FORM 10-K.--ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
-----------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- -------
US AIRWAYS GROUP, INC.
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 872-5306
(Registrant's telephone number, including area code)
(Commission file number: 1-8444)
(I.R.S. Employer Identification No: 54-1194634)
US AIRWAYS, INC.
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 872-7000
(Registrant's telephone number, including area code)
(Commission file number: 1-8442)
(I.R.S. Employer Identification No: 53-0218143)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Registrant Title of each class on which registered
---------- ------------------- -------------------
US Airways Common Stock New York Stock
Group, Inc. par value $1.00 Exchange
per share (Common Stock)
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
-- --
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K section 229.405 is not
contained herein, and will not be contained, to the best of the
registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock of US Airways
Group, Inc. held by non-affiliates on February 26, 1999 was
approximately $3,691,000,000. On February 26, 1999, there were
outstanding approximately 79,088,000 shares of Common Stock and
1,000 shares of common stock of US Airways, Inc.
The registrant US Airways, Inc. meets the conditions set
forth in General Instructions I(1)(a) and (b) of Form 10-K and is
therefore participating in the filing of this form in the reduced
disclosure format permitted by such Instructions.
Item of Form 10-K Document Incorporated By Reference
----------------- ----------------------------------
Part III, Items 10, 11, Proxy Statement* (excluding
12 and 13 therefrom the subsections
entitled "Human Resources
Committee Report on Executive
Compensation" and "Performance
Graph")
* Refers to the definitive Proxy Statement of US Airways Group,
Inc., to be filed pursuant to Regulation 14A, relating to the
Annual Meeting of Stockholders of US Airways Group, Inc. to be
held on May 19, 1999.
(this space intentionally left blank)
US AIRWAYS GROUP, INC.
AND
US AIRWAYS, INC.
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business 1
Overview 1
Airline Industry and the Company's 3
Position in the Marketplace
Industry Regulation and Airport Access 4
Certain Ownership Matters 6
Executive Officers 7
Employees 8
Aviation Fuel 10
Use of Travel Agents and Commissions Expenses 10
Computerized Reservation Systems 11
Frequent Traveler Program 12
Insurance 13
Item 2. Properties 13
Flight Equipment 13
Ground Facilities 15
Terminal Construction Projects 15
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 17
PART II
Item 5A. Market for US Airways Group's Common 17
Equity and Related Stockholder Matters
Stock Exchange Listing 17
Market Prices of Common Stock 18
Foreign Ownership Restrictions 18
Item 5B. Market for US Airways' Common Equity 18
and Related Stockholder Matters
Item 6. Selected Financial Data 19
Consolidated Statements of 19
Operations-US Airways Group
Consolidated Balance Sheets 19
-US Airways Group
Selected Operating and Financial 20
Statistics-US Airways
(table of contents continued on following page)
US AIRWAYS GROUP, INC.
AND
US AIRWAYS, INC.
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
(CONTINUED)
Page
----
Item 7. Management's Discussion and Analysis 21
of Financial Condition and Results of Operations
Results of Operations 30
Liquidity and Capital Resources 35
Item 7A. Quantitative and Qualitative Disclosures 39
About Market Risk
Item 8A. Consolidated Financial Statements for 41
US Airways Group, Inc.
Item 8B. Consolidated Financial Statements for 75
US Airways, Inc.
Item 9. Changes In and Disagreements with 104
Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of 104
US Airways Group and US Airways
Item 11. Executive Compensation 104
Item 12. Security Ownership of Certain 104
Beneficial Owners and Management
Item 13. Certain Relationships and Related 104
Party Transactions
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 105
Consolidated Financial Statements 105
Consolidated Financial Statement Schedules 105
Exhibits 105
Reports on Form 8-K 109
SIGNATURES
US Airways Group, Inc. 110
US Airways, Inc. 111
(this space intentionally left blank)
PART I
ITEM 1. BUSINESS
OVERVIEW
US Airways Group, Inc. (US Airways Group or the
Company) is organized under the laws of the State of
Delaware. The Company's executive offices are located at
2345 Crystal Drive, Arlington, Virginia 22227 (telephone
number (703) 872-5306). US Airways Group changed its name
from USAir Group, Inc. effective February 21, 1997.
US Airways Group's primary business activity is the
ownership of all the common stock of US Airways, Inc. (US
Airways), Shuttle, Inc. (Shuttle), Allegheny Airlines, Inc.
(Allegheny), Piedmont Airlines, Inc. (Piedmont), PSA
Airlines, Inc. (PSA), US Airways Fuel Corporation (Fuel
Corp.), US Airways Leasing and Sales, Inc. (US Airways
Leasing and Sales), Material Services Company, Inc. (MSC)
and Airways Assurance Limited, LLC (AAL). US Airways owns
all of the common stock of USAM Corp. (USAM) (see
"Computerized Reservation Systems" below for additional
information related to USAM).
US Airways, which is also organized under the laws of
the State of Delaware, is the Company's principal operating
subsidiary. US Airways is a certificated air carrier engaged
primarily in the business of transporting passengers,
property and mail. In 1998, US Airways accounted for
approximately 90% of the Company's operating revenues on a
consolidated basis. US Airways enplaned almost 58 million
passengers in 1998 and is currently the sixth largest
domestic air carrier (as ranked by revenue passenger miles
(RPMs)). As of December 31, 1998, US Airways operated 376 jet
aircraft (see Part I, Item 2 "Properties" for additional
information related to aircraft operated by US Airways) and
provided regularly scheduled service at 103 airports in the
continental United States, Canada, Mexico, France, Germany,
Italy, the Netherlands, Spain, the United Kingdom and the
Caribbean. US Airways' executive offices are located at 2345
Crystal Drive, Arlington, Virginia 22227 (telephone number
(703) 872-7000). US Airways' internet address is
www.usairways.com. US Airways changed its name from USAir,
Inc. effective February 21, 1997.
The Company's operations consist of two segments: US
Airways and US Airways Express. As mentioned above, US
Airways accounted for approximately 90% of the Company's
operating revenues on a consolidated basis in 1998. In
addition, the Company derived 90% of its operating revenues
from scheduled-service passenger transportation in 1998. The
Company's results are seasonal with operating results
typically highest in the second and third quarters due to
US Airways' combination of business traffic and North-South
leisure traffic in the Eastern U.S. during those periods.
US Airways' major connecting hubs are at airports in
Charlotte, Philadelphia and Pittsburgh. US Airways also has
substantial operations at the Baltimore/Washington
International Airport (BWI), Boston's Logan International
Airport, New York's LaGuardia Airport (LaGuardia) and
Washington's Ronald Reagan Washington National Airport
(Reagan National). Measured by departures, US Airways is the
largest or second largest airline at each of the foregoing
airports and is the largest air carrier in many smaller
eastern U.S. cities such as Albany, Buffalo, Hartford,
Providence, Richmond, Rochester and Syracuse. US Airways is
also the leading airline from the Northeast U.S. to Florida.
US Airways currently has approximately 84% of its departures
and approximately 56% of its capacity (available seat miles
or ASMs) deployed in the Eastern U.S. (that portion of the
U.S. east of the Mississippi River).
As of December 31, 1998, US Airways had code share
arrangements with nine air carriers which operate under the
trade name "US Airways Express," including Allegheny,
Piedmont and
1
PSA (see Part I, Item 2 "Properties" for information related
to aircraft operated by the Company's three wholly-owned
regional airlines). Typically under a code share arrangement
one air carrier places its designator code and sells tickets
on the flights of another air carrier (its code share
partner). Through service agreements US Airways provides
reservations and, at certain stations, ground support
services, in return for service fees. The US Airways Express
network feeds traffic into US Airways' route system at
several points, primarily at US Airways' connecting hubs. As
of December 31, 1998, US Airways Express served 169 airports
in the continental U.S., Canada and the Bahamas, including
69 airports also served by US Airways. During 1998, US
Airways Express air carriers enplaned 12 million passengers
(including 7 million passengers enplaned by Allegheny,
Piedmont and PSA), approximately 59% of whom connected to
US Airways flights.
During the fourth quarter of 1996, US Airways began
purchasing all of the capacity (ASMs) generated by
Allegheny, Piedmont and PSA. US Airways determines the
markets in which these air carriers operates, sets the fares
in those markets and earns the related passenger
transportation revenues. These agreements have no effect on
the Company's results of operations (most of US Airways'
revenues from these arrangements are reclassified to
Passenger transportation revenues and the related expenses
eliminated during consolidation of the Company's financial
results). In January 1998, US Airways began purchasing the
capacity of Mesa Airlines, Inc. (Mesa) in certain markets.
Mesa operates regional jets in these markets as part of US
Airways Express.
US Airways also has a code share arrangement with
Shuttle, which operates under the trade name "US Airways
Shuttle." The US Airways Shuttle currently provides high
frequency service between New York (LaGuardia) and Boston and
between New York (LaGuardia) and Washington (Reagan National)
(see Part I, Item 2 "Properties" for information related to
aircraft operated by Shuttle). On December 30, 1997, the
Company exercised its right to purchase the Shuttle from its
prior owners. US Airways managed Shuttle's operations prior
to the purchase. See Note 1(a) to the Company's Notes to
Consolidated Financial Statements contained in Part II, Item
8A of this report for additional information related to the
Company's purchase of Shuttle.
US Airways also code shares with the airline Deutsche
BA on certain intra-Germany flights.
US Airways Leasing and Sales, Fuel Corp., MSC and AAL
operate in support of the Company's five airline
subsidiaries in areas such as procurement, including the
procurement of aviation fuel, assisting with maintenance
contracts, the marketing of surplus assets and insurance.
During 1997, US Airways terminated the remaining
aspects of its relationship with British Airways Plc
(British Airways), including the code sharing agreement
between the two companies and certain other commercial
arrangements (see Notes 7 and 11 to the Company's Notes to
Consolidated Financial Statements for additional
information). As discussed in Part I, Item 3 "Legal
Proceedings," litigation remains outstanding between the
Company and British Airways.
The Company has agreements for the acquisition of up to
400 new single-aisle aircraft and up to 30 new
intercontinental-range widebody aircraft. As of December 31,
1998, US Airways had introduced six of the new single-aisle
aircraft into its operating fleet. Deliveries of the new
widebody aircraft are scheduled to begin in the first
quarter of the year 2000. The Company's aircraft acquisition
agreements are discussed in detail in Part II, Item 7
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" (hereafter referred to as "MD&A"
in this section of this report) as well as Note 6(a) to the
Company's Notes to Consolidated Financial Statements.
2
AIRLINE INDUSTRY AND THE COMPANY'S POSITION IN THE
MARKETPLACE
Historically, the demand for air transportation has
tended to mirror general economic conditions. Since early
1995, general domestic economic conditions have been
relatively favorable as has been the level of demand for air
transportation. In addition, over the same time period, the
Company's airline subsidiaries have experienced favorable
pricing and capacity trends in the markets in which they
operate.
Most of the markets in which the Company's airline
subsidiaries operate are highly competitive, especially with
respect to leisure traffic. The Company's airline
subsidiaries compete to varying degrees with other air
carriers and with other forms of transportation. US Airways
competes with at least one major airline on most of its
routes between major cities. Airlines, including US Airways,
typically use discount fares and other promotions to
stimulate traffic during normally slack travel periods to
generate cash flow and to increase relative market share in
selected markets. Discount and promotional fares are often
subject to various restrictions such as minimum stay
requirements, advance ticketing, limited seating and refund
penalties. US Airways has often elected to match discount or
promotional fares initiated by other air carriers in certain
markets in order to compete in those markets. Competition
between air carriers also involves certain route structure
characteristics, such as flight frequencies, availability of
non-stop flights, markets served and the time certain
flights are operated. To a lesser extent, competition can
involve other products, such as in-flight food or amenities,
frequent flier programs and airport clubs.
Recent years have seen the entrance and growth of "low-
cost, low-fare" competitors in many of the markets in which
the Company's airline subsidiaries operate. These
competitors, based on low costs of operations and low fare
structures, include Southwest Airlines Co. (Southwest) as
well as a number of smaller start-up air carriers. Southwest
has steadily increased operations within the Eastern U.S.
since first offering service in this region in late 1993.
During October 1996, Delta Air Lines, Inc. (Delta) launched
a low-cost product called "Delta Express." Delta Express,
which has grown substantially since its introduction,
operates primarily within the Eastern U.S. US Airways has
the highest cost structure of all major domestic air
carriers. The Company considers the growth of low-cost, low-
fare competition in certain of its markets to be its
foremost competitive threat.
In the past, US Airways has in some cases responded to
the entry of a low-cost, low-fare competitor into its markets
by matching fares and, as a result of increased passenger
traffic volumes related to lower fares, increasing the
frequency of service in related markets, generally with the
result of diluting US Airways' yield (Passenger
transportation revenue per revenue passenger mile) in these
markets. In some cases, US Airways has responded by reducing
or eliminating service in affected markets. US Airways'
Northeast-Florida service has been particularly affected by
low-cost, low-fare competition.
The new contract between US Airways and its pilots that
became effective on January 1, 1998 is helping US Airways to
compete effectively with low-cost, low-fare competitors.
Besides other cost-savings provisions (see related
information under "Employees" below), the new contract
allowed US Airways to introduce its own low-cost product,
"MetroJet." MetroJet began operations on June 1, 1998 with
five aircraft and service from BWI to four eastern cities.
By the end of 1998, MetroJet had grown to 22 aircraft
serving 16 cities. MetroJet is expected to operate 54
aircraft by the end of 1999. The Company considers MetroJet
to be an effective competitive response to low-cost, low-
fare competition.
As mentioned in "Overview" above, a substantial portion
of US Airways' current route structure is located in the
Eastern U.S. Although a competitive strength in some regards,
the regional concentration of significant operations results
in US Airways being susceptible to changes in
3
certain regional conditions that may adversely affect the
Company's results of operations and financial condition. The
combination of a high cost structure and the regional
concentration of operations has also contributed to US
Airways being particularly vulnerable to competition from air
carriers or operations with lower cost and fare structures.
The Company's long-term strategic objective is to
establish US Airways as a competitive global airline. As part
of its efforts to achieve this objective, US Airways has
substantially expanded its international operations in recent
years. US Airways has also introduced a new international
business class product, "Envoy Class." In support of
additional international growth plans, as well as its efforts
to further enhance its international service, US Airways
expects to add new Airbus widebody aircraft to its operating
fleet beginning in the year 2000.
The Company has also entered into agreements to acquire
up to 400 Airbus single-aisle aircraft. These aircraft,
members of the A320-Family, are expected to replace, at a
minimum, US Airways' B737-200, DC-9-30 and MD80 aircraft
fleets. 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. By the end
of 1998, six new Airbus A320-Family aircraft had entered
service with US Airways.
The Company has taken other initiatives to improve its
competitive position in the marketplace. In 1998, US Airways
announced a marketing arrangement with American Airlines,
Inc. (American). US Airways has also entered into a contract
with The SABRE Group, Inc. (TSG) which is expected to provide
substantial long-term cost savings and enhancements in the
information services area. In addition, the Company added new
regional jet service in 1998 on certain routes operated by
US Airways Express. See MD&A for additional information
related to the Company's efforts to improve its competitive
position in the marketplace, including the acquisition of new
aircraft.
INDUSTRY REGULATION AND AIRPORT ACCESS
The Company's airline subsidiaries operate under
certificates of public convenience and necessity issued by
the U.S. Department of Transportation (DOT). Such
certificates may be altered, amended, modified or suspended
by the DOT if the public convenience and necessity so
require, or may be revoked for failure to comply with the
terms and conditions of the certificates. Airlines are also
regulated by the U.S. Federal Aviation Administration (FAA),
a division of the DOT, primarily in the areas of flight
operations, maintenance, ground facilities and other
technical matters. Pursuant to these regulations, the
Company's airline subsidiaries have FAA-approved maintenance
programs for each type of aircraft they operate that provides
for the ongoing maintenance of such aircraft, ranging from
frequent routine inspections to major overhauls. From time-
to-time, the FAA issues maintenance directives and other
regulations affecting the Company's airline subsidiaries or
one or more of the aircraft types they operate. In recent
years, for example, the FAA has issued or proposed such
mandates relating to, among other things, flight data
recorders that measure more parameters than most original
equipment flight data recorders, cargo hold fire
detection/suppression systems, ground proximity warning
systems, the retirement of older aircraft, collision
avoidance systems, airborne windshear avoidance systems,
noise abatement and increased inspections and maintenance
procedures to be conducted on certain aircraft.
The DOT allows local airport authorities to implement
procedures designed to abate special noise problems,
provided such procedures do not unreasonably interfere with
interstate or foreign commerce or the national transporta-
tion system. Certain airports, including the major airports
at Boston, Washington, D.C., Chicago, San Diego, San
Francisco and Orange County (California), have established
airport restrictions to limit noise, including restrictions
on aircraft types to be used and limits on the number of
hourly or daily operations or the time of such operations.
In some instances these restrictions have caused
curtailments in services or increases in operating
4
costs and such restrictions could limit the ability of US
Airways to expand its operations at the affected airports.
Authorities at other airports may consider adopting similar
noise regulations.
The airline industry is also subject to increasingly
stringent federal, state and local laws protecting the
environment. Future regulatory developments could affect
operations and increase operating costs for the airline
industry, including the Company's airline subsidiaries.
As with most domestic companies, the Company is subject
to federal and state income taxes. The Company recognized
certain income tax benefits totaling $467 million in 1997.
These benefits were related to the Company reflecting for
financial reporting purposes the future income tax benefits
associated with net operating losses and other tax credits
generated in prior years. As a result of recognizing these
tax benefits, the Company's effective income tax rate for
financial reporting purposes increased substantially in
1998. See MD&A for additional information, including
information related to the Company's expectation that the
effective rate at which it pays cash income taxes will
increase in 1999.
The Company's airline subsidiaries are obligated to
collect a federal excise tax on domestic and international
air transportation (commonly referred to as the "ticket
tax"). Effective for travel commencing October 1, 1997,
legislation was enacted that reduced the domestic ticket tax
from 10.0% of fare to 9.0% (decreasing to 8.0% on October 1,
1998 and to 7.5% on October 1, 1999, remaining 7.5% through
September 30, 2007), added a new segment fee of $1.00 per
passenger (increasing to $3.00 by the year 2002, subject to
adjustment for inflation thereafter through September 30,
2007), changed the current $6.00 international departure tax
to $12.00 and added a $12.00 international arrival tax (the
latter two taxes each increased to $12.20 on January 1, 1999,
subject to adjustment for inflation thereafter through
September 30, 2007). The Company's airline subsidiaries
collect these taxes, along with certain other U.S. and
foreign taxes and user fees on air transportation, and pass
through the collected amounts to the appropriate
governmental agencies. The legislation also added a new 7.5%
tax effective October 1, 1997 on certain purchases of
frequent traveler program miles from domestic air carriers.
Although such taxes are not operating expenses to the
Company, they represent an additional cost to the Company's
customers. Increases in such taxes can be detrimental to
demand for air transportation and decreases can have a
stimulative effect on demand.
