("US Airways") concerning supplemental
retirement benefits to be paid to you upon your retirement from US Airways. US
Airways hereby agrees with you as follows:
1. In consideration for your future services between the date of this
letter and the time of your retirement, US Airways will pay to you a
supplemental pension benefit equal to the pension benefit calculated under the
benefit formula set forth in the Retirement Plan for Certain Employees of
USAir, Inc. (the "Retirement Plan") assuming (i) that the Retirement Plan had
not been frozen in 1991, (ii) final average earnings under the Retirement Plan
in an amount based on your actual base salary plus an assumed bonus in the
target amount of 60% of your base salary, (iii) no amendments to the Retirement
Plan after the date hereof, and (iv) credited service under the Retirement Plan
using "deemed credited service" determined at the rate of one year of credited
service for each actual year of credited service with US Airways up to a
maximum of 5 years of credited service. You will become immediately vested in
your accrued supplemental pension benefit as each full year of credited service
is completed.
2. For purposes of calculating the supplemental pension benefit under
paragraph 1 above, the following rules will apply:
(a) In determining the amount of the pension benefit calculated under
the benefit formula set forth in the Retirement Plan it shall be
assumed that the limitations imposed by Sections 401(a)(17) and
415 of the Internal Revenue Code of 1986, as amended, are not
applicable.
(b) In determining the amount of your supplemental benefit hereunder,
the reduction factors, actuarial assumptions, definitions,
administrative provisions and other applicable provisions of the
Retirement Plan will control.
3. The amount of supplemental pension benefit calculated pursuant to
paragraph 1 will be payable in the event of your normal retirement from US
Airways at age 65. You may elect to receive early retirement benefits under
this agreement at any time after termination of your employment with US Airways
and upon your attainment of age 55. In the event of your early retirement from
US Airways, the supplemental pension benefit calculated pursuant to paragraph 1
will be reduced for early commencement in accordance with the early retirement
reduction factors set forth in the Retirement Plan.
4. You may elect to receive your supplemental pension benefit in any of
the following payment forms:
(a) an annuity (single life or joint and survivor) payable from the
general assets of US Airways;
(b) any one of the optional payment forms provided for under the terms
of the Retirement Plan; or
(c) a single lump sum payment.
In the event that you select an option other than option (a), the cost of
providing such optional payment form must be cost-neutral to US Airways to
providing payment option (a) and actuarial equivalencies will be determined in
accordance with the terms of the Retirement Plan, or if no such provision is
included in the Retirement Plan, determined at US Airways' sole discretion.
5. In the event of your death prior to the payment of your supplemental
pension benefit, your surviving spouse will be entitled to a benefit hereunder
equal to 50 percent of the benefit which would have been payable had you
retired and commenced benefits on the day before your death. In the event of
your death prior to the payment of your supplemental pension benefit and you
have no surviving spouse, US Airways will have no payment obligation under this
agreement. In the event of your death after the commencement of benefits
hereunder, a death benefit will be payable only if applicable pursuant to the
payment form elected under paragraph 4.
6. Notwithstanding anything in this agreement to the contrary, your
supplemental pension benefit will immediately vest and you will be entitled to
a benefit under paragraph 1 assuming 5 years of deemed credited service if you
resign for "good reason" or your employment is terminated after a "change-of-
control." For purposes of this paragraph the terms "good reason" and "change-
of-control" shall have the definitions set forth in the employment agreement
between you and US Airways dated November 18, 1998.
7. Your benefits hereunder shall be accrued, but unfunded and unsecured.
8. This letter may be amended or supplemented at the request of either
party hereto to clarify its application with respect to any future pension plan
which US Airways may adopt replacing or supplementing its existing plans. Any
such amendment or supplement will be prepared on the basis of the intent of the
parties that US Airways is seeking to provide you with supplemental pension
benefits as determined in paragraph 1 above.
If you concur in the foregoing, please indicate your agreement by signing
a copy of this letter in the space provided below.
US AIRWAYS, INC.
-------------------
Michelle V. Bryan
Vice President, Deputy General
Counsel and Secretary
Agreed:
- ------------------------
Thomas A. Mutryn
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<ARTICLE> 5
<CIK> 0000701345
<NAME> US AIRWAYS GROUP, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 606
<SECURITIES> 549
<RECEIVABLES> 405<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 235
<CURRENT-ASSETS> 2,161
<PP&E> 6,575
<DEPRECIATION> 2,747
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<BONDS> 1,890
0
0
<COMMON> 101
<OTHER-SE> 45
<TOTAL-LIABILITY-AND-EQUITY> 7,653
<SALES> 0
<TOTAL-REVENUES> 4,358
<CGS> 0
<TOTAL-COSTS> 3,990
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 97
<INCOME-PRETAX> 608
<INCOME-TAX> 245
<INCOME-CONTINUING> 363
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 363
<EPS-BASIC> 4.76
<EPS-DILUTED> 4.67
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 602
<SECURITIES> 549
<RECEIVABLES> 598<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 208
<CURRENT-ASSETS> 2,297
<PP&E> 6,044
<DEPRECIATION> 2,625
<TOTAL-ASSETS> 7,567
<CURRENT-LIABILITIES> 2,457
<BONDS> 1,878
0
0
<COMMON> 0
<OTHER-SE> 104
<TOTAL-LIABILITY-AND-EQUITY> 7,567
<SALES> 0
<TOTAL-REVENUES> 4,288
<CGS> 0
<TOTAL-COSTS> 3,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 97
<INCOME-PRETAX> 667
<INCOME-TAX> 261
<INCOME-CONTINUING> 406
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 406
<EPS-BASIC> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>EPS calculations are not relevant because US Airways, Inc. is a
wholly-owned subsidiary of US Airways Group, Inc.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 360
<SECURITIES> 941
<RECEIVABLES> 537<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 199
<CURRENT-ASSETS> 2,275
<PP&E> 5,938<F2>
<DEPRECIATION> 2,573
<TOTAL-ASSETS> 7,478
<CURRENT-LIABILITIES> 2,318
<BONDS> 1,892
0
0
<COMMON> 0
<OTHER-SE> 327
<TOTAL-LIABILITY-AND-EQUITY> 7,478
<SALES> 0
<TOTAL-REVENUES> 2,040
<CGS> 0
<TOTAL-COSTS> 1,947
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> 109
<INCOME-TAX> 42
<INCOME-CONTINUING> 67
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67
<EPS-BASIC> 0<F3>
<EPS-DILUTED> 0<F3>
<FN>
<F1>Receivables are presented net of allowances.
<F2>This amount was amended to conform with current classifications.
<F3>EPS calculations are not relevant because US Airways, Inc. is a wholly-owned
subsidiary of US Airways Group, Inc.
</FN>
</TABLE>