The Company's airline subsidiaries became obligated to
pay the $.043 per gallon federal excise tax on
transportation fuels on October 1, 1995. These taxes
represent operating expenses to the Company and are
reflected in the Company's statements of operations as a
component of Aviation fuel expenses. US Airways recognized
expenses of $40 million, $42 million and $43 million as a
result of this tax in 1998, 1997 and 1996, respectively. See
also "Aviation Fuel" below.
Several domestic airports have recently sought to
increase substantially the rates charged to air carriers and
the ability of air carriers to contest such increases has
been restricted by federal legislation, DOT regulations and
judicial decisions. In addition, legislation that became
effective June 1, 1992 allows public airports to impose
passenger facility charges of up to $3 per departing or
connecting passenger at such airports. Legislation was
introduced in Congress in early 1999 that would permit
airports to increase the passenger facility charges to $4 or
$5 under certain circumstances. With certain exceptions, air
carriers pass these charges on to passengers. The ability of
US Airways to pass-through such fees to its customers is
subject to various factors, including market conditions and
competitive factors.
The FAA has designated John F. Kennedy International
Airport (Kennedy), Chicago O'Hare International Airport
(O'Hare), LaGuardia and Reagan National as "high-density
traffic airports" and limited the number of departure and
arrival slots available to air carriers at those airports.
Currently, slots at the high-density traffic airports may be
voluntarily sold or transferred between
5
air carriers. The DOT has in the past reallocated slots to
other air carriers and reserves the right to add or withdraw
slots. In October 1997, the DOT awarded slots to several
low-cost, low-fare air carriers, however, these slots were
"created" and not confiscated from incumbent air carriers.
Various amendments to the slot system, proposed from time-
to-time by the FAA, members of Congress and others, could,
if adopted, significantly affect operations at the high-
density traffic airports or expand slot controls to other
airports. Certain proposals could restrict the number of
flights, limit the ownership transferability of slots,
increase the risk of slot withdrawal, or otherwise decrease
the value of slots. Legislation recently introduced in
Congress would eliminate the high-density rule at Kennedy,
O'Hare and LaGuardia in five years. Passage of such
legislation could have a significant impact on the Company's
results of operations and financial condition. US Airways
and Shuttle hold a substantial number of slots at LaGuardia
as well as Reagan National. These slots are valuable assets
and important to the Company's overall business strategy.
The Company cannot predict whether any of the current
proposals before Congress will be adopted or, if adopted,
precisely how their implementation would impact the
operations of the Company's airline subsidiaries.
Subsequent to several announcements of cooperative
agreements between certain air carriers, including a
marketing relationship between US Airways and American, the
DOT enacted legislation that provides for increased scrutiny
of certain airline joint ventures (US Airways' marketing
relationship with American is discussed in MD&A). In
addition, in April 1998, the DOT issued proposed rules
designed to regulate perceived anti-competitive behavior
directed at new entrants in the airline industry. Legislation
has recently been enacted requiring, among other things, the
National Research Council of the National Academy of Sciences
to complete a comprehensive study pertaining to competitive
issues in the airline industry prior to the DOT's
implementation of any such rules. The Company cannot predict
whether or when any such proposed rules will be adopted, or
the effect, if any, of such legislation on the Company's
operations. In early 1999, legislation was introduced in
Congress that would impose, in some cases, substantial
obligations on airlines by providing significant rights to
passengers. The Company cannot predict whether, or in what
form, any such legislation might be enacted.
The availability of international routes to domestic air
carriers is regulated by agreements between the U.S. and
foreign governments. See MD&A for additional information
related to the Company's international operations, including
the Company's recent expansion of international operations
and its efforts to introduce service in additional
international markets.
CERTAIN OWNERSHIP MATTERS
In 1998, the Company purchased 17.9 million shares of
its common stock at a cost of $1.1 billion. Additional
information related to the Company's purchases of its common
stock can be found in MD&A. In addition, on March 12, 1998,
Berkshire Hathaway, Inc. exercised its right to convert the
Company's Series H Preferred Stock into 9.2 million shares of
the Company's common stock. The Company subsequently retired
the Series H Preferred Stock. The Company had previously
retired its Series F Preferred Stock (May 1997), its Series T
Preferred Stock (May 1997), and its Series B Preferred Stock
(September 1997). With the retirement of these preferred
stock issuances, the Company had retired all of its preferred
stock and relieved itself of annual dividends of
approximately $79 million. Additional information related to
activity involving the Company's preferred stock issuances
can be found in MD&A and in Notes 7 and 8(b) to the Company's
Notes to Consolidated Financial Statements.
(this space intentionally left blank)
6
EXECUTIVE OFFICERS
The following individuals are the executive officers of
US Airways Group and US Airways as of March 19, 1999:
Name Age Position
- ---- --- --------
Stephen M. Wolf 57 Chairman, US Airways Group and
US Airways
Rakesh Gangwal 45 President and Chief Executive Officer
of US Airways Group and US Airways
Lawrence M. Nagin 58 Executive Vice President-Corporate
Affairs and General Counsel,
US Airways Group and US Airways
N. Bruce Ashby 38 Senior Vice President-Planning,
US Airways
Michelle V. Bryan 42 Senior Vice President-Human Resources,
US Airways
Christopher Doan 52 Senior Vice President-Maintenance,
US Airways
Thomas A. Mutryn 45 Senior Vice President-Finance and
Chief Financial Officer, US Airways
Group and US Airways
There are no family relationships among any of the
officers listed above. No officer was selected pursuant to
any arrangement between himself and any other person.
Officers are elected annually to serve for the following
year or until the election and qualification of their
successors.
The business experience of the officers listed in the
table on the preceding page since at least January 1, 1994:
Mr. Wolf is Chairman of the Board of Directors of US
Airways Group and US Airways. He was elected to those
positions upon joining both companies in January 1996. Mr.
Wolf was Chief Executive Officer of US Airways Group from
January 1996 until November 1998 and Chief Executive Officer
of US Airways from January 1996 until May 1998. Immediately
prior to joining US Airways, Mr. Wolf was a senior advisor
to the investment bank Lazard Freres & Co. From 1987 to July
1994, Mr. Wolf was Chief Executive Officer of UAL Corp.
(UAL) and United Air Lines, Inc. (United) and became
Chairman of each in 1988. Mr. Wolf is a Director of Philip
Morris Companies, R.R. Donnelley & Sons Co., The Brookings
Institution and the Alzheimer's Disease and Related
Disorders Association. He is also a trustee of Northwestern
University and Georgetown University.
Mr. Gangwal was elected President and Chief Executive
Officer of US Airways Group in November 1998 and President
and Chief Executive Officer of US Airways in May 1998. Mr.
Gangwal had been President and Chief Operating Officer of
both companies since February 1996. From November 1994 until
February 1996, Mr. Gangwal was Executive Vice President-
Planning and Development for Compagnie Nationale Air France.
Mr. Gangwal previously served in a variety of management
roles at United over an eleven-year period, culminating in
the role of Senior Vice President-Planning. Mr. Gangwal is a
Director of Boise Cascade Corp.
Mr. Nagin practiced law with Skadden, Arps, Slate,
Meagher & Flom LLP from August 1994 until he joined US
Airways Group and US Airways in February 1996. He previously
served in several executive positions at United and UAL from
September 1988 to July 1994, culminating in the role of
Executive Vice President-Corporate Affairs and General
Counsel of United and UAL. From 1980-1988, Mr. Nagin was
Senior Vice President and General Counsel of The Flying
Tiger Line Inc.
From April 1996, Mr. Ashby served as Vice President-
Financial Planning and Analysis of US Airways until his
election as Senior Vice President-Planning in January 1998.
He previously served as Vice President-Marketing Development
at Delta from June 1995 to April 1996, and in several
management positions at United from January 1989 to June
1995, including Vice President-Financial Planning and
Analysis and Vice President and Treasurer.
7
Ms. Bryan joined US Airways in 1983 as a staff
attorney. She was elected Corporate Secretary and Assistant
General Counsel of US Airways in 1988. In 1995, Ms. Bryan
was named Vice President and Deputy General Counsel of
US Airways, retaining her position as US Airways' Corporate
Secretary. She was also named Corporate Secretary of
US Airways Group in 1996. Ms. Bryan was elected Senior Vice
President-Human Resources of US Airways in January 1999.
Mr. Doan joined US Airways in March of 1997. Prior to
joining US Airways, Mr. Doan was Vice President of Technical
Operations at Northwest Airlines, Inc. (Northwest). Mr. Doan
served as an officer in a variety of maintenance-related
positions at Northwest from 1985 through 1997. Prior to
1985, Mr. Doan served for 18 years in maintenance-related
management positions at Trans World Airlines, Inc.
Mr. Mutryn joined US Airways Group and US Airways in
November 1998 from United. At United, Mr. Mutryn served as
Director of Financial Analysis and Vice President-Revenue
Management from 1989 until his election as Vice President
and Treasurer in July 1995. Mr. Mutryn held a variety of
positions at American from 1983 to 1989. Mr. Mutryn is a
member of the boards of directors of Galileo International,
Inc. (Galileo) and Galileo Japan Partnership.
EMPLOYEES
As of December 31, 1998, on a full-time equivalent
basis, US Airways employed approximately, 9,450 station
personnel, 8,175 flight attendants, 7,025 mechanics and
related employees, 4,775 pilots, 3,125 reservations
personnel, and 5,650 personnel in administrative and
miscellaneous job categories. As of December 31, 1998, on a
full-time equivalent basis, the Company's remaining
subsidiaries employed approximately 1,500 station personnel,
1,125 pilots, 675 mechanics and related employees, 650
flight attendants and 475 personnel in administrative and
miscellaneous job categories.
As of December 31, 1998, approximately 37,950, or 84%,
of the employees of the Company's subsidiaries were covered
by collective bargaining agreements with various labor
unions, or will be covered by a collective bargaining
agreement for which negotiations are in progress.
The status of US Airways' labor agreements as of
December 31, 1998:
Date
Contract
Union (1) Class or Craft Employees (2) Amendable
- ----- -------------- --------- ---------
ALPA Pilots 4,775 01/01/03
AFA Flight attendants 8,175 01/01/97 (4)
CWA Passenger service employees 8,900(3) - (5)
IAMAW Mechanics and related employees 7,025 10/01/95 (4)
IAMAW Fleet service employees 6,000 (3) - (5)
TWU Flight crew training instructors 117 10/09/96 (4)
TWU Flight simulator engineers 56 08/02/97 (4)
TWU Dispatch employees 155 09/01/96 (4)
(1) ALPA Air Line Pilots Association, International
AFA Association of Flight Attendants
CWA Communications Workers of America
IAMAW International Association of Machinists and
Aerospace Workers
TWU Transport Workers' Union
(2) Approximate number of employees covered by the
contract.
(3) Estimated number of employees who will be covered under
the initial contract.
(4) Currently in negotiations.
(5) Initial contract in negotiations.
8
A new five-year labor contract between US Airways and
its pilots became effective January 1, 1998. This contract
includes various provisions that the Company believes are
helping US Airways to address its high cost structure,
including linking the compensation of US Airways' pilots to
the compensation of pilots at several other major domestic
air carriers and allowing US Airways to launch its low-cost
product, "MetroJet." As discussed in MD&A, US Airways faces
significant pressure in certain markets from competitors
with lower cost structures. Other provisions of the new
contract include: an early retirement program for 325
pilots; lump sum payments to pilots equal to 1% of annual
salary for the calendar years 1999, 2001 and 2002 (payable
in the subsequent calendar year); 11.5 million options to
purchase US Airways Group common stock, to be issued ratably
to pilots over the five-year life of the contract (with
exercise prices established based on the fair market value
of the Company's common stock over a time period preceding
each grant); and certain job security provisions, including
a "no furlough" clause for pilots on the seniority list on
the effective date of the agreement.
As discussed in MD&A, the Company recorded a $115
million charge to Personnel costs during the fourth quarter
of 1997 associated with the early retirement plan.
US Airways expects to realize significant net long-term
savings in both wages and benefits expenses as a result of
the early retirement program. US Airways will recognize
expenses for the lump sum payments, which are expected to
total approximately $20 million, as an element of Personnel
costs in the period in which they are earned. Additional
information related to the stock options that will be
granted to US Airways' pilots under the new contract can be
found in Note 8(e) to the Company's Notes to Consolidated
Financial Statements.
During the third quarter of 1998, US Airways issued
recall notices to all of its furloughed pilots. The recalls
were part of US Airways' continuing planning process due to
normal attrition, retirements and training requirements for
the new single-aisle Airbus aircraft that have begun
entering US Airways' operating fleet. US Airways had
approximately 280 pilots on furlough prior to the recalls.
On September 29, 1998, the IAMAW filed with the
National Mediation Board (NMB) for mediation in its contract
negotiations with US Airways covering approximately 7,025
mechanics and related employees. The labor agreement
covering these employees was amendable on October 1, 1995.
Negotiations between the parties resumed in November 1998
under the auspices of the NMB-appointed mediator.
On June 23, 1998 the IAMAW filed with the NMB for
mediation in its negotiations with US Airways for an initial
contract covering approximately 6,000 fleet service
employees. Following the NMB's appointment of a mediator,
the IAMAW and US Airways reached a tentative agreement on
August 17, 1998. The IAMAW failed to ratify the tentative
agreement and the mediator reconvened the parties to resume
negotiations on October 6, 1998. On March 4, 1998, the
parties reached a new tentative agreement which will be
voted on by the fleet services employees in the near future.
US Airways is also in negotiations over amendable labor
agreements with the Association of Flight Attendants
covering flight attendants and with the Transport Workers
Union covering flight crew training instructors, flight
simulator engineers and dispatch employees. US Airways is
also negotiating with the CWA with respect to an initial
labor contract with US Airways covering approximately 8,900
passenger service employees. On February 23, 1999, the
parties filed with the NMB for a mediator to assist in the
negotiations.
The Company is unable to predict how long it will take
to conclude collective bargaining talks with respect to
labor contracts that are currently amendable or for labor
contracts for which an initial contract is being negotiated
or the ultimate outcome of these discussions. Under the
Railway Labor Act, a labor contract does not "expire," but
rather becomes amendable on a
9
certain date. Thirty days prior to that date, either party
to the contract may give notice to the other of its
intention to amend the contract, at which point the
collective bargaining process begins. If, after a period of
negotiations, the parties cannot reach an agreement, a
federal mediator from the NMB is brought in to assist. The
process of mediation continues until the NMB determines, at
its sole discretion, that the parties have reached an
impasse. At that point, the parties enter a thirty-day
"cooling-off" period before either party may employ so-
called "self-help" (e.g., the imposition of contract changes
or a lockout by the company or a strike by the union). While
in negotiations and mediation, both parties must observe the
status quo.
As discussed in MD&A, US Airways announced certain
efficiency measures in May 1997. These efficiency measures
included US Airways' elimination of service on certain
unprofitable routes and the consolidation of certain
maintenance and reservations activities into fewer
facilities. The Company estimates that approximately 750
employees were displaced as a result of these efficiency
measures.
During December 1997, US Airways entered into a 25-year
agreement with TSG under which TSG assumed responsibility for
managing most of US Airways' information technology
requirements. As a result of this agreement, approximately
670 US Airways employees took positions with TSG on January
1, 1998. See MD&A for additional information related to
US Airways' agreement with TSG.
AVIATION FUEL
Prices and availability of all petroleum products are
subject to political, economic and market factors that are
generally outside of the Company's control. Accordingly, the
price and availability of aviation fuel, as well as other
petroleum products, can be unpredictable. Because the
operations of the Company's airline subsidiaries are
dependent upon aviation fuel, significant increases in
aviation fuel costs could materially and adversely affect the
Company's results of operations and financial condition. For
1998, 1997 and 1996, aviation fuel expenses were 8.2%, 10.5%
and 10.8%, respectively, of US Airways' total operating
expenses (as adjusted to exclude nonrecurring items and
certain other expenses for comparability purposes).
US Airways continually adjusts its aviation fuel
procurement strategy in order to take advantage of the best
available prices while at the same time ensuring that it has
an adequate supply of aviation fuel to support its
operations. In addition, US Airways may participate in
arrangements designed to reduce its exposure to significant
increases in the price of aviation fuel. These arrangements
have the net effect of increasing or decreasing US Airways'
aviation fuel expense in the period in which they are
settled (see Note 2(a) to the Company's Notes to
Consolidated Financial Statements for additional information
related to such arrangements).
See Part II, Item 6 "Selected Financial Data" for
additional information related to aviation fuel. In
addition, see "Industry Regulation and Airport Access" above
for information related to certain taxes on aviation fuel.
USE OF TRAVEL AGENTS AND COMMISSIONS EXPENSES
As is typical in the airline industry, a majority of
the tickets for travel on the Company's airline subsidiaries
are sold by travel agents. During 1998, travel agents
accounted for approximately 74% of US Airways' ticket sales
(as measured by gross fares). The comparable percentages for
1997 and 1996 were 76% and 77%, respectively. A majority of
the remaining ticket sales are through US Airways' in-house
reservations function (see "Employees" above).
The Company accounts for fees paid to travel agents in
the Commissions line item on its Consolidated Statements of
Operations (which are contained in Part II, Item 8A of this
report).
10
Such fees are calculated in accordance with policies
established by the Company. Fees paid to travel agents
accounted for approximately 6.8%, 7.7% and 7.5% of US
Airways' total operating expenses (as adjusted to exclude
nonrecurring items and certain other expenses for
comparability purposes) for the years 1998, 1997 and 1996,
respectively.
During September 1997, US Airways established a revised
fee structure for base commissions paid to travel agents: 8%
of ticket price on all domestic and international tickets
issued by travel agents in the U.S., Puerto Rico, the U.S.
Virgin Islands and Canada. US Airways' existing maximum
payment of $25 one-way and $50 round-trip for tickets
purchased in the U.S. and Puerto Rico for travel in and
between the U.S., Puerto Rico, the U.S. Virgin Islands and
Canada was not changed. Effective December 3, 1998, a
maximum payment of $50 for one-way tickets and $100 for
round-trip tickets for other international destinations for
tickets purchased in the U.S., Puerto Rico and the U.S.
Virgin Islands was instituted (prior to the revised rate
structure, the standard commission rate was 10% of ticket
price, subject to a maximum for domestic travel of $50 per
round-trip ticket, but without any maximum limit for
international travel). US Airways pays travel agents
additional "incentive" commissions under certain
circumstances, such as for reaching certain volume sales
levels. Such incentive fees are typical in the airline
industry.
In April 1996, the Company began selling electronic
tickets for travel on the Company's airline subsidiaries;
travel agents obtained this capability in October 1996. By
February 1999, "E Tickets" for travel on US Airways and its
regional affiliates had exceeded 45% of all ticket sales.
The Company believes that electronic ticketing helps to
reduce distribution costs.
COMPUTERIZED RESERVATION SYSTEMS
Computerized Reservation Systems (CRSs) play a
significant role in the marketing and distribution of
airline tickets. As mentioned above, travel agents sell
tickets which generate the majority of US Airways' passenger
revenues. Most travel agents use one or more CRSs to obtain
information about airline schedules and fares and to book
their clients' travel.
On December 5, 1998, as part of a comprehensive
information technology management agreement with TSG, US
Airways' reservation, airport customer service and aircraft
tracking systems were converted to the SABRE system. SABRE
is the world's largest CRS system, as measured by revenues
generated by travel agent subscribers. US Airways is also
now using the SABRE O&D yield management system. US Airways
anticipates significant long-term benefits from its
transition to computer technologies obtained from TSG. See
MD&A for additional information related to US Airways'
information technology management agreement with TSG.
On July 30, 1997, Galileo completed an initial public
offering (IPO) and used the proceeds, together with the
proceeds of bank financing, to purchase Apollo Travel
Services Partnership (ATS). At that time, USAM owned
approximately 21% of ATS. Immediately preceding the IPO,
Galileo International Partnership (GIP) was merged with and
into a wholly-owned limited liability company subsidiary of
Galileo and USAM received shares in Galileo in the same
proportion as its partnership interest in GIP. As part of
the IPO, USAM sold some of its Galileo shares and its
interest in Galileo was reduced from 11% to approximately
6.7%. The transaction is discussed further in MD&A.
Galileo owns, operates and markets the Galileo CRS. The
Galileo CRS is the world's second largest CRS system, as
measured by revenues generated by travel agent subscribers.
As of December 31, 1998, USAM owned approximately 6.7%
of Galileo and held an 11% interest in Galileo Japan
Partnership, which markets the Galileo CRS in Japan.
11
FREQUENT TRAVELER PROGRAM
Under US Airways' Dividend Miles frequent traveler
program (FTP), participants generally receive mileage credits
equal to the greater of actual miles flown or 500 miles for
each paid flight segment on US Airways (including MetroJet)
or US Airways Express, or actual miles flown on one of US
Airways' FTP airline partners. Participants generally receive
a minimum of 500 mileage credits for each paid flight on US
Airways Shuttle plus, through September 1999, additional
mileage in American's FTP, the AAdvantage Program (as long as
the passenger is also a member of AAdvantage). Participants
flying on First Class or Envoy Class tickets generally
receive additional mileage credits. Participants may also
earn mileage credits by flying on FTP airline partners,
utilizing certain credit cards, staying at participating
hotels, renting cars from participating car rental companies
and through other means. Mileage credits earned by FTP
participants can be redeemed for various travel awards,
including fare discounts, upgrades to First Class or Envoy
Class and tickets on US Airways or on one of US Airways' FTP
airline partners. Certain awards also include discount hotel
and car rental awards. Mileage credits may not be brokered,
bartered or sold, and have no cash value.
US Airways and its FTP airline partners limit the
number of seats allocated per flight for award recipients by
using various inventory management techniques. Award travel
for all but the highest-level Dividend Miles participants is
generally not permitted on blackout dates, which correspond
to certain holiday periods or peak travel dates to foreign
destinations. US Airways reserves the right to terminate
Dividend Miles or portions of the program at any time.
Program rules, partners, special offers, blackout dates,
awards and requisite mileage levels for awards are subject
to change without prior notice.
US Airways uses the incremental cost method to account
for liabilities associated with Dividend Miles. Estimated
future travel awards are valued at the estimated average
incremental cost of carrying one additional passenger.
Incremental costs include unit costs for passenger food,
beverages and supplies, fuel, reservations, communications,
liability insurance and denied boarding compensation
expenses. No profit or overhead margin is included in the
accrual for incremental costs. US Airways periodically
reviews the assumptions made to calculate its FTP liability
for reasonableness and makes adjustments to these
assumptions as necessary. No liability is recorded for
hotel, car rental or most airline award certificates that
are to be honored by other parties because there is no cost
to US Airways for such awards. US Airways charges certain of
its partner airlines for redemptions of awards for travel on
its flights. Conversely, certain partner airlines charge US
Airways for Dividend Miles earned by US Airways FTP
participants on their flights.
As of December 31, 1998 and 1997, Dividend Miles
participants had accumulated mileage credits for
approximately 4,388,000 awards and 4,253,000 awards,
respectively. Because US Airways expects that some potential
awards will never be redeemed, calculations of FTP
liabilities are based on approximately 86% of total
accumulated mileage credits. Mileage credits for Dividend
Miles participants who have accumulated less than the
minimum number of mileage credits necessary to claim an
award are excluded from calculations of FTP liabilities.
Incremental changes in FTP liabilities resulting from
participants earning or redeeming mileage credits or changes
in assumptions used for the related calculations are
recorded as part of the regular review process.
During 1998, 1997 and 1996, US Airways' customers
redeemed approximately 0.9 million, 0.9 million and 1.0
million awards for free travel, respectively, representing
approximately 5%, 5% and 6% of US Airways' RPMs in those
years, respectively. These low percentages as well as the
use of certain inventory management techniques (see above)
minimize the displacement of revenue passengers by
passengers traveling on Dividend Miles award tickets.
12
In January 1999, US Airways announced changes to its
FTP that take effect on July 1, 1999. Under current program
guidelines, mileage credits do not expire. Mileage credits
earned after December 31, 1999 may expire, in certain
circumstances, under the new program guidelines. In
addition, the number of mileage credits required for award
travel redemption will change when the new program
guidelines take effect. For example, the number of mileage
credits necessary for an award for domestic travel will vary
depending on the date of travel and whether or not the
travel itinerary includes a Saturday night stay over.
In July 1998, US Airways and American entered into
agreements whereby participants of each airlines' FTP may
redeem mileage credits for award travel on either airline.
Participants may also "pool" mileage credits between FTPs.
Each company compensates the other when relieved of an
obligation to provide a travel award.
As mentioned previously, US Airways terminated its
relationship with British Airways during 1997, including
arrangements involving the two companies' frequent traveler
programs.
INSURANCE
The Company and its subsidiaries maintain insurance of
the types and in amounts deemed adequate to protect
themselves and their property. Principal coverage includes
liability for bodily injury to or death of members of the
public, including passengers; damage to property of the
Company, its subsidiaries and others; loss of or damage to
flight equipment, whether on the ground or in flight; fire
and extended coverage; and workers' compensation and
employer's liability. Coverage for environmental liabilities
is expressly excluded from current insurance policies.
ITEM 2. PROPERTIES
FLIGHT EQUIPMENT
As of December 31, 1998, US Airways and Shuttle operated the
following jet aircraft:
Passenger Average
Type Capacity Age (years) Owned(4) Leased(5) Total
---- -------- ----------- ------- --------- -----
Boeing 767-200ER 200 9.5 8 4 12
Boeing 757-200 182 8.2 23 11 34
Boeing 727-200 (1) 161 26.7 12 - 12
Boeing 737-400 144 9.0 19 35 54
McDonnell Douglas MD-80 142 16.8 15 16 31
Boeing 737-300 126 11.7 11 74 85
Airbus A319 120 0.2 - 6 6
Boeing 737-200 (2) 109 16.7 54 10 64
Douglas DC-9-30 (3) 100 24.1 43 7 50
Fokker 100 97 8.1 36 4 40
---- --- --- ---
13.7 221 167 388
==== === === ===
(1) Operated by Shuttle (see Note 1(a) to the Company's Notes
to Consolidated Financial Statements for information
related to the Company's purchase of Shuttle in 1997).
(2) US Airways purchased two leased B737-200 aircraft in
January 1999.
(3) US Airways retired three owned DC-9-30 aircraft during the
first quarter of 1999.
(4) Of the owned aircraft, 91 were pledged as collateral for
various secured financing obligations aggregating $1.9
billion as of December 31, 1998.
(5) The terms of the leases expire between 1999 and 2018.
13
As of December 31, 1998, the Company's three wholly-owned
regional airline subsidiaries operated the following turboprop
aircraft:
Passenger Average
Type Capacity Age (years) Owned(4) Leased(5) Total
---- -------- ----------- ------- --------- -----
de Havilland Dash 8 (1) 37 8.0 29 68 97
Dornier 328-110 32 3.3 - 26 26
---- -- -- ---
7.0 29 94 123
==== == == ===
(1) An additional leased Dash 8 aircraft was added in
January 1999.
(2) The terms of the leases expire between 1999 and 2012.
The Company has agreements for the acquisition of up to
400 new single-aisle aircraft and up to 30 new
intercontinental-range widebody aircraft. As of December 31,
1998, US Airways had added six of the new single-aisle
aircraft into its operating fleet. US Airways expects to
take delivery of 33 additional new single-aisle aircraft in
1999. US Airways plans to retire 24 older aircraft during
1999. Deliveries of the new widebody aircraft are scheduled
to begin in the first quarter of the year 2000. The
Company's aircraft acquisition agreements are discussed in
detail in MD&A as well as Note 6(a) to the Company's Notes
to Consolidated Financial Statements. The Company has
recently signed a letter of intent to purchase nine new Dash
8 aircraft in 1999 from Bombardier Aerospace, the
manufacturer of these aircraft. In addition, upon completion
of a definitive purchase agreement, the Company plans to
extend the leases on ten Dash 8 aircraft currently operated
by the Company's regional airline subsidiaries (the leases
are scheduled to expire in 1999).
The Company's airline subsidiaries maintain inventories
of spare engines, spare parts, accessories and other
maintenance supplies sufficient to meet their operating
requirements.
As of December 31, 1998, the Company's airline
subsidiaries, principally US Airways, owned or leased the
following aircraft which were not considered part of the
operating fleets presented in the tables above. These
aircraft were either parked in storage facilities or, as
shown in the far right column, leased or subleased to third
parties.
Average Leased/
Type Age (years) Owned Leased Total Subleased
---- ----------- ----- ------ ----- ---------
British Aerospace BAe-146-200 13.9 - 11 11 11
British Aerospace Jetstream 3100 11.7 - 14 14 14
Douglas DC-9-30 25.6 1 - 1 -
Fokker F28-1000 25.5 16 - 16 16
Fokker F28-4000 13.0 - 11 11 11
---- -- -- -- --
16.9 17 36 53 52
==== == == == ==
See Note 6(b) to the Company's Notes to Consolidated
Financial Statements for additional information related to
third party lease arrangements involving flight equipment.
US Airways and Shuttle are participants in the Civil
Reserve Air Fleet (CRAF), a voluntary program administered by
the Air Mobility Command (AMC). The General Services
Administration of the U.S. government requires that airlines
participate in CRAF in order to receive U.S. government
business. The U.S. government is US Airways' largest
customer. US Airways' and Shuttle's commitments under CRAF
are to provide up to eleven B767-200ER and four B727-200
aircraft, respectively, in support of military operations,
most likely aeromedical missions, as specified by the AMC. US
Airways and Shuttle would be reimbursed at prescribed rates
if these aircraft were activated under the CRAF program. To
date, the AMC has not requested US Airways or Shuttle to
activate any of their aircraft under CRAF.
14
GROUND FACILITIES
US Airways leases the majority of its ground
facilities, including executive and administrative offices
in Arlington, Virginia adjacent to Reagan National; its
principal operating, overhaul and maintenance bases at the
Pittsburgh and Charlotte/Douglas International Airports;
major training facilities in Pittsburgh and Charlotte;
central reservations offices in several cities; and line
maintenance bases and local ticket, cargo and administrative
offices throughout its system. US Airways owns a building
and vacant land in Fairfax County (Virginia), a training
facility in Winston-Salem (North Carolina) and reservations
facilities in San Diego and Orlando. The property in Fairfax
County is not used as part of the Company's operations and
is currently available for sale.
In 1998, US Airways closed its maintenance facilities in
Roanoke (Virginia), Greensboro (North Carolina) and Winston-
Salem (see related information in MD&A). The work performed
at these locations was transferred to other US Airways
maintenance facilities.
TERMINAL CONSTRUCTION PROJECTS
The Company's airline subsidiaries utilize public airports
for their flight operations under lease arrangements with the
government entities that own or control these airports.
Airport authorities frequently require airlines to execute
long-term leases to assist in obtaining financing for
terminal and facility construction. Any future requirements
for new or improved airport facilities and passenger
terminals at airports at which the Company's airline
subsidiaries operate could result in additional expenditures
and long-term commitments for these subsidiaries. Several
significant projects which affect large airports on US
Airways' route system are discussed below.
In 1998, US Airways reached an agreement with the
Philadelphia Authority for Industrial Development (PAID) and
the City of Philadelphia to construct a new international
terminal and a new US Airways Express terminal at the
Philadelphia International Airport, one of US Airways'
connecting hubs and US Airways' principal international
gateway. The international terminal will include 12 gates for
widebody aircraft and new federal inspection facilities and
is expected to be completed in 2001. The new US Airways
Express facility will be capable of accommodating
approximately 30 regional aircraft and is expected to be
completed in 2000. PAID has issued $443.7 million in airport
revenue bonds to finance the two terminals, ramp control
tower, and related projects. Upon completion of the project,
US Airways expects that its annual cost of operations will
increase by approximately $30 million.
In 1993, US Airways and the City of Philadelphia reached an
agreement to proceed with certain capital improvements at
Philadelphia International Airport. These improvements
include approximately $136 million in various terminal
renovations and improvements, including the construction of a
new US Airways club and $220 million to expand the runway
used primarily by regional aircraft. The terminal renovations
and improvements were completed in 1998 and increased US
Airways annual cost of operations by approximately $7
million. The runway expansion project is expected to be
completed in late 1999. US Airways expects that its annual
costs of operations at Philadelphia International Airport
will increase by approximately $9 million once construction
of the runway is complete.
ITEM 3. LEGAL PROCEEDINGS
US Airways is involved in legal proceedings arising out
of an aircraft accident in September of 1994 near Pittsburgh
in which 127 passengers and five crew members lost their
lives. With respect to this accident, the National
Transportation Safety Board (NTSB) held hearings in January
and November of 1995, and is scheduled to hold a final
hearing on March 23, 1999 before issuing its final accident
investigation report. Wrongful death cases are pending in a
consolidated multi-district
15
litigation in U.S. District Court for the Western District of
Pennsylvania and in state court in Cook County, Illinois.
Although US Airways has settled over 80% of the cases and
claims arising from the Pittsburgh accident, it expects that
it will be at least a year before all of the settlements
and/or 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 September 1997, The Boeing Company (Boeing) filed
suit against US Airways in state court in King County,
Washington seeking unspecified damages, estimated at
approximately $220 million, for alleged breach of two
aircraft purchase agreements concerning, respectively, eight
B757-200 aircraft and 40 B737-Series aircraft. On October
31, 1997, US Airways filed an answer and counterclaims to
Boeing's complaint denying liability and seeking recovery
from Boeing of approximately $35 million in equipment
purchase deposits. On April 23, 1998 the parties reached a
settlement terminating all obligations with respect to both
purchase agreements. Pursuant to the settlement, the
litigation has been dismissed with prejudice as to both
Boeing's claims and US Airways' counterclaims.
In October 1995, US Airways terminated for cause an
agreement with In-Flight Phone Corporation (IFPC). IFPC was
US Airways' provider of on-board telephone and interactive
data systems. The IFPC system had been installed in
approximately 80 aircraft prior to the date of termination of
the agreement. On December 6, 1995, IFPC filed suit against
US Airways in Illinois state court seeking equitable relief
and damages in excess of $186 million. US Airways believes
that its termination of its agreement with IFPC was
appropriate and that it is owed significant damages from
IFPC. US Airways has filed a counterclaim against IFPC
seeking compensatory damages in excess of $25 million and
punitive damages in excess of $25 million. In January 1997,
IFPC filed for protection from its creditors under Chapter 11
of the Bankruptcy Code. The parties stipulated to lift the
automatic stay provided for in the Bankruptcy Code which
could allow IFPC's and US Airways' claims to be fully
litigated. The Company is unable to predict at this time the
ultimate resolution or potential financial impact of these
proceedings on the Company's financial condition or results
of operations.
On July 30, 1996, the Company and US Airways initiated a
lawsuit in U.S. District Court for the Southern District of
New York against British Airways, BritAir Acquisition Corp.,
Inc., American and American's parent company, AMR Corp. The
Company and US Airways claimed that British Airways, in
pursuit of an alliance with American, is responsible for
breaches of fiduciary duty to the Company and US Airways and
violated certain provisions of the January 21, 1993
Investment Agreement between the Company and British Airways
(the Investment Agreement). The lawsuit also claims that the
defendants have committed violations of U.S. antitrust laws.
In response to the defendants' Motion to Dismiss, the Court
sustained US Airways' claims for breach of contract against
British Airways. The Court dismissed the remaining claims
against British Airways and all claims against American. On
February 6, 1998, British Airways filed its answer to the
complaint along with counterclaims against the Company and US
Airways. British Airways' counterclaims alleged that US
Airways breached various provisions of the Investment
Agreement and that US Airways breached the Code Share
Agreement between British Airways and US Airways by providing
certain allegedly confidential information to specific third
parties. In addition, British Airways seeks a declaratory
judgment regarding certain payment obligations under its wet
lease arrangement with US Airways. British Airways claimed
damages of $16.7 million for the termination of the code
share relationship and an unspecified amount of damages for
its remaining claims. On January 29, 1999, the Company, US
Airways and British Airways jointly filed a pretrial order
with the Court, and on February 5, 1999, the Court placed the
lawsuit on its trial-ready calendar. On February 5, 1999,
British Airways filed a motion for summary judgment seeking
dismissal of the Company's and US Airways' claims and a
finding that the Company and US Airways are liable for breach
of the Code Share Agreement. Subsequently, the Company and
16
US Airways filed a memorandum of law opposing British
Airways' motion. The Company is unable to predict at this
time the ultimate resolution or potential financial impact of
these proceedings on the Company's financial condition or
results of operations.
In May 1995, the Company, US Airways and the Retirement
Income Plan for US Airways, Inc. (the Pilots Pension Plan)
were sued in federal district court for the District of
Columbia by 481 active and retired pilots alleging that
defendants had incorrectly interpreted the Pilots Pension
Plan provisions and erroneously calculated benefits under the
Pilots Pension Plan. The plaintiffs sought damages in excess
of $70 million. In May 1996, the court issued a decision
granting US Airways' 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 Pilots Pension Plan was
collectively bargained. The court retained jurisdiction over
one count of the complaint alleging a violation of a
disclosure requirement under the Employee Retirement Income
Security Act. The plaintiffs have 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 plaintiff's 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 United States
Court of Appeals for the District of Columbia. In February
1999, the United States Court of Appeals upheld the District
Court's decision originally granted in May 1996 in US
Airways' favor.
In February of 1998 a purported class action complaint
was filed by a travel agency in Puerto Rico against seven
major U.S. airlines, including US Airways. The complaint
alleges that the defendant airlines are undercompensating
Puerto Rican travel agents in connection with the agents'
sale of travel. The plaintiffs allege that the airlines are
contractually obligated to pay a 10% commission and that the
defendant airlines breached that contract as a result of the
introduction of commission caps limiting commission payable
with respect to a single trip to a stated dollar amount and
reducing certain commissions to 8%. The plaintiffs have
stated their damages for the class in the amount of $150
million. On December 22, 1998, after the filing of various
motions by the defendants and some preliminary discussions,
the plaintiffs dismissed this action without the payment of
any amount by US Airways.
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. The City and County
of San Francisco has identified US Airways as a potentially
responsible party. The City and County of San Francisco and
US Airways recently entered into an agreement in principle to
resolve this matter and expect to finalize the agreement by
April 1, 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of 1998.
PART II
ITEM 5A. MARKET FOR US AIRWAYS GROUP'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
STOCK EXCHANGE LISTING
US Airways Group's Common Stock, $1 par value (Common
Stock), is traded on the New York Stock Exchange (Symbol U).
As of February 26, 1999, there were approximately 25,000
stockholders of record. These stockholders reside throughout
the United States and in other countries.
17
MARKET PRICES OF COMMON STOCK
The high and low sale prices of the Company's Common
Stock as reported on the New York Stock Exchange Composite
Tape were:
Period High Low
------ ---- ---
1998 Fourth Quarter $ 58 9/16 $ 34 3/4
Third Quarter 83 1/4 47
Second Quarter 82 1/8 63 5/8
First Quarter 76 7/8 56 9/16
1997 Fourth Quarter 65 3/4 39 15/16
Third Quarter 43 1/8 32 7/8
Second Quarter 38 1/4 23 1/8
First Quarter 26 3/4 19 1/4
Holders of Common Stock are entitled to receive such
dividends as may be lawfully declared by the Company's board
of directors. The Company has not paid dividends on its
Common Stock since the second quarter of 1990. As of the date
of this report, the Company's board of directors had not
authorized the resumption of dividends on the Company's
Common Stock and there can be no assurance when or if such
dividend payments will resume.
FOREIGN OWNERSHIP RESTRICTIONS
Under current federal law, non-U.S. citizens cannot own
or control more than 25% of the outstanding voting securities
of a domestic air carrier. The Company believes that it was
in compliance with this statute during the time period
covered by this report.
ITEM 5B. MARKET FOR US AIRWAYS' COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
US Airways Group owns all of US Airways' outstanding
common stock, par value $1 (US Airways Common Stock). US
Airways' board of directors has not authorized the payment of
dividends on US Airways' Common Stock since 1988.
Currently, the amount of dividends that US Airways can
pay on its common stock is materially limited by a covenant
contained in its 9 5/8% Senior Notes. However, this covenant
does not restrict US Airways from loaning or advancing funds
to US Airways Group.
(this space intentionally left blank)
18
ITEM 6. SELECTED FINANCIAL DATA
CONSOLIDATED STATEMENTS OF OPERATIONS-US AIRWAYS GROUP (IN MILLIONS, EXCEPT
PER SHARE AMOUNTS) (1)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Operating Revenues $ 8,688 $ 8,514 $ 8,142 $ 7,474 $ 6,997
Operating Expenses 7,674 7,930 7,705 7,153 7,489
---- ---- ---- ---- ----
Operating Income (Loss) $ 1,014 $ 584 $ 437 $ 322 $ (491)
Income (Loss)
Before Taxes $ 902 $ 672 $ 275 $ 128 $ (685)
Provision (Credit) for
Income Taxes 364 (353) 12 9 -
---- ---- ---- ---- ----
Net Income (Loss) $ 538 $ 1,025 $ 263 $ 119 $ (685)
Net Earnings Applicable
to Common
Stockholders $ 532 $ 961 $ 175 $ 34 $ (763)
Basic Earnings (Loss)
per Common Share (2) $ 5.75 $ 12.32 $ 2.73 $ 0.55 $(12.73)
Diluted Earnings (Loss)
per Common Share (2) $ 5.60 $ 9.87 $ 2.35 $ 0.55 $(12.73)
Cash dividends per
Common Share $ - $ - $ - $ - $ -
CONSOLIDATED BALANCE SHEETS-US AIRWAYS GROUP (IN MILLIONS)
As of December 31,
------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Total Assets $ 7,870 $ 8,372 $ 7,531 $ 6,955 $ 6,808
Long-Term
Obligations (3) (4) $ 3,266 $ 4,142 $ 4,552 $ 4,572 $ 4,699
Series B Preferred
Stock (4) $ - $ - $ 213 $ 213 $ 213
Common Stockholders'
Equity (Deficit) (4) $ 593 $ 725 $ (798)$(1,049)$(1,110)
Total Stockholders'
Equity (Deficit) (4) $ 593 $ 725 $ (584)$ (836)$ (897)
Shares of Common Stock
Outstanding (5) 83.8 91.5 64.3 63.4 61.1
(1) Certain years include nonrecurring items, activity that
is reported as "nonrecurring items" by the Company in
its various filings from time-to-time with the U.S.
Securities and Exchange Commission (See Note 14 to the
Company's Notes to Consolidated Financial Statements
for related information).
(2) During 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share"
(SFAS 128). SFAS 128 established new guidelines for
calculating earnings per common share. The Company's
Earnings (Loss) per Common Share figures for the years
1994 through 1996 have been restated to conform with
the provisions of SFAS 128.
(3) Includes long-term debt, capital leases, postretirement
benefits other than pensions (noncurrent) and
outstanding redeemable preferred stock.
(4) 1996, 1995 and 1994 do not include any effects from
deferred dividends on preferred stock. See Notes 7 and
8(b) to the Company's Notes to Consolidated Financial
Statements contained in Part II, Item 8A of this report
for additional information related to the Company's
preferred stock and related activity.
(5) 1998 and 1997 activity included conversions of
preferred stock into Common Stock. See Notes 7 and 8(b)
to the Company's Notes to Consolidated Financial
Statements for additional information.
Note: Numbers may not add or calculate due to rounding.
(this space intentionally left blank)
19
SELECTED OPERATING AND FINANCIAL STATISTICS-US AIRWAYS (1)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Revenue passengers
(thousands)* 57,990 58,659 56,640 56,674 59,495
Total RPMs (millions)(2) 41,370 41,749 39,220 38,079 38,395
RPMs (millions)* 41,253 41,579 38,943 37,618 37,941
Total ASMs (millions)(3) 56,861 58,500 57,208 58,678 61,540
ASMs (millions)* 56,723 58,294 56,885 58,163 61,027
Passenger load factor*(4) 72.7% 71.3% 68.5% 64.7% 62.2%
Break-even load
factor (5) 65.7% 66.4% 67.9% 64.9% 67.3%
Yield* (6) 17.02c 17.10c 17.46c 16.66c 15.61c
Passenger revenue
per ASM*(7) 12.38c 12.20c 11.95c 10.78c 9.70c
Revenue per ASM(8) 13.80c 13.50c 13.19c 11.80c 10.59c
Cost per ASM(9) 12.34c 12.33c 12.69c 11.40c 11.02c
Average passenger
journey (miles)* 711 709 688 664 638
Average stage
length (miles)* 597 591 578 560 536
Revenue aircraft miles
(millions)* 422 435 426 444 473
Cost of aviation fuel
per gallon(10) 51.83c 67.47c 70.51c 56.83c 55.79c
Cost of aviation fuel
per gallon, excluding
fuel taxes (11) 45.95c 61.26c 64.09c 53.23c 53.28c
Gallons of aviation fuel
consumed (millions) 1,109 1,129 1,107 1,137 1,205
Operating aircraft
at year-end 376 376 390 394 424
Full-time equivalent
employees at year-end 38,210 38,533 40,160 39,891 42,399
* Scheduled service only (excludes charter service).
c cents.
(1) Operating statistics include free frequent travelers
and the related miles they flew. Operating statistics
exclude flights operated by US Airways under a wet
lease arrangement with British Airways Plc (the "wet
lease arrangement," which ended May 31, 1996).
Nonrecurring items and certain revenues and expenses
have been excluded from US Airways' financial results
for purposes of financial statistical calculation and
to provide better comparability between periods.
Nonrecurring items include those items reported as
"nonrecurring items" by US Airways in its various
filings from time-to-time with the U.S. Securities and
Exchange Commission (see Note 13 to US Airways' Notes
to Consolidated Financial Statements for additional
information). Revenues and expenses associated with
US Airways' capacity purchase arrangements with certain
affiliated airlines and the wet lease arrangement are
also excluded from financial statistical calculations
(see Notes 10(a) and 10(b) to US Airways' Notes to
Consolidated Financial Statements for additional
information).
(2) Revenue Passenger Miles (RPMs) - revenue passengers
multiplied by the number of miles they flew.
(3) Available Seat Miles (ASMs) - seats available
multiplied by the number of miles flown (a measure of
capacity).
(4) Percentage of aircraft seating capacity that is
actually utilized (RPMs/ASMs).
(5) Percentage of aircraft seating capacity utilized that
equates to US Airways breaking-even at the pre-tax
income level.
(6) Passenger transportation revenue divided by RPMs.
(7) Passenger transportation revenue divided by ASMs (a
measure of unit revenue).
(8) Total Operating Revenues divided by ASMs (a measure of
unit revenue).
(9) Total Operating Expenses divided by ASMs (a measure of
unit cost).
(10) Includes the base cost of aviation fuel, fuel taxes and
transportation charges.
(11) Includes the base cost of aviation fuel and
transportation charges.
(this space intentionally left blank)
20
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL INFORMATION
A "forward-looking information" which is subject to a number of risks
and uncertainties. The preparation of forward-looking information requires
the use of estimates of future revenues, expenses, activity levels and
economic and market conditions, many of which are outside the Company's
control. Among the specific factors that could cause actual results to
differ materially from those set forth in the forward-looking information
are the following: economic conditions, labor costs, aviation fuel costs,
competitive pressures on pricing-particularly from competitors with lower
cost structures, weather conditions, government legislation, consumer
perceptions of the Company's products, demand for air transportation in the
markets in which the Company operates and other risks and uncertainties
listed from time to time in the Company's reports to the United States
Securities and Exchange Commission (SEC). Other factors and assumptions not
identified above are also involved in the preparation of forward-looking
information, and the failure of such other factors and assumptions to be
realized may also cause actual results to differ materially from those
discussed. The Company assumes no obligation to update such estimates to
reflect actual results, changes in assumptions or changes in other factors
affecting such estimates.
Except where noted, the following discussion relates primarily to the
results of operations, financial condition and future prospects of US
Airways. US Airways is the Company's principal operating subsidiary,
accounting for 90% of the Company's operating revenues for 1998 (on a
consolidated basis).
FINANCIAL OVERVIEW
For 1998, the Company's operating income was $1.0 billion, income
before taxes was $902 million, net income was $538 million and earnings per
common share (EPS) was $5.60 on a diluted basis. For 1997, the Company
recognized operating income, income before taxes, net income and EPS on a
diluted basis of $584 million, $672 million, $1.0 billion and $9.87,
respectively. The comparative amounts for 1996 were $437 million, $275
million, $263 million and $2.35, respectively. The Company's financial
results for each of these years include the nonrecurring items detailed in
"Results of Operations" below.
Excluding nonrecurring items, the Company's operating income has
increased significantly on a year over year basis for the last three years.
This improvement is primarily attributable to relatively favorable domestic
economic and industry conditions and overall favorable capacity and pricing
trends in markets served by the Company's airline subsidiaries. In addition,
US Airways' improved operational performance, marketing efforts and the
positive influence of certain revenue enhancement and cost-reduction
initiatives have also contributed. Comparisons of net income over the last
three years are affected by certain tax benefits the Company recorded in
1997, which also had the effect of substantially increasing the Company's
effective tax rate for financial reporting purposes in 1998 (see also
"Income Taxes" below).
(this space intentionally left blank)
21
NEW STRATEGIC FOUNDATION
The Company has established a new foundation on which it is moving
forward with achieving its long-term strategic objective of establishing US
Airways as a competitive global airline:
- a new labor contract between US Airways and its pilots;
- an agreement with a subsidiary of Airbus Industrie G.I.E. (Airbus) to
purchase up to 430 new aircraft, including both single-aisle
A320-Family aircraft and intercontinental-range widebody aircraft;
- an expanded and substantially improved line of products, including
new
international service and a new international business class product,
"Envoy Class;"
- the purchase of Shuttle, Inc. (Shuttle), which operates under the
trade name "US Airways Shuttle;"
- a marketing arrangement with American Airlines, Inc. (American);
- "MetroJet," the Company's competitive response to low-cost, low-fare
competition;
- a contract with The SABRE Group, Inc. (TSG) that is expected to
provide
substantial long-term cost savings and enhancements in the
information
services area; and
- new regional jet service on certain routes operated by US Airways
Express.
A new five-year labor contract between US Airways and its pilots became
effective January 1, 1998. This contract includes various provisions that
the Company believes are helping US Airways to address its high cost
structure, including linking the compensation of US Airways' pilots to the
compensation of pilots at several other major domestic air carriers. The new
contract was a key factor in the Company's decision to finalize its single-
aisle aircraft order with Airbus and also includes provisions that allowed
US Airways to launch its low-cost product, MetroJet.
As of the date of this report, March 19, 1999, US Airways had acquired
ten Airbus A320-Family single-aisle aircraft, including one A320 and nine
A319 aircraft. The Company has 118 additional A320-Family aircraft on firm
order, including 29 to be delivered during the remainder of 1999 and 89
scheduled for delivery in the years 2000 through 2002. The Company's
aircraft acquisition agreement with Airbus also includes 112 aircraft
subject to reconfirmation prior to scheduled delivery and options for 160
additional aircraft. The Company anticipates that the new Airbus single-
aisle aircraft will ultimately replace, at a minimum, US Airways' B737-200,
DC-9-30 and MD-80 aircraft fleets. 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. However, certain expenses such as aircraft
rent will likely increase in conjunction with the acquisition of the new
aircraft. The Company has also entered into an agreement with CFM
International, Inc. (CFMI) for jet engines to power the new Airbus A320-
Family aircraft. As part of its agreement with CFMI, GE Engine Services,
Inc. will maintain these engines under an up to 20-year agreement.
On July 2, 1998, the Company announced that it had reached an
agreement with Airbus for the purchase of up to 30 widebody A330-300
aircraft. The agreement includes seven firm aircraft orders, seven aircraft
subject to reconfirmation prior to scheduled delivery and options for 16
additional aircraft. Of the seven firm-order A330-300 aircraft, six are
scheduled for delivery in the year 2000 and one in early 2001. Orders
subject to reconfirmation are for aircraft that are tentatively scheduled
for delivery beginning in the fourth quarter of the year 2000. The Company
22
can substitute other Airbus widebody aircraft for the A330-300s, including
the A330-200 or members of the A340-Series, for orders other than the first
seven aircraft. In October 1998, the Company reached an agreement with
Pratt & Whitney for jet engines to power US Airways' new Airbus widebody
aircraft and to provide long-term maintenance for the engines. The new
widebody aircraft are expected to operate primarily in transatlantic
markets. See Note 6(a) to the Company's Notes to Consolidated Financial
Statements contained in Part II, Item 8A of this report and "Liquidity and
Capital Resources" below for additional information related to the
Company's commitments to purchase flight equipment.
US Airways added additional transatlantic service during 1998:
Philadelphia-London (Gatwick Airport) and Philadelphia-Amsterdam in April
1998, Pittsburgh-Paris in October 1998 and a second Philadelphia-London
flight in early November 1998. US Airways expects to reinstate a second
Philadelphia-Paris flight in Summer 1999 (US Airways temporarily suspended
a second Philadelphia-Paris flight in order to add Pittsburgh-Paris
service). Also in 1998, US Airways applied to the U.S. Department of
Transportation (DOT) for authority to operate Philadelphia-Milan service
using seven weekly frequencies recently made available pursuant to an
agreement between the U.S. and Italy. US Airways participated vigorously in
the DOT's Italy proceedings. However, in February 1999 the DOT selected
Delta Air Lines, Inc. (Delta) over US Airways for the new Italy route. US
Airways has also filed with the DOT for authority to serve London's
Heathrow Airport (Heathrow) from Boston, Charlotte, Philadelphia and
Pittsburgh. US Airways continues to explore additional international
opportunities. US Airways' transatlantic capacity (as measured by available
seat miles or ASMs) for 1998 was 142% higher than for 1995, the year before
US Airways began to bolster its international operations.
In December 1997, in support of its growing international presence, US
Airways launched an improved international business class product called
"Envoy Class." Envoy Class offers travelers sleeper-quality seats, personal
in-arm video entertainment systems, First Class-style dining among other
amenities, all at business class fares. US Airways has also announced a
major expansion and improvements to its facilities at Philadelphia,
including a new international terminal and a new facility for US Airways
Express operations. Philadelphia International Airport is US Airways'
primary international gateway. As discussed above, the Company has also
entered into agreements to acquire new widebody, intercontinental-range
Airbus aircraft.
On March 11, 1999, US Airways announced that it had obtained
commercially viable takeoff and landing rights at London's Gatwick Airport
that will permit initiation of the long-awaited service from Charlotte.
Specific service plans will be announced soon.
US Airways anticipates moving its operations at Gatwick Airport 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). Talks between the U.S. and the U.K. government aimed
at negotiating a new bilateral aviation treaty with the U.K. were suspended
in October 1998, however, informal talks resumed in mid-February 1999. In
addition, according to press reports, British Airways Plc (British Airways)
and American have decided to phase in their proposed alliance over a four
to five year period rather than seek government approval for all aspects of
the alliance at this time. The U.K. has stated that it would favor an
incremental liberalization of the aviation treaty. These changes in the
British position could make it more difficult for other airlines, including
US Airways, to obtain the rights and access to slots (takeoff and landing
rights) necessary to operate flights to Heathrow. US Airways believes that
a new aviation treaty between the two countries is a prerequisite for US
Airways' obtaining the right to serve Heathrow and has proposed that the
U.S. government renounce the treaty in order to permit negotiation of a new
liberal agreement. US Airways continues to explore opportunities to further
its growth in European markets, especially in light of the Company's recent
order for new widebody aircraft.
23
On December 30, 1997, the Company purchased Shuttle. Shuttle, which
operates under the trade name "US Airways Shuttle," currently provides high
frequency service between New York (LaGuardia) and Boston and between New
York (LaGuardia) and Washington (Reagan National). Shuttle owns twelve
B727-200 aircraft (see also "Liquidity and Capital Resources" below). The
Company is currently revamping the US Airways Shuttle product, which will
include upgrading Shuttle's fleet.
On April 23, 1998, US Airways and American announced a marketing
relationship that gives customers of both companies important new benefits,
including combined access to both frequent traveler programs: US Airways'
Dividend Miles and American's AAdvantage. Under the program, effective
August 1, 1998, members who belong to Dividend Miles and AAdvantage are
able to claim awards for travel on both airlines. In addition, US Airways
Club and American's Admiral Club members now enjoy reciprocal access to
each airlines' airport clubs. During August 1998, the second phase of the
marketing relationship was launched: enabling Dividend Miles and AAdvantage
members who belong to both programs to combine miles when claiming a travel
award on either airline. The third phase of the relationship, allowing
AAdvantage members to earn AAdvantage miles as well as Dividend Miles on
certain US Airways Shuttle flights (through September 1999), was unveiled
in early October 1998.
US Airways also believes that "code-sharing" with American on certain
flights would be beneficial to its customers. However, because certain
types of code-sharing are subject to provisions in the labor contracts of
both airlines, US Airways has no plans to implement domestic code-sharing
between the "mainline" operations of the airlines unless pressured to do so
for competitive reasons. Code-sharing on the regional air carriers of both
airlines, US Airways Express and American Eagle, is expected to be
implemented in early 1999 on certain flight segments.
Legislation has recently been enacted that would provide for increased
scrutiny of certain airline joint ventures by the DOT. In April 1998, the
DOT issued proposed rules designed to regulate perceived anti-competitive
behavior directed at new entrants in the airline industry. Legislation has
recently been enacted requiring among other things, the National Research
Council of the National Academy of Sciences to complete a comprehensive
study pertaining to competitive issues in the airline industry prior to the
DOT's implementation of any such rules. The Company cannot predict whether
or when any such proposed rules will be adopted.
On June 1, 1998, US Airways launched MetroJet, its competitive
response to low-cost, low-fare competition, with five Boeing B737-200
aircraft and service between Baltimore/Washington International Airport and
four eastern cities. MetroJet offers travelers single-class service,
convenient schedules, assigned seating and low fares, in addition to the
other benefits available to customers of US Airways. MetroJet's operational
performance has exceeded management's expectations. MetroJet operated 22
aircraft with service to 16 cities at the end of 1998. MetroJet, which can
comprise up to 25% of the US Airways system (as measured by revenue block
hours), is expected to operate 54 aircraft by the end of 1999.
In December 1997, US Airways entered into an agreement with TSG under
which TSG assumed responsibility, as of January 1, 1998, for substantially
all of US Airways' information technology requirements. The agreement with
TSG is expected to result in substantial information system enhancements and
efficiencies, particularly in the areas of reservations, passenger check-in,
yield management and aircraft and crew scheduling. Under the terms of the
agreement, TSG purchased US Airways' information systems and related assets.
On January 1, 1998, in conjunction with US Airways' agreement with TSG, 670
US Airways information services employees took positions with TSG and TSG
assumed management and operation of US Airways' data processing facilities,
data and voice networks and substantially all other information technologies
activities. US Airways and TSG achieved a significant milestone on December
5, 1998, when US Airways' reservation,
24
airport customer service and aircraft tracking systems were converted to the
SABRE system. US Airways is also now using the SABRE O&D yield management
system. See "Results of Operations" below for additional information related
to US Airways' agreement with TSG.
As of December 31, 1998, there were twelve regional jets operating as
part of US Airways Express. These aircraft add a great deal of flexibility
to the US Airways system as they can operate effectively in markets
generally too small for US Airways' jet service and with stage lengths too
great for turboprop aircraft. Under its agreement with its pilots, because
US Airways has recalled all of its furloughed pilots (approximately 280
pilots), the Company has the option to increase the number of regional jets
operating as part of US Airways Express to 35. In addition, two of the
Company's wholly-owned regional airlines added a total of ten deHavilland
Dash 8 turboprop aircraft to their fleets in 1998. The Company has recently
signed a letter of intent to purchase nine new Dash 8 aircraft in 1999 from
Bombardier Aerospace, the manufacturer of these aircraft. In addition, upon
completion of a definitive purchase agreement, the Company plans to extend
the leases on ten Dash 8 aircraft currently operated by the Company's
regional airline subsidiaries (the leases are scheduled to expire in 1999).
CURRENT COMPETITIVE POSITION
The Company's foremost competitive threat continues to be the growth
of low-cost, low-fare competition in its primary operating region, the
Eastern U.S. Currently, approximately 84% of US Airways' departures and
approximately 56% of its capacity (ASMs) are located within this region. US
Airways' estimated origin/destination passenger overlap with low-cost, low-
fare competition is approximately 35% of its traffic base.
Before October 1996, the primary low-cost, low-fare competition
confronted by the Company's airline subsidiaries included Southwest
Airlines Co. (Southwest) and a number of smaller, start-up air carriers.
Southwest has steadily increased operations within the Eastern U.S. since
first offering service in this region in late 1993. In October 1996, Delta,
a major air carrier that was itself experiencing pressure from low-cost,
low-fare competition, launched a low-cost product called "Delta Express."
Delta Express currently operates 37 aircraft predominantly in Eastern U.S.
markets. In addition, recent reports indicate that United Air Lines, Inc.
(United) is considering adding "Shuttle by United" service at Northern
Virginia's Dulles International Airport in conjunction with a planned
expansion of operations at that facility. Shuttle by United, United's low-
cost product, currently operates exclusively in the Western U.S.
Direct competition with low-cost, low-fare competitors has typically
resulted in the dilution of yield realized by the Company's airline
subsidiaries. US Airways' Northeast-Florida service has been particularly
affected by low-cost, low-fare competition. US Airways has the highest unit
operating cost (operating cost per ASM or cost per ASM) of all major
domestic air carriers. US Airways' cost per ASM was 12.34 cents for 1998. By
contrast, Southwest reported unit operating costs for 1998 of 7.32 cents.
Although Delta reported an overall unit operating cost of 8.86 cents for
calendar year 1998, its Delta Express product is purported to have a unit
operating cost of approximately 7.50 cents.
On June 1, 1998, US Airways launched MetroJet, its competitive
response to the low-cost, low-fare threat. As discussed above in "New
Strategic Foundation," MetroJet has grown considerably since its launch and
is exceeding management's expectations operationally. The Company believes
that MetroJet represents a significant improvement in the Company's
competitive position, especially in markets in which the Company's airline
subsidiaries face low-cost, low-fare competition.
As mentioned above, US Airways has the highest unit operating cost of
all the major domestic air carriers. US Airways believes that it has taken
steps important to addressing its high
25
cost structure and enhancing its competitive position. US Airways' new
five-year contract with its pilots, which became effective January 1, 1998,
and the introduction of new Airbus aircraft into its operating fleet are
two of the most important. The pilot's contract includes a "parity"
provision linking compensation of US Airways' pilots to the weighted
average pilot cost at four of the largest domestic airlines, plus 1%. The
contract also includes provisions that allowed the Company to establish its
own low-cost product, MetroJet, as well as add regional jets to US Airways
Express. The new Airbus aircraft that US Airways began taking delivery of
in late 1998 are also expected to have a positive effect on US Airways'
unit operating cost, as discussed above in "New Strategic Foundation." The
Company has also completed a substantial portion of its project to revamp
its information services function, a project that is also discussed above
in "New Strategic Foundation." It is noteworthy that US Airways' unit
operating cost for 1998 was relatively unchanged versus 1997, in spite of
the costs of launching MetroJet, integrating a new aircraft type into its
operating fleet and its information systems projects. However, if fuel
costs are equalized between the two years, US Airways' unit operating cost
for 1998 was 2.6% higher than for 1997.
In May 1997, US Airways announced certain efficiency measures
including retiring 22 aircraft from its operating fleet, including its last
five F28-4000 aircraft and 17 older DC-9-30 aircraft (all of these aircraft
had been retired by the end of February 1998), ending unprofitable service
to nine cities and eliminating other routes that had not been profitable
(completed during early September 1997) and closing a flight crew base
(February 1998), two reservations centers (October 1997) and three
maintenance facilities (September 1998). The Company recognized certain
nonrecurring charges as a result of these actions (nonrecurring items are
discussed in "Results of Operations" below). In September 1997, US Airways
decided to retire its remaining DC-9-30 aircraft earlier than previously
planned resulting in an additional nonrecurring charge. US Airways
anticipates that deliveries of new Airbus single-aisle aircraft will
mitigate the effects of DC-9-30 retirements on its financial results and
capacity. As discussed in "Results of Operations" below, US Airways expects
to moderately increase the size of its operations in 1999.
CERTAIN OWNERSHIP MATTERS
In January 1998, the Company announced plans to purchase up to 2.3
million shares of its common stock. The program was authorized by the
Company's board of directors in conjunction with US Airways' agreement to
provide up to 2.3 million stock options to its pilots in 1998. In February
1998, the Company's board of directors announced certain actions aimed at
increasing shareholder value, including a second common stock buy-back
program, authorizing the purchase of up to $500 million of the Company's
common stock. The Company announced a third common stock buy-back program in
September 1998 for the purchase of up to five million shares and a fourth
common stock buy-back program in November 1998 for the purchase of up to
$500 million of the Company's common stock. In 1998, the Company purchased
17.9 million shares of its common stock at a cost of $1.1 billion, including
completing the first three stock purchase programs and $178 million of
shares under the fourth program.
On March 12, 1998, Berkshire Hathaway, Inc. exercised its right to
convert the Company's Series H Preferred Stock into 9.2 million shares of
the Company's Common Stock. The Company subsequently retired its Series H
Preferred Stock. The Company had previously retired its Series F Preferred
Stock (May 1997), its Series T Preferred Stock (May 1997), and its Series B
Preferred Stock (September 1997). With the retirement of these preferred
stock issuances, the Company had retired all of its preferred stock and
relieved itself of annual dividends of approximately $79 million. See Notes
7 and 8(b) to the Company's Notes to Consolidated Financial Statements for
additional information.
See "Liquidity and Capital Resources" below for additional information
related to the Company's common stock purchases and preferred stock
retirements. In addition, see "Results of
26
Operations" below for information related to certain preferred stock
conversion (into common stock) transactions.
INCOME TAXES
During the fourth quarter of 1997, the Company recognized income tax
benefits of $467 million. These income tax benefits, which are reflected in
the line item, "Provision (Credit) for Income Taxes" on the Company's
Consolidated Statements of Operations (which are included in Part II, Item
8A of this report), stem primarily from net operating losses and other tax
credits generated in prior years. The Company recognized these income tax
benefits for financial reporting purposes based on its expectations of
future earnings levels and the fact that certain of these income tax
benefits do not expire or would be realized in future periods irrespective
of future earnings levels.
Excluding the effect of the income tax benefits recognized in the
fourth quarter, the Company's effective income tax rate for financial
reporting purposes for 1997 was approximately 17%. As a result of
recognizing the income tax benefits in 1997, the Company's effective income
tax rate for financial reporting purposes for 1998 increased to
approximately 40%. The Company expects its effective income tax rate for
financial reporting purposes to remain at approximately 40% for 1999.
The rate at which the Company pays cash taxes on pre-tax income was
approximately 15% for 1997, 19% for 1998 and is expected to increase to at
least 30% in 1999. The increase expected for 1999 is due to the Company's
utilization of net operating losses and investment tax credits in 1998 and
the expected utilization of its remaining alternative minimum tax credit
carryforwards in 1999.
See Note 3 to the Company's Notes to Consolidated Financial Statements
for additional information related to income taxes, including the
components of the Company's deferred income tax assets and liabilities.
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 operations
systems, that will not properly process dates on or after January 1, 2000
(commonly referred to as the "Year 2000" 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
TSG, including the Year 2000 (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 has engaged the consulting arm of a "big
five" public accounting firm to assist them with their efforts. 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
TSG pursuant to which it has been converting many of its information
technology systems to those provided by TSG. TSG has reported that a
majority of its primary "host" systems (including systems for reservations,
flight operations and cargo) are already Y2K compliant. The balance of TSG
systems to which the Company will be converting to are scheduled to be Y2K
compliant no later than August 1, 1999. TSG has agreed to remediate all
non-Y2K compliant systems that are covered by the Company's relationship
with TSG, but that are not being converted to a TSG system. These
remediation efforts are scheduled for completion by August 1, 1999.
27
TSG has also informed the Company that it is in the process of
communicating with TSG's 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 TSG 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 an inventory of items with possible Y2K
problems. The Company has 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. The Company plans to complete the
remediation of all non-discretionary systems by August 31, 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 has also commenced airport and facility reviews. This
entails 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.
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.
Approximately 90% of these vendors have been contacted with 65% vendor
responses returned. The Company will track these responses and evaluate its
long-term relationship with these vendors based on the responses it
receives.
Although TSG 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 remediate or replace all non-compliant internal mission critical
non-TSG systems by August 31, 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 December 31, 1998, aggregate expenses incurred by the Company to
become Y2K compliant, apart from expenses related to the TSG relationship,
have amounted to approximately $2 million. The Company expects to spend an
additional $8 million, apart from the TSG relationship, in order to become
fully Y2K compliant. These amounts are also exclusive of any
28
replacement equipment that may become necessary and have not yet been
identified. With respect to the cost of TSG'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 TSG systems. However, the
Company anticipates incurring $32 million in expenses for TSG services
which are related solely to Y2K compliance efforts on the systems,
unrelated to the broader conversion plan. The Company paid TSG $21 million
for these services in 1998 and expects to pay TSG an additional $11 million
in 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
In October 1998, US Airways launched an on-line internet reservation
system called "Personal TravelWorks." The new system offers customers the
ability to make their own travel arrangements for flights on US Airways,
its low-cost product MetroJet, US Airways Shuttle and US Airways Express.
Visitors to US Airways' internet site, www.usairways.com, and MetroJet's
internet site, www.flymetrojet.com, can make travel reservations, purchase
tickets, and obtain flight schedules, ticket prices and other travel
information on-line.
On September 29, 1998, the International Association of Machinists and
Aerospace Workers (IAMAW) filed with the National Mediation Board (NMB) for
mediation in its contract negotiations with US Airways covering
approximately 7,025 mechanics and related employees. The labor agreement
covering these employees was amendable on October 1, 1995. Negotiations
between the parties resumed in November 1998 under the auspices of the NMB-
appointed mediator.
On June 23, 1998 the IAMAW filed with the NMB for mediation in its
negotiations with US Airways for an initial contract covering approximately
6,000 fleet service employees. Following the NMB's appointment of a
mediator, the IAMAW and US Airways reached a tentative agreement on August
17, 1998. The IAMAW failed to ratify the tentative agreement and the
mediator reconvened the parties to resume negotiations in October 1998. On
March 4, 1999, the parties reached a new tentative agreement which will be
voted on by the fleet service employees in the near future.
US Airways is also in negotiations over amendable labor agreements
with the Association of Flight Attendants covering flight attendants and
with the Transport Workers Union covering flight crew training instructors,
flight simulator engineers and dispatch employees. US Airways is also
negotiating with the Communications Workers of America with respect to an
initial labor contract with US Airways covering approximately 8,900
passenger service employees. On February 23, 1999, the parties filed with
the NMB for a mediator to assist in the negotiations.
US Airways is unable to determine the timing of when any of these
negotiations will be concluded and new or amended contracts established, or
the final terms and conditions of new or amended contracts. See Part I,
Item 1 "Business: Employees" for additional information related to the
Company's workforce, including the status of all of US Airways' labor
contracts.
In September 1997, The Boeing Company (Boeing) filed suit against US
Airways in state court in King County, Washington seeking unspecified
damages, estimated at approximately $220 million, for alleged breach of two
aircraft purchase agreements concerning, respectively, eight B757-200
aircraft and 40 B737-Series aircraft. On October 31, 1997, US Airways filed
an answer and counterclaims to Boeing's complaint denying liability and
seeking recovery from Boeing of approximately $35 million in equipment
purchase deposits. On April 23, 1998 the parties reached a settlement
terminating all obligations with respect to both purchase agreements.
29
Pursuant to the settlement, the litigation has been dismissed with
prejudice as to both Boeing's claims and US Airways' counterclaims.
The Company and its subsidiaries are subject to a wide range of
government regulation. Besides taxes on income, property and aviation fuel,
among other taxes, the Company's airline subsidiaries are subject to
numerous safety, maintenance and environmental-related mandates. The
Company's airline subsidiaries also collect various taxes from their
customers, such as the federal excise tax on domestic air transportation
(commonly referred to as the "ticket tax"), and pass through the collected
amounts to the appropriate governmental agencies. Although taxes such as
the ticket tax are not operating expenses to the Company, they represent an
additional cost to the Company's customers. Increases in such taxes can be
detrimental to demand for air transportation and decreases can have a
stimulative effect on demand. In addition, especially in regards to
international operations and certain high-traffic domestic airports, the
Company's airline subsidiaries are subject to certain restrictions on when
and where they can operate. Changes in government regulation can have a
material impact on the Company's results of operations and financial
condition. Besides the effect of certain additional taxes on the Company's
results of operations and financial condition, the Company's financial
performance can be materially affected by the ability of the Company to
pass through additional costs to its customers. Additional information
related to government regulation can be found in Part I, Item 1 of this
report under "Business: Industry Regulation and Airport Access."
RESULTS OF OPERATIONS
The following section pertains to activity included in the Company's
Consolidated Statements of Operations and to changes in selected US Airways
operating and financial statistics (which are contained in Part II, Item 8A
and Part II, Item 6 of this report, respectively). Except where noted,
operating statistics referred to in this section are for scheduled service
only.
1998 COMPARED WITH 1997
As mentioned above, the Company purchased Shuttle on December 30,
1997. Because the Company's acquisition of Shuttle was accounted for using
the purchase method, only Shuttle's financial results post-acquisition are
included in the Company's results of operations.
Operating Revenues-Passenger transportation revenues increased $114 million
or 1.5%, including an increase of $172 million attributable to Shuttle, an
increase of $34 million attributable to the Company's three wholly-owned
regional airlines, partially offset by a $91 million decrease in
US Airways' passenger transportation revenues. The increase in Passenger
transportation revenues for the Company's three wholly-owned regional
airlines is due primarily to an increase in revenue passenger miles (RPMs).
The decrease for US Airways is due primarily to a decrease in both RPMs and
yield. See "Selected US Airways Operating and Financial Statistics" below
for additional information related to US Airways' passenger transportation
revenues. Cargo and Freight revenues decreased due primarily to lower mail
volume in 1998. In addition, activity during the third quarter of 1997 was
favorably affected by an employee strike at United Parcel Service. Other
operating revenues increased 11.8% due principally to revenues generated
from sales of capacity (ASMs) on a non-owned US Airways Express air carrier
(the agreement began in January 1998), an increase in frequent traveler
mileage credits sold to partners in US Airways' Dividend Miles frequent
traveler program and an increase in cancellation fees revenues. The
increased revenues resulting from sales of capacity on the US Airways
Express air carrier are partially offset by increased expenses recognized
in the Other operating expenses category related to purchases of the
capacity (see below).
30
Operating Expenses-The Company recognized certain activity including
nonrecurring items in both 1998 and 1997. The table below shows where these
items were recorded in the Company's Consolidated Statements of Operations
(dollars in millions; brackets indicate an expense, except for the tax
benefits recognized in 1997).
1998 1997
---- ----
Operating Expenses
Personnel costs (1) $ - $(122)
Aircraft rent (2) 3 1
Other rent and landing fees (3) - (5)
Depreciation and amortization (4) - (89)
--- ---
3 (215)
Other Income (Expense)
Gains on sales of interests in affiliates (5) - 180
--- ---
- 180
--- ---
Net amount reflected in Income Before Taxes $ 3 $ (35)
=== ===
Provision (Credit) for Income Taxes (6) $ - $(467)
=== ====
(1) Includes a $115 million charge recognized in the fourth quarter of
1997
in accordance with Statement of Financial Accounting Standards (SFAS)
No. 88, "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits" (SFAS 88).
The charge relates to an early retirement program offered to 325
US Airways pilots. This program is expected to result in significant
net long-term savings in both wages and benefits expenses. The
remaining
$7 million represents severance for employees displaced as a result of
certain efficiency measures the Company announced in the second
quarter
of 1997 (see "Current Competitive Position" above).
(2) Aircraft rent credits recognized in conjunction with US Airways'
disposal (1998) or subleasing (1997) of nonoperating British Aerospace
BAe-146-200 (BAe-146) aircraft. During 1994, US Airways accrued a
substantial portion of the future rent obligations related to these
aircraft (US Airways removed these aircraft from its operating fleet
in
1991).
(3) Accrual of future lease obligations at certain facilities abandoned as
a
result of the efficiency measures the Company announced in May 1997.
See
also "Current Competitive Position" above.
(4) Charges stem mainly from analyses performed in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-
Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). In
general, SFAS 121 requires an impairment charge to be recognized when
the net undiscounted future cash flows from an asset's use (including
any anticipated proceeds from disposition) are less than the asset's
current book value and the asset's current book value exceeds its fair
value. The impairment charge reflects writing-down the asset to fair
value. The 1997 charges include an $18 million impairment charge
related
to US Airways' retirement of 17 DC-9-30 aircraft as a result of the
efficiency measures the Company announced in May 1997 and a $59
million
impairment charge resulting from US Airways' late-September 1997
decision to retire its remaining DC-9-30 aircraft over the next
several
years. US Airways suspended its DC-9-30 "hush-kit" program in
conjunction with its decision to retire this fleet-type. US Airways
plans to retire 16 DC-9-30 aircraft in 1999 with its last DC-9-30
aircraft expected to be retired in early 2002. The remaining
components
of this charge relate to facilities abandoned as a result of the
efficiency measures the Company announced in May 1997. See also
"Current
Competitive Position" above.
(5) Resulted from USAM Corp.'s (USAM) sale of its investment in Apollo
Travel Services Partnership and a sell-down of its interest in Galileo
International, Inc. (Galileo), both of which occurred in July 1997.
(6) As discussed under Provision (Credit) for Income Taxes below, US
Airways
recognized certain tax benefits totaling $467 million in the fourth
quarter of 1997.
Excluding nonrecurring items (see above), Personnel costs increased
marginally as decreases in stock-based compensation, medical and dental
expenses were more than offset by the effects of including Shuttle's
personnel costs in the Company's 1998 financial results and higher
training-related activity in 1998. The increased training-related activity
stems from US Airways' integration of new Airbus aircraft into its
operating fleet (training for pilots, flight attendants and mechanics) and
the implementation of several new information systems managed by TSG
(training for customer service and reservations employees). Personnel costs
decreases resulting from employees who took positions with TSG at the
beginning of 1998 (see "New Strategic Foundation" above) were mitigated by
increases in employees in other employee classifications, most notably
pilots (recalls from furlough). See also Other operating expenses below.
Aviation fuel expenses decreased significantly due primarily to lower
average fuel prices in 1998.
31
Commissions expenses also decreased significantly reflecting the revised
commission rate structure the Company established in September 1997.
Aircraft rent expenses in 1997 were adversely affected by adjustments
totaling $15 million recorded during 1997 related to US Airways' F28-4000
aircraft. In 1998, US Airways bought four previously-leased operating
aircraft upon lease expiry. US Airways added six leased Airbus A319
aircraft to its operating fleet in December 1998 (see also "New Strategic
Foundation" above and "Liquidity and Capital Resources" below). Aircraft
maintenance decreased $27 million or 5.9% if Shuttle's maintenance expenses
are excluded. US Airways' maintenance expenses for 1997 were adversely
affected by the timing of when certain expenses were recorded associated
with "power-by-the-hour" maintenance service agreements. In addition,
expenses stemming from unserviceable (scrap) maintenance materials,
primarily related to JT8D jet engines, were $24 million higher in 1997. US
Airways is realizing cost savings from its power-by-the-hour maintenance
arrangements. Depreciation and amortization expenses were relatively
unchanged if nonrecurring items are excluded. US Airways expects
amortization of costs capitalized as part of the conversion to TSG
information systems to increase Depreciation and amortization expenses by
approximately $22 million in 1999. Other operating expenses increased $208
million or 16.5% due primarily to expenses associated with US Airways'
information services management contract with TSG (see "Effects of the Year
2000" above for related information), amounts recorded during the second
quarter of 1998 related to US Airways' settlement of litigation with Boeing
(as discussed above under "Other Information") and expenses associated with
purchases of capacity from a non-owned US Airways Express air carrier. As a
result of US Airways' information services agreement with TSG, certain
expenses categorized as Personnel costs and Depreciation and amortization
in 1997 have been supplanted by expenses categorized as Other operating
expenses (e.g., outside services).
Other Income (Expense)-Interest income was relatively unchanged year-over-
year, but decreased 27.3% for the fourth quarter of 1998 compared to the
fourth quarter of 1997 due to a decrease in cash equivalents and short-term
investments. The decrease can be linked to the Company's common stock
purchase activity and increased purchase deposits for new flight equipment
(see "Certain Ownership Matters" above and "Liquidity and Capital
Resources" below, respectively). Interest expense decreased as the result
of less outstanding long-term debt. In 1998, besides normal principal
repayments, US Airways retired early certain debt with principal amounts
totaling $434 million. The decrease in Interest capitalized reflects
US Airways' write-off of capitalized interest on equipment purchase
deposits with Boeing in conjunction with the settlement of litigation
between US Airways and Boeing (as discussed above under "Other
Information") partially offset by capitalized interest on equipment
purchase deposits for new Airbus aircraft. The decrease in Equity in
earnings of affiliates results from USAM discontinuing the equity method of
accounting for certain investments in July 1997. In 1998, US Airways
recognized gains in the Other, net category totaling $17 million related to
asset dispositions. The comparable amount for 1997 was $18 million. In
addition, US Airways incurred prepayment penalties of $15 million
associated with the early extinguishment of its $300 million principal
amount 10% Senior Notes in July 1998.
Provision (Credit) for Income Taxes-The Company's effective income tax rate
for financial reporting purposes increased to approximately 40% for 1998
from approximately 17% for 1997 as the result of the Company recognizing
certain income tax benefits during the fourth quarter of 1997. See related
discussion under "Income Taxes" above.
Preferred Dividend Requirement-With the retirement of the Company's
Series H Preferred Stock in March 1998, the Company no longer has preferred
stock outstanding. In addition to dividends on the Series H Preferred
Stock, the preferred dividend requirement of $64 million for 1997 reflects
dividend requirements for the Company's Series F and Series T Preferred
Stock, both of which were retired in May 1997, and its Series B Preferred
Stock, which was retired in September 1997.
32
Earnings per Common Share-EPS calculations have been affected by: the
conversion of the Series F Preferred Stock into common stock (14.5 million
shares) in May 1997; the purchase of the remaining shares of Series F
Preferred stock (1.0 million equivalent shares of common stock) in May
1997; the purchase of the Series T Preferred Stock (3.8 million equivalent
shares of common stock) in May 1997; the conversion/redemption of the
Series B Preferred Stock (in total, 10.6 million equivalent shares of
common stock); the conversion of the Series H Preferred stock into common
stock (9.2 million shares) in March 1998; and the purchase of 17.9 million
shares of common stock (treasury stock) in 1998.
Selected US Airways Operating and Financial Statistics-A 0.8% decrease in
RPMs and a 0.5% decrease in yield resulted in a 1.3% decrease in US
Airways' Passenger transportation revenues year-over-year. For the fourth
quarter of 1998 compared to the fourth quarter of 1997, RPMs increased
2.1%, but yield fell 4.6%. The yield decrease quarter-over-quarter is
attributable to an increase in US Airways' capacity (ASMs), an increase in
average stage length and increased competitive pressures-both in terms of
capacity and fares in certain markets (particularly in Florida and European
markets). Although MetroJet's growth positively influences US Airways' unit
operating cost (cost per ASM) its growth puts downward pressure on yield.
US Airways' unit operating cost was relatively unchanged as the
effects of a 2.8% decrease in capacity were offset by a decrease in the
expense basis used for the calculation (nonrecurring items, which are
discussed above, are excluded from unit operating cost calculations for
comparability purposes). US Airways retired six DC-9-30 aircraft from its
operating fleet in 1998 and added six new A319 aircraft to its operating
fleet in the fourth quarter of 1998.
US Airways' capacity (ASMs) is expected to increase approximately 8%
for 1999 compared to 1998, composed of an increase of 460% for MetroJet, an
increase of 23% for transatlantic service and a decrease of 4% for
US Airways' higher-cost mainline operations. This growth is distributed by
quarter as follows: in the first quarter of 1999, year-over-year capacity
growth will be approximately 4%; in the second quarter, approximately 6.5%;
in the third quarter, approximately 10.5% and in the fourth quarter,
approximately 10%. US Airways expects to take delivery of 33 new Airbus
single-aisle aircraft in 1999, including 22 A319s and eleven A320s. The
Company plans to retire 24 older aircraft during 1999. In addition, US
Airways believes that it is a real possibility that its unit revenue
(revenue per ASM) for 1999 will decline more than its unit cost (cost per
ASM).
Supplemental Information-In 1998, the Company adopted the following
accounting standards for financial reporting purposes: SFAS No. 130,
"Reporting Comprehensive Income" (SFAS 130); SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information" (SFAS 131); SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits" (SFAS 132); and Statement of Financial Position 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use"
(SOP 98-1). SFAS 130 established standards for the reporting and
presentation of comprehensive income and its components in financial
statements. SFAS 131 prescribes standards for defining operating segments
and the reporting of certain information regarding operating segments. SFAS
132 revised disclosure requirements with respect to employer pension and
benefit plans. SOP 98-1 provides guidance on accounting for the costs of
computer software developed or obtained for internal use. The adoption of
these accounting standards had no effect on the Company's financial
condition or results of operations.
In June 1998, the Financial Accounting Standards Board adopted SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activitiesz"
(SFAS 133). SFAS 133, which the Company must adopt for financial reporting
purposes beginning January 1, 2000, establishes accounting and reporting
standards for derivative financial instruments and for hedging activities.
The Company does not believe that implementing SFAS 133 will materially
impact its financial
33
condition or results of operations. This conclusion is based on US Airways'
current limited participation in contracts involving derivative financial
instruments and hedging transactions.
1997 COMPARED WITH 1996
Operating Revenues-US Airways' Passenger transportation revenues increased
$313 million (4.6%) resulting from a 6.8% increase in revenue passenger
miles (RPMs) partially offset by a 2.1% decrease in yield. The main factors
that contributed to the improved performance in 1997 are similar to those
factors that favorably affected the Company's financial results for 1998,
as discussed above. In addition, the Company estimates that severe winter
weather within the Eastern U.S. and a partial shutdown of the federal
government adversely affected first quarter 1996 revenues by approximately
$55 million. Inclement weather (hurricanes) during the third quarter of
1996 adversely affected Passenger transportation revenues by an estimated
$10 million. Cargo and freight revenues increased due primarily to volume
factors. Other revenues for 1996 included $13 million from an aircraft wet
lease arrangement between US Airways and British Airways. The wet lease
arrangement was terminated in May 1996 (see also Other below).
Operating Expenses-As presented in a table under "1998 Compared With 1997,"
the Company recognized certain nonrecurring items during 1997. In addition,
the Company recognized certain nonrecurring items during 1996, both related
to US Airways' nonoperating BAe-146 aircraft, including a $23 million
credit to Aircraft rent (reversal of previously accrued lease obligations)
and a credit of $7 million to Aircraft maintenance (reversal of previously
accrued lease return provisions).
Excluding the nonrecurring items recognized in 1997 (see above) and
profit sharing expenses totaling $122 million recorded during 1996,
Personnel costs expenses were relatively unchanged. The profit sharing
expenses recognized during 1996 were associated with US Airways' 1992
Salary Reduction Program (the Company's obligations under this plan ended
with a payment to participants in early March 1997; there were no similar
expenses during 1997). The Company's defined benefit pension and
postretirement benefit expenses decreased due primarily to higher interest
rates (discount factors) used for 1997 calculations. Medical and dental
expenses were marginally higher year-over-year. Expenses associated with
stock appreciation rights (SARs) were $33 million for 1997 and $42 million
for 1996.
Commissions expenses increased marginally year-over-year, but
decreased 8.2% if activity for fourth quarter 1997 is compared to fourth
quarter 1996 due primarily to a revised commission rate structure
established during September 1997. Excluding the effects of nonrecurring
items (see above), Aircraft rent expenses increased due primarily to net
rent expense adjustments totaling $15 million recorded during 1997 related
to certain F28-4000 aircraft. Other rent and landing fees expenses were
relatively unchanged if the effects of the nonrecurring items (see above)
are excluded. Aircraft maintenance expenses increased due to an increase of
approximately $23 million related to unserviceable (scrap) Pratt & Whitney
JT8D jet engine parts, other adjustments to spare parts totaling
approximately $13 million, increases in the cost of certain JT8D jet engine
parts and expenses attributable to certain timing factors associated with
the "power-by-the-hour" jet engine maintenance contracts US Airways entered
into during the fourth quarters of both 1997 and 1996. US Airways signed a
ten-year power-by-the-hour maintenance agreement with Rolls Royce Canada
Limitee during December 1997 covering jet engines originally manufactured
by Rolls Royce Plc. US Airways entered into a similar ten-year agreement
with the General Electric Company (GE) during the fourth quarter of 1996
for US Airways' GE-manufactured jet engines. In addition, 1996 activity
included a nonrecurring expense credit (see above). Other selling expenses
increased primarily related to higher credit card fees. Depreciation and
amortization expenses decreased 1.5% if nonrecurring items (see above) are
excluded. Other includes expenses totaling $36 million recorded during the
fourth quarter of 1997 related to US Airways' new information technology
management agreement with
34
TSG. Also, US Airways experienced increases in certain sales and traffic-
related expenses during 1997. 1996 activity included expenses of $13
million associated with US Airways' wet lease arrangement with British
Airways (see also Other revenues above).
Other Income (Expense)-Equity in earnings of affiliates decreased due to
USAM discontinuing the equity method of accounting for certain investments
after July 1997. The amount recorded in Gains on sales of interests in
affiliates is related to USAM's sale of certain investments (see "1998
Compared With 1997"). Other, net activity in 1997 included $18 million
related to US Airways' sale of eleven nonoperating aircraft. 1996 activity
included losses totaling $9 million related to US Airways' sale of eight
nonoperating aircraft and an expense item of $10 million related to
US Airways' settlement of litigation involving certain travel agencies.
Provision (Credit) for Income Taxes-During the fourth quarter of 1997, the
Company recognized certain income tax benefits totaling $467 million. See
"1998 Compared With 1997" for additional information. The Company was
subject to federal alternative minimum tax for 1997 and 1996 as well as
income taxes in certain states. The Company was not subject to regular
federal income tax during 1997 and 1996 as the result of using federal
income tax net operating loss carryforwards.
Earnings per Common Share-During the third quarter of 1997, most of the
Series B Preferred Stock was converted into 10.6 million shares of Common
Stock. During the second quarter of 1997, most of the Series F Preferred
Stock was converted into 14.5 million shares of Common Stock. For full-year
1997, on a weighted average basis, these transactions had the effect of
increasing shares of Common Stock outstanding by 12.6 million shares.
The Company adopted SFAS No. 128, "Earnings per Share" (SFAS 128)
during 1997. The Company's EPS figures for 1996 have been restated to
conform to the provisions of SFAS 128. The implementation of SFAS 128 did
not have a material impact on the Company's EPS disclosures.
Selected US Airways Operating and Financial Statistics-A 6.8% increase in
RPMs more than offset the effects on US Airways' Passenger transportation
revenues of a 2.1% decrease in yield. The yield decrease is primarily
attributable to competitive pressures and matters related to the ticket tax
(see also "1998 Compared With 1997" above). An increase in US Airways'
average passenger journey also negatively affected yield. US Airways
selectively increased fares in certain markets up to 5% in both March and
September 1997.
US Airways' unit operating cost decreased slightly due primarily to a
2.3% increase in total capacity (nonrecurring items, which are discussed
above, are excluded from unit operating cost calculations for comparability
purposes). The capacity (ASMs) increase is primarily the result of higher
aircraft utilization rates during 1997 partially offset by fewer operating
aircraft in US Airways' fleet during 1997. Aircraft utilization was
adversely affected by inclement weather during both the first and third
quarters of 1996 (see also Passenger transportation revenues above). During
fourth quarter 1997, as compared to fourth quarter 1996, however, capacity
decreased 4.2% as the result of schedule changes implemented during third
quarter 1997 (see also "1998 Compared With 1997" above).
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company's Cash, Cash equivalents and
Short-term investments totaled $1.2 billion. The Company's ratio of current
assets to current liabilities ("current ratio") was 1.0 and 1.3 as of
December 31, 1998 and 1997, respectively (the Company's Consolidated
Balance Sheets are contained in Part II, Item 8A of this report). The
decrease is principally attributable to the Company's common stock purchase
activity and purchase deposits for flight
35
equipment, both of which are discussed below. The Company's debt to equity
ratio improved to 3.4 as of December 31, 1998 from 3.6 as of December 31,
1997 (calculations exclude amounts related to redeemable preferred stock),
reflecting a $358 million increase in Stockholders' Equity which resulted
from the conversion of the Series H Preferred Stock into Common Stock
during the first quarter of 1998 (see "Certain Ownership Matters" above),
significant reductions in outstanding long-term debt (see below), partially
offset by the effects of the Company's common stock purchase programs (see
below).
For 1998, the Company's operating activities provided net cash of $1.3
billion (as presented in the Company's Consolidated Statements of Cash
Flows, which are contained in Part II, Item 8A of this report). For 1997
and 1996, the Company's operating activities provided net cash of $870
million and $1.0 billion, respectively. Operating cash flows during 1997
were adversely affected by profit sharing payments totaling $129 million
and the effects of remitting to the federal government ticket taxes
totaling $180 million collected from passengers in 1996. The profit sharing
payments the Company made to employees during the first quarter of 1997
ended the Company's obligation for profit sharing under its 1992 Salary
Reduction Plan (the liability had been accrued in prior years). With the
reinstatement of the ticket tax during March 1997, the Company resumed
ticket tax remittances to the federal government (see "Other Information"
above). The ticket tax was not in effect during the periods January 1,
1996-August 26, 1996 and January 1, 1997-March 6, 1997. Approximately 0.2
million, 3.9 million and 0.6 million SARs were exercised during 1998, 1997
and 1996, respectively, resulting in cash outflows of $8 million, $55
million and $5 million during 1998, 1997 and 1996, respectively. The
Company's 1992 Stock Option Plan ceased as of August 1, 1998. USAM received
dividends/partnership distributions from its CRS investments of $3 million,
$18 million and $49 million during 1998, 1997 and 1996, respectively, as
reflected in the Other operating adjustments category in the Company's
Consolidated Statements of Cash Flows (see additional information related
to USAM's CRS investments below).
US Airways contributed $53 million and $113 million to its defined
benefit plans in 1998 and 1997, respectively. In addition, US Airways made
a $100 million payment to a Voluntary Employee Beneficiary Association
(VEBA) trust in December 1998. The contribution to the VEBA trust is
reflected as an operating use of cash in the Company's Consolidated
Statements of Cash Flows. US Airways estimates that it will need to
contribute $50 million to its defined benefit plans in 1999 in order to
meet statutory minimum pension funding requirements. US Airways' estimates
of future pension plan contributions are subject to change, including the
possibility of US Airways contributing to these pension plans in excess of
minimum funding requirements. US Airways' new labor contract with its
pilots includes a provision for early retirement that could result in the
funding of certain pilot pension plans in excess of funding minimums (see
related discussion in "Results of Operations" above).
The Company expects decreases in certain future operating cash
outflows as US Airways replaces several older, diverse aircraft types with
newer, more efficient aircraft, but may experience increases in certain
other future operating cash outflows as the result of US Airways' growth
plans, including costs associated with integrating new aircraft types into
its operating fleet. As discussed under "Income Taxes" above, the Company
expects the rate at which it pays cash income taxes to increase in 1999.
For 1998, investing activities included cash outflows of $642 million
related to capital expenditures and cash inflows of $301 million related to
asset dispositions. Capital expenditures included $274 million for new
aircraft (including purchase deposits), $52 million to purchase four
aircraft upon lease expiry, with the balance related to obtaining computer
equipment and software (primarily related to US Airways' information
services management agreement with TSG), other ground equipment and
miscellaneous assets. Asset dispositions included proceeds of $189 million
from the sale-leaseback of six new Airbus aircraft, proceeds of $47 million
from
36
US Airways' sale of substantially all of its information systems and
related assets to TSG and proceeds of $38 million from US Airways' sale of
17 nonoperating aircraft. Restricted cash and investments increased $41
million due primarily to US Airways' return to using cash to collateralize
letters of credit for workers' compensation policies (US Airways previously
collateralized such policies with certain owned flight equipment). The net
cash used for investing activities during 1998 was $103 million.
Investing activities during 1997 included cash outflows of $280
million for capital expenditures and cash inflows of $85 million related to
asset dispositions. Progress payments for new aircraft totaled $77 million
for 1997. US Airways' cash outflows related to asset acquisitions include
$126 million for aircraft and aircraft-related assets. US Airways purchased
nine aircraft upon lease expiry during 1997, including four BAe-146
aircraft that were sold to third parties immediately following their
purchase. Asset dispositions included cash inflows related to US Airways'
sale of certain nonoperating aircraft. Investing activities during 1997
also included proceeds of $162 million that resulted from USAM's sale of
its interest in ATS and proceeds of $62 million related to USAM's sell-down
of its interest in Galileo. On December 30, 1997, the Company purchased
Shuttle for $190 million. Short-term investments increased $235 million
from the year-end 1996 balance due primarily to cash flows generated from
operations exceeding immediate operational and other needs. The net cash
used for investing activities during 1997 was $372 million.
Investing activities during 1996 included cash outflows of $181
million for capital expenditures, including $82 million for aircraft-
related assets and $99 million related to the purchase of rotables, various
ground support equipment and computer equipment. Short-term investments
increased $604 million during the year as the Company's operations
generated significantly more cash than needed to fulfill immediate
operational needs. Net cash used by investing activities during 1996 was
$754 million.
Net cash used for financing activities in 1998 was $1.6 billion.
Besides scheduled principal repayments of $152 million, US Airways retired
early certain long-term debt with a face amount of $434 million in 1998. On
July 1, 1998, US Airways retired its 10% Senior Notes, which had a
principal amount of $300 million. The transaction resulted in a cash
outflow of $315 million, including prepayment penalties of $15 million.
Annual interest payments associated with the debt obligations retired early
totaled $38 million. US Airways also paid $75 million to retire the first
series of its 1993 Pass-Through Certificates in August 1998. The retirement
was according to the terms of the obligation (no prepayment penalties). In
1998, the Company purchased 17.9 million shares of Common Stock in open
market transactions. The related cash outflows totaled $1.1 billion. See
"Certain Ownership Matters" above for additional information. On March 12,
1998, the holders of the Company's Series H Preferred Stock exercised their
right to convert those shares into shares of the Company's Common Stock. As
a result of the conversion transactions, the Company issued 9.2 million
shares of Common Stock and retired its Series H Preferred Stock. The
Company paid dividends totaling $6 million to holders of its Series H
Preferred Stock in 1998 prior to that series conversion into Common Stock.
Annual dividend requirements for the Series H Preferred Stock were $33
million. The Company had previously retired its Series F and T Preferred
Stock in May 1997 and its Series B Preferred Stock in September 1997.
Net cash used for financing activities in 1997 was $355 million. The
Company paid dividends totaling $181 million to holders of its outstanding
preferred stock during 1997. In May 1997, the Company repurchased the
Series T Preferred Stock and 1,940.636 shares of Series F Preferred Stock
from British Airways for a combined $127 million. British Airways converted
the remaining Series F shares into Common Stock and subsequently sold those
shares to third parties. In August 1997, the Company exercised its right to
redeem all 4,263,000 outstanding depositary shares representing its Series
B Preferred Stock. All but approximately 6,000
37
depositary shares were converted into Common Stock prior to the redemption
date. The related cash outflows were $0.3 million. Proceeds resulting from
stock options exercises totaled $39 million for 1997.
Net cash used by financing activities in 1996 was $209 million. In the
third quarter of 1996, US Airways paid-off certain long-term debt with a
principal amount of $43 million for one of the Company's regional airline
subsidiaries (the affiliated company repaid US Airways during December
1996). Also in 1996, the Company paid dividends of $83 million on its
outstanding Senior Preferred Stock. The Company had previously deferred
dividends on all of its outstanding series of preferred stock beginning in
September 1994.
US Airways sold $263 million principal amount of Enhanced Equipment
Notes (the Enhanced Notes) during the first quarter of 1996 through a
private placement offering under SEC Regulation 144A. US Airways used the
proceeds from the offering as part of the funds necessary to repay in full
the indebtedness incurred in connection with certain B757-200 aircraft
delivered to US Airways in 1995 and 1994. The transaction is reflected on
the Company's Consolidated Statements of Cash Flows as proceeds from the
issuance of debt of $103 million and a "noncash" issuance of debt of $160
million. The noncash component reflects proceeds that US Airways directed
to reduce debt and pay underwriter's fees at the time of the offering.
US Airways used the cash proceeds it received from the offering and
additional funds to make debt repayments of $106 million immediately
following the offering. The Enhanced Notes are secured by nine B757-200
aircraft. US Airways filed a Form S-4 Registration Statement with the SEC
during July 1996 in connection with its offer to exchange registered
Enhanced Notes for the privately-placed Enhanced Notes. The exchange offer
was completed in August 1996. The exchange offer did not result in cash
inflows or outflows with the exception of filing fees and certain
administrative costs.
Although the Company has significantly reduced its outstanding debt
and preferred stock obligations over the last several years, the Company
continues to be highly leveraged. The Company and its subsidiaries require
substantial working capital in order to meet scheduled debt and lease
payments and to finance day-to-day operations. The Company's agreements to
acquire up to 430 new Airbus aircraft, accompanying jet engines and
ancillary assets have increased the Company's financing needs, besides
adding to the Company's financial obligations. Eastern U.S. operations
comprise a substantial portion of the route structure of the Company's
airline subsidiaries. Although a competitive strength in some regards, the
regional concentration of significant operations results in the Company
being susceptible to changes in certain regional conditions that may
adversely affect the Company's financial condition or results of
operations. The combination of a high cost structure and the regional
concentration of operations has also contributed to US Airways being
particularly vulnerable to low cost, low fare competition. 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 materially adverse effect on the Company's
financial condition, results of operations and future prospects. The
Company's financial condition and results of operations are also
particularly susceptible to adverse changes in general economic and market
conditions due to US Airways' high cost structure relative to its major
competitors (see related discussion above under "Current Competitive
Position").
As of December 31, 1998, the minimum determinable payments associated
with the Company's aircraft acquisition agreements for Airbus aircraft
(including progress payments, payments at delivery, buyer-furnished
equipment, spares, capitalized interest, penalty payments, cancellation
fees and/or nonrefundable deposits) are currently estimated at $1.3 billion
in 1999, $2.1 billion in 2000 and $9 million in 2001. If the Company takes
delivery of all of the Airbus aircraft it currently has on firm order, the
aggregate payments for aircraft and related expenditures in connection with
the acquisition of the aircraft could approximate $4.8 billion.
38
The Company estimates that non-aircraft capital expenditures for 1999 will
total approximately $100 million. The Company expects to satisfy its short-
term liquidity requirements 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. The Company has obtained committed financing for the
first 17 new aircraft to be delivered in 1999 and commitments that it
believes will provide financing for at least 25% of the anticipated
purchase price of its remaining firm-order Airbus aircraft. However,
additional financing or internally-generated funds will be needed to
satisfy the Company's capital commitments for the balance of firm-order
aircraft commitments 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.
On April 15, 1998, Standard & Poor's (S&P) raised its credit ratings
of US Airways Group and US Airways and removed all ratings from
CreditWatch, where they were placed on October 1, 1997. S&P cited "sharply
improved operating performance" among other factors for its decision to
raise the credit ratings. On April 23, 1998, Moody's Investors Service
(Moody's) also raised its credit ratings of the Company and US Airways.
Credit ratings issued by agencies such as S&P and Moody's affect a
company's ability to issue debt or equity securities and the effective rate
at which such financings are undertaken.
Historically, the Company has used certain risk management strategies
to reduce its exposure to certain market uncertainties. Such strategies
have included entering into financial contracts which the Company believes
helps it to reduce its exposure to significant increases in the price of
aviation fuel, although the Company was not party to any such contracts as
of December 31, 1998. US Airways has hedged certain foreign-denominated
debt to maturity. This arrangement fixes the cost of the debt in U.S.
dollars. US Airways periodically reviews the financial condition of each
counterparty to any such financial contracts. US Airways believes that the
potential for default by the counterparty to the foreign currency contract
is negligible. Although such financial contracts involve certain inherent
risks and costs, US Airways believes that such arrangements can reduce its
exposure to significant increases in aviation fuel prices and the value of
certain foreign currencies. See Note 2(a) to the Company's Notes to
Consolidated Financial Statements for additional information. See also
"Results of Operations" above related to a recently issued accounting
standard that will affect the Company's accounting for such financial
instruments.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposures include commodity price
risk (i.e., the price paid to obtain aviation fuel), interest rate risk,
equity price risk and foreign currency exchange rate risk. The potential
impact of adverse increases in the aforementioned risks and general
strategies employed by the Company to manage such risks are discussed
below.
COMMODITY PRICE RISK
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally outside of the
Company's control. Accordingly, the price and availability of aviation
fuel, as well as other petroleum products, can be unpredictable. Because
the operations of the Company's airline subsidiaries are dependent upon
aviation fuel, significant increases in aviation fuel costs could
materially and adversely affect the Company's results of operations and
financial condition. For 1998, aviation fuel expenses represented 8.1% of
the Company's total operating expenses (as adjusted to exclude certain
nonrecurring items). Based upon the Company's 1998 fuel consumption, a one
cent change in the average annual price per
39
gallon of aircraft fuel would increase the Company's annual aviation fuel
expenses by $12 million. See related information in Part I, Item 1
"Business: Aviation Fuel."
The Company's airline subsidiaries continually adjust their aviation
fuel procurement strategies in order to take advantage of the best
available prices while at the same time ensuring that they have an adequate
supply of aviation fuel to support operations. In addition, US Airways may
participate in arrangements designed to reduce its exposure to significant
increases in the price of aviation fuel. These arrangements have the net
effect of increasing or decreasing US Airways' aviation fuel expense in the
period in which they are settled (see Note 2(a) to the Company's Notes to
Consolidated Financial Statements for additional information related to
such arrangements).
INTEREST RATE RISK
Exposure to interest rate risk relates primarily to the Company's cash
equivalents and short-term investments portfolios and long-term debt
obligations.
Considering the Company's average balance and typically short duration
of Cash equivalents and Short-term investments during 1998, an assumed 10%
decrease in the average interest earned on these financial instruments
would not materially impact the Company's results of operations. The
Company's short-term investment portfolio is considered "available-for-
sale" in accordance with the provisions of Statement of Financial
Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities"(SFAS 115).
As of December 31, 1998, the Company had $92 million of variable-rate
debt outstanding; assuming a 10% increase in average interest rates during
1999 as compared to 1998, interest expense would increase $1 million.
Additional information regarding the Company's long-term debt obligations
(in millions):
Expected Maturity Date 12/31/98
------------------------------------------- Fair
1999 2000 2001 2002 2003 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
Fixed-rate debt $60 $106 $232 $60 $179 $1,270 $1,907 $2,144
Weighted avg.
interest rate 8.5% 8.9% 8.5% 10.0% 8.8% 9.8%
Variable-rate debt $ 4 $ 4 $ 5 $ 6 $ 7 $ 66 $ 92 $ 99
Weighted avg.
interest rate 9.4% 9.4% 9.4% 9.4% 9.4% 9.4%
The Company is highly leveraged and has entered into agreements to
acquire up to 430 new aircraft and accompanying jet engines. These
agreements increase the Company's financing needs and will result in a
significant increase in its financial obligations. The Company's efforts to
reduce its exposure to interest rate risk have included the early
retirement of certain long-term debt and other obligations and scheduled
retirement of other debt obligations (see Notes 4, 7 and 8(b) to the
Company's Notes to Consolidated Financial Statements for additional
information). These efforts contributed to recent improvements to the
Company's credit ratings issued by Standard & Poor's and Moody's Investors
Service.
EQUITY PRICE RISK
The Company holds 7,000,400 shares of common stock of Galileo
International, Inc. (Galileo). This investment is considered "available-
for-sale"in accordance with the provisions of SFAS 115. As of December 31,
1998, the aggregate quoted fair value of the Company's Galileo investment
was $301 million, including an aggregate unrealized gain of $269 million
(excluding income tax effects). The market risk associated with these
equity securities is the potential loss in fair value resulting from a
decrease in the market price of the common stock. Based on the value
40
of the Company's Galileo investment as of December 31, 1998, a 10% decrease
in the fair value of this investment would result in a decrease of $30
million in the value of the investment (excluding income tax effects).
FOREIGN CURRENCY EXCHANGE RATE RISK
An aggregate of $31 million of future principal payments of the
Company's long-term debt due 1999 through 2000 is payable in Japanese Yen,
as discussed in Note 2(a) to the Company's Notes to Consolidated Financial
Statements. This foreign currency exposure has been hedged to maturity by
the Company's participation in foreign currency contracts.
Item 8A. CONSOLIDATED FINANCIAL STATEMENTS FOR US AIRWAYS GROUP, INC.
INDEPENDENT AUDITORS' REPORTS
The Stockholders and Board of Directors
US Airways Group, Inc.:
We have audited the accompanying consolidated balance sheets of US Airways
Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, cash flows, and changes in
stockholders' equity (deficit) for each of the years in the three year
period ended December 31, 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of US
Airways Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and
the results of their operations and their cash flows for each of the years
in the three year period ended December 31, 1998, in conformity with
generally accepted accounting principles.
KPMG LLP
Washington, D. C.
February 24, 1999
(this space intentionally left blank)
41
US Airways Group, Inc.
Consolidated Statements of Operations
Year Ended December 31,
- -------------------------------------------------------------------------
(dollars in millions, except per share amounts)
1998 1997 1996
---- ---- ----
Operating Revenues
Passenger transportation $7,826 $7,712 $7,371
Cargo and freight 168 181 163
Other 694 621 608
----- ----- -----
Total Operating Revenues 8,688 8,514 8,142
Operating Expenses
Personnel costs 3,101 3,179 3,196
Aviation fuel 623 805 825
Commissions 519 595 586
Aircraft rent 440 475 437
Other rent and landing fees 417 420 412
Aircraft maintenance 448 451 373
Other selling expenses 342 346 331
Depreciation and amortization 318 401 316
Other 1,466 1,258 1,229
----- ----- -----
Total Operating Expenses 7,674 7,930 7,705
----- ----- -----
Operating Income 1,014 584 437
Other Income (Expense)
Interest income 111 108 75
Interest expense (223) (256) (267)
Interest capitalized 3 13 8
Equity in earnings of affiliates 1 30 37
Gains on sales of interests in affiliates - 180 -
Other, net (4) 13 (15)
----- ----- -----
Other Income (Expense), Net (112) 88 (162)
----- ----- -----
Income Before Taxes 902 672 275
Provision (Credit) for Income Taxes 364 (353) 12
----- ----- -----
Net Income 538 1,025 263
Preferred Dividend Requirement (6) (64) (88)
----- ----- -----
Earnings Applicable to Common Stockholders $ 532 $ 961 $ 175
===== ===== =====
Earnings per Common Share
Basic $ 5.75 $12.32 $ 2.73
Diluted $ 5.60 $ 9.87 $ 2.35
Shares Used for Computation (000)
Basic 92,413 78,054 64,021
Diluted 96,211 103,180 94,834
See accompanying Notes to Consolidated Financial Statements.
42
<TABLE>
US Airways Group, Inc.
Consolidated Balance Sheets
December 31,
- --------------------------------------------------------------------------------
(dollars in millions, except per share amount)
ASSETS
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Current Assets
Cash $ 29 $ 18
Cash equivalents 583 1,076
Short-term investments 598 870
Receivables, net 355 300
Materials and supplies, net 228 226
Deferred income taxes 347 147
Prepaid expenses and other 224 140
----- -----
Total Current Assets 2,364 2,777
Property and Equipment
Flight equipment 5,188 5,221
Ground property and equipment 915 877
Less accumulated depreciation and amortization (2,641) (2,528)
----- -----
3,462 3,570
Purchase deposits 198 155
----- -----
Total Property and Equipment, Net 3,660 3,725
Other Assets
Goodwill, net 593 616
Other intangibles, net 475 371
Investment in marketable equity securities 301 190
Deferred income taxes - 270
Other assets, net 477 423
----- -----
Total Other Assets 1,846 1,870
----- -----
$7,870 $8,372
===== =====
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 71 $ 186
Accounts payable 430 323
Traffic balances payable and unused tickets 752 707
Accrued aircraft rent 166 187
Accrued salaries, wages and vacation 329 311
Other accrued expenses 521 492
----- -----
Total Current Liabilities 2,269 2,206
Long-Term Debt, Net of Current Maturities 1,955 2,426
Deferred Credits and Other Liabilities
Accrued aircraft rent 332 322
Deferred gains, net 337 332
Postretirement benefits other than pensions, noncurrent 1,240 1,173
Noncurrent employee benefit liabilities and other 1,144 830
----- -----
Total Deferred Credits and Other Liabilities 3,053 2,657
Commitments and Contingencies
Redeemable Cumulative Convertible Preferred Stock
Series H, no par value, 358,000 shares authorized,
issued and outstanding as of December 31, 1997 - 358
Stockholders' Equity
Common stock, par value $1 per share, issued
101,177,000 shares and 91,482,000 shares,
respectively 101 91
Paid-in capital 2,283 1,906
Retained earnings (deficit) (748) (1,280)
Common stock held in treasury, at cost,
17,422,000 shares and 40,000 shares, respectively (1,069) (3)
Deferred compensation (99) (80)
Accumulated other comprehensive income, net of
income tax effect 125 91
----- -----
Total Stockholders' Equity 593 725
----- -----
$7,870 $8,372
===== =====
See accompanying Notes to Consolidated Financial Statements.
43
</TABLE>
US Airways Group, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
- ------------------------------------------------------------------------
(in millions)
1998 1997 1996
----- ----- -----
Cash and Cash equivalents at beginning of year $1,094 $ 951 $ 882
----- ----- -----
Cash flows from operating activities
Net income 538 1,025 263
Adjustments to reconcile net income to net cash
provided by (used for) operating activities
Depreciation and amortization 318 401 316
Losses (gains) on dispositions of property (17) (16) 1
Gains on sales of interests in affiliates - (180) -
Amortization of deferred gains and credits (28) (28) (28)
Other 72 35 38
Changes in certain assets and liabilities
Decrease (increase) in receivables (55) 40 (15)
Decrease (increase) in materials and supplies,
prepaid expenses and pension assets (154) 38 (45)
Decrease (increase) in deferred income taxes 193 (454) -
Increase (decrease) in traffic balances
payable and unused tickets 45 (14) 108
Increase (decrease) in accounts payable
and accrued expenses 272 (36) 316
Increase (decrease) in postretirement
benefits other than pensions, noncurrent 67 59 78
----- ----- -----
Net cash provided by (used for)
operating activities 1,251 870 1,032
Cash flows from investing activities
Capital expenditures (642) (280) (181)
Proceeds from the sale-leaseback of aircraft 189 - -
Proceeds from dispositions of property 112 85 25
Acquisition of Shuttle, Inc. - (190) -
Proceeds from sales of interests in affiliates - 224 -
Decrease (increase) in short-term investments 275 (235) (604)
Decrease (increase) in restricted cash
and investments (41) 18 11
Other 4 6 (5)
----- ----- -----
Net cash provided by (used for)
investing activities (103) (372) (754)
Cash flows from financing activities
Issuances of debt - - 103
Principal payments on long-term debt (556) (88) (236)
Issuances of Common Stock 8 39 4
Purchases of Common Stock (1,081) - -
Sales of treasury stock 5 2 3
Redemptions of preferred stock,
including redemption premiums - (127) -
Dividends paid on preferred stock (6) (181) (83)
----- ----- -----
Net cash provided by (used for)
financing activities (1,630) (355) (209)
----- ----- -----
Net increase (decrease)
in Cash and Cash equivalents (482) 143 69
----- ----- -----
Cash and Cash equivalents at end of year $ 612 $1,094 $ 951
===== ===== =====
Noncash investing and financing activities
Conversions of preferred stock
into Common Stock $ 358 $ 497 $ -
Net unrealized gain on
available-for-sale securities,
net of income tax effect $ 73 $ 104 $ -
Reductions of aircraft - related
purchase deposits $ 61 $ - $ -
Issuances of debt - refinancing
of debt secured by aircraft $ - $ - $ 160
Reductions of debt - refinancing
of debt secured by aircraft $ - $ - $ 154
Issuances of debt - aircraft acquisitions $ - $ - $ 29
Acquisition of Shuttle, Inc.
Fair value of assets acquired $ - $ 258 $ -
Cash paid $ - $ (190) $ -
----- ----- -----
Liabilities assumed $ - $ 68 $ -
===== ===== =====
Supplemental Information
Cash paid during the year for interest,
net of amounts capitalized $ 233 $ 246 $ 261
Net cash paid during the year for income taxes $ 234 $ 95 $ 12
See accompanying Notes to Consolidated Financial Statements.
44
<TABLE>
US Airways Group, Inc.
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Three Years Ended December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
<CAPTION> Accumulated other comprehensive
income, net of income tax effect
--------------------------------
Unrealized Adjustment
Series B Retained Common Deferred gain on for minimum Compre-
Preferred Common Paid-in earnings Stock held compen- available-for pension hensive
Stock Stock capital (deficit) in treasury sation -sale securities* liability* Total income
--------- ------ ------- --------- ----------- -------- ----------------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
December 31, 1995 $ 213 $ 63 $1,363 $(2,298) $ - $(99) $ - $(78) $ (836)
Grant of 635,000 shares
of restricted stock and
2,415,000 options - 1 21 - - (22) - - -
Acquisition of 118,000
shares of Common Stock
from certain employees - - - - (3) - - - (3)
Exercise of 435,000 options - - 4 - 3 - - - 7
Reversion of 96,000 shares
of previously-granted
non-vested stock - - (1) - - 1 - - -
Dividends declared
(preferred stock)
Series H -$133.74 per share - - - (48) - - - - (48)
Series F -$902.14 per share - - - (27) - - - - (27)
Series T -$799.91 per share - - - (8) - - - - (8)
Amortization of deferred
compensation - - - - - 25 - - 25
Adjustment for minimum
pension liability* - - - - - - - 43 43 $ 43
Net income - - - 263 - - - - 263 263
---- ---- ----- ------ ------ --- --- --- ------ -----
Total comprehensive
income $ 306
=====
Balance as of
December 31, 1996 $ 213 $ 64 $1,387 $(2,118) $ - $(95) $ - $(35) $ (584)
Conversion of 4,257,000
depositary shares (213) 11 202 - - - - - -
Conversion of 28,000
shares of Series F
Preferred Stock - 14 262 - - - - - 276
Grant of 162,000 shares of
non-vested stock - - 4 - - (4) - - -
Reversion of 89,000 shares
of previously-granted
non-vested stock - - (1) - - 1 - - -
Acquisition of 125,000
shares of Common Stock
from certain employees - - - - (5) - - - (5)
Exercise of 2,119,000
Options - 2 43 - 2 - - - 47
Dividends declared
(preferred stock)
Series H -$225.24 per share - - - (81) - - - - (81)
Series F -$1,137.00
per share - - - (34) - - - - (34)
Series T -$991.22 per share - - - (10) - - - - (10)
Series B -$13.49 per share - - - (56) - - - - (56)
Redemption premiums on
repurchases of Redeemable
Cumulative Convertible
Preferred Stock - - - (6) - - - - (6)
(continued on following page)
45
</TABLE>
<TABLE>
US Airways Group, Inc.
Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Continued)
Three Years Ended December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
<CAPTION> Accumulated other comprehensive
income, net of income tax effect
--------------------------------
Unrealized Adjustment
Series B Retained Common Deferred gain on for minimum Compre-
Preferred Common Paid-in earnings Stock held compen- available-for pension hensive
Stock Stock capital (deficit) in treasury sation -sale securities* liability* Total income
--------- ------ ------- --------- ----------- -------- ----------------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amortization of
deferred compensation - - - - - 18 - - 18
Tax benefit from employee
stock option exercises - - 9 - - - - - 9
Unrealized gain on
available-for-sale
securities* - - - - - - 104 - 104 $ 104
Adjustment for minimum
pension liability* - - - - - - - 22 22 22
Net income - - - 1,025 - - - - 1,025 1,025
---- ---- ----- ------ ------ --- --- --- ------ -----
Total comprehensive
Income $1,151
=====
Balance as of
December 31, 1997 $ - $ 91 $1,906 $(1,280) $ (3) $(80) $104 $(13) $ 725
Purchase of 17,924,000
shares of Common Stock - - - - (1,099) - - - (1,099)
Conversion of 358,000
shares of Series H
Preferred Stock - 9 349 - - - - - 358
Grant of 453,000 shares
of non-vested stock
and 2,300,000 stock
options - - 30 - 17 (47) - - -
Reversion of 71,000
shares of previously-
granted non-vested stock - - (2) - - 2 - - -
Acquisition of 91,000
shares of Common Stock
from certain employees - - - - (4) - - - (4)
Exercise of 704,000
stock options - 1 (6) - 20 - - - 15
Dividends paid-Series H
Preferred Stock
$18.50 per share - - - (6) - - - - (6)
Amortization of deferred
Compensation - - - - - 26 - - 26
Tax benefit related to
employee stock option
exercises - - 6 - - - - - 6
Unrealized gain on
available-for-sale
securities* - - - - - - 73 - 73 $ 73
Adjustment for minimum
pension liability* - - - - - - - (39) (39) (39)
Net income - - - 538 - - - - 538 538
---- ---- ----- ------ ------ --- --- --- ------ -----
Total comprehensive
Income $ 572
=====
Balance as of
December 31, 1998 $ - $ 101 $ 2,283 $ (748) $(1,069) $(99) $177 $(52) $ 593
==== ==== ===== ====== ====== === === === ======
* Net of income tax effect
See accompanying Notes to Consolidated Financial Statements.
46
</TABLE>
US AIRWAYS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION AND NATURE OF OPERATIONS
The accompanying Consolidated Financial Statements include the
accounts of US Airways Group, Inc. (US Airways Group or the Company) and
its wholly-owned subsidiaries US Airways, Inc. (US Airways), Shuttle, Inc.
(Shuttle), Allegheny Airlines, Inc. (Allegheny), Piedmont Airlines, Inc.
(Piedmont), PSA Airlines, Inc. (PSA), US Airways Leasing and Sales, Inc.
(US Airways Leasing and Sales), US Airways Fuel Corporation (Fuel Corp.),
Airways Assurance Limited (AAL) and Material Services Company, Inc. (MSC).
All significant intercompany accounts and transactions have been
eliminated.
US Airways is the Company's principal operating subsidiary and
accounted for approximately 90% of the Company's operating revenues in 1998
on a consolidated basis. US Airways is a major United States air carrier
engaged primarily in the business of transporting passengers, property and
mail. US Airways enplaned 58 million passengers during 1998 and is
currently the sixth largest domestic air carrier, as ranked by total
revenue passenger miles (RPMs). US Airways operates predominantly in the
Eastern U.S. with major connecting hubs at airports in Charlotte,
Philadelphia and Pittsburgh. US Airways also has substantial operations at
Baltimore/Washington International Airport, Boston's Logan International
Airport, New York's LaGuardia Airport (LaGuardia) and Washington's Ronald
Reagan Washington National Airport (Reagan National).
US Airways' results include the results of its wholly-owned subsidiary
USAM Corp. (USAM). As of December 31, 1998, USAM owned approximately 6.7%
of Galileo International, Inc. (Galileo), which provides electronic global
distribution services for the travel industry, and 11% of the Galileo Japan
Partnership (GJP). GJP markets the Galileo Computer Reservation System
(Galileo CRS) in Japan. USAM accounts for its investment in Galileo using
the cost method (see Note 1(g)). USAM accounts for its investment in GJP
using the equity method because it is represented on the board of directors
and therefore participates in policy making processes. Until July 1997, as
discussed in Note 10, USAM held interests in the Galileo International
Partnership and the Apollo Travel Services Partnership and accounted for
these investments using the equity method.
Allegheny, Piedmont and PSA (which enplaned 7 million passengers in
1998) are regional air carriers that, along with six non-owned regional
airline franchisees, form "US Airways Express." US Airways Express also
has a majority of its operations in the Eastern U.S.
On December 30, 1997, the Company purchased Shuttle for $190 million.
Shuttle's assets include twelve B727-200 aircraft and takeoff and landing
rights at both LaGuardia and Reagan National airports. Shuttle, which
operates under the trade name "US Airways Shuttle," provides high-
frequency service between New York (LaGuardia) and Boston and between New
York (LaGuardia) and Washington (Reagan National). For accounting purposes
the acquisition was treated as a purchase and, accordingly, Shuttle's
results of operations for December 31, 1997 and for subsequent periods have
been included in the Company's Consolidated Statements of Operations. In
addition, Shuttle's assets and liabilities were re-valued at fair value as
of the acquisition date and included in the Company's Consolidated Balance
Sheets as of December 31, 1997. The purchase of Shuttle resulted in
goodwill, as discussed in Note 1(f).
Fuel Corp. was established in 1987 primarily to serve as a fuel
wholesaler to US Airways, in certain circumstances. MSC performs a function
similar to Fuel Corp., selling aviation fuel to US Airways Express carriers
and also assisting the US Airways Express carriers with major
47
maintenance and procurement contracts. US Airways Leasing and Sales' main
function is remarketing US Airways' surplus or inactive aircraft.
AAL was incorporated in June 1998 and is a wholly-owned subsidiary of
US Airways Group. AAL is a captive insurance company that was formed to
manage a portion of US Airways' airline hull and liability insurance needs.
A portion of the premium paid by US Airways to AAL is commission revenues
to AAL and the remaining premium is used to obtain policies from insurance
underwriters.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Certain 1997 and 1996 amounts have been reclassified to conform with
1998 classifications.
(b) OPERATING ENVIRONMENT
Most of the operations of the Company's airline subsidiaries are in
competitive markets. Competitors include other air carriers along with
other methods of transportation.
US Airways has the highest unit operating costs among the major
domestic air carriers. The growth and expansion of competitors with lower
cost and fare structures in its markets has put considerable pressure on US
Airways to reduce its operating costs in order to maintain competitiveness.
In addition, although a competitive strength in some regards, the
concentration of significant operations in the Eastern U.S. results in US
Airways being susceptible to changes in certain regional conditions that
may have an adverse effect on the Company's results of operations and
financial condition. In addition, the Company's agreements to acquire up to
430 new Airbus aircraft, accompanying jet engines and ancillary assets are
expected to increase its financing needs and result in a significant
increase in its financial obligations (see Note 6(a) for additional
information).
Personnel costs represent the Company's largest expense category. As
of December 31, 1998, the Company's various subsidiaries employed
approximately 42,625 full-time equivalent employees. Approximately 37,950
(84%) of the Company's employees are covered by collective bargaining
agreements with various unions or will be covered by collective bargaining
agreements for which initial negotiations are in progress. A new five-year
contract between US Airways and its pilots became effective January 1,
1998. US Airways' contracts with its mechanics and related employees,
flight attendants, flight crew training instructors, flight simulator
engineers and dispatch employees are currently amendable; talks with
respect to new contracts are ongoing. US Airways is also negotiating with
representatives of its fleet service and passenger service employees with
respect to initial labor contracts. The Company cannot predict the ultimate
outcome of any of these negotiations or the timing of any new agreements.
US Airways believes that its new contract with its pilots is helping it to
address its high cost structure.
The operations of the Company's airline subsidiaries are largely
dependent on the availability of aviation fuel. The availability and price
of aviation fuel is largely determined by actions generally outside of the
Company's control. The Company's airline subsidiaries have a diversified
aviation fuel supplier network and use certain risk management techniques
(see Note 2(a)) in order to help ensure aviation fuel availability and
partially protect themselves from temporary aviation fuel price
fluctuations.
48
(c) CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
All highly liquid investments purchased within three months of
maturity are classified as Cash equivalents. Short-term investments consist
primarily of certificates of deposit and commercial paper purchased with
maturities greater than three months but less than one year.
The Company classifies securities underlying its Cash equivalents and
Short-term investments as "available-for-sale" in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS 115). Cash
equivalents are stated at cost, which approximates fair value due to the
highly liquid nature and short maturities of the underlying securities.
Short-term investments are stated at fair value with the offsetting
unrecognized gain or loss reflected as a separate component of
Stockholders' Equity within Accumulated other comprehensive income, net of
income tax effect. See also Note 8(f).
(d) MATERIALS AND SUPPLIES, NET
Inventories of materials and supplies are valued at the lower of cost
or fair value. Costs are determined using average costing methods and are
charged to operations as consumed. An allowance for obsolescence is
provided for flight equipment expendable and repairable parts.
(e) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost or, if acquired under capital
lease, at the lower of the present value of minimum lease payments or fair
value of the asset at the inception of the lease. Interest expenses related
to the acquisition of certain property and equipment are capitalized as an
additional cost of the asset or as a leasehold improvement if the asset is
leased. Costs of major improvements are capitalized for both owned and
leased assets. Maintenance and repairs are recognized as operating expenses
as incurred.
Depreciation and amortization expense for principal asset
classifications is calculated on a straight-line basis to an estimated
residual value. Depreciable lives are 11-20 years for operating flight
equipment (except for B727-200 aircraft which are being depreciated over 2-
3 years to a residual value of $1-$2 million), 25-30 years for facilities
and 3-10 years for other ground property and equipment. Improvements to
leased assets are depreciated over the term of the lease of the related
asset. The cost of property acquired under capital lease is amortized on a
straight-line basis to Depreciation and amortization expense over the term
of the lease. When property and equipment is sold or retired any gain or
loss is recognized in the Other, net category of Other Income (Expense).
The Company monitors the recoverability of the carrying value of its
long-lived assets. Under the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of" (SFAS 121), the Company
recognizes an "impairment charge" when the net undiscounted future cash
flows from an asset's use (including any proceeds from disposition) are
less than the asset's carrying value and the asset's carrying value exceeds
its fair value. The impairment charge reflects writing-down the asset to
fair value. See Note 14(b) for impairment charges recognized by US Airways
during 1997.
(f) GOODWILL AND OTHER INTANGIBLES, NET
Goodwill, the cost in excess of fair value of identified net assets
acquired, is amortized on a straight-line basis over 40 years. The $629
million goodwill resulting from the acquisitions of Pacific Southwest
Airlines (Pacific Southwest) and Piedmont Aviation, Inc. (Piedmont
Aviation), both in 1987, is amortized as depreciation and amortization
expense. As of December 31, 1998 and 1997, accumulated amortization related
to the Pacific Southwest and
49
Piedmont Aviation acquisitions was $176 million and $160 million,
respectively. Goodwill of $4 million resulting from USAM's computer
reservation system investment is being amortized as a component of Other
Income (Expense), consistent with the classification of the related income
from this investment. As of December 31, 1998 and 1997, USAM's related
accumulated amortization was $1 million. As of December 31, 1998 and 1997,
goodwill resulting from the acquisition of Shuttle was $140 million and
$143 million, respectively (includes an adjustment for deferred income
taxes during 1998). Shuttle's goodwill is amortized as depreciation and
amortization expense. As of December 31, 1998, Shuttle's accumulated
amortization was $4 million (see also Note 1(a)).
The Company periodically evaluates whether goodwill is impaired by
comparing the goodwill balances with estimated future undiscounted cash
flows which, in the Company's judgment, are attributable to the goodwill.
This analysis is performed separately for the goodwill which resulted from
each acquisition.
Other intangible assets consist mainly of purchased operating rights
at various airports, capitalized software costs and the intangible asset
associated with the underfunded amounts of certain pension plans. The cost
of operating rights and capitalized software costs are amortized on a
straight-line basis over the expected periods of benefit as depreciation
and amortization expense. Operating rights, which are valued at purchase
cost or appraised value if acquired with Pacific Southwest, Piedmont
Aviation or Shuttle, are amortized over periods ranging from seven to 25
years and capitalized software costs are amortized over five years. The
intangible pension asset is recognized in accordance with Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions" (SFAS 87) (see Note 8(f)). As of December 31, 1998 and 1997,
accumulated amortization related to other intangible assets was $169
million and $149 million, respectively.
Based on the most recent analyses, the Company believes that goodwill
and other intangible assets were not impaired as of December 31, 1998.
(g) INVESTMENT IN MARKETABLE EQUITY SECURITIES
USAM's investment in Galileo which is accounted for under the cost
method, is classified as "available-for-sale" under SFAS 115 and recorded
at fair value. See also Notes 2(b), 8(f) and 10.
(h) OTHER ASSETS, NET
Other assets, net consist primarily of noncurrent pension assets,
restricted cash and investments, unamortized debt issuance costs and a
long-term receivable from British Airways Plc (British Airways). Restricted
cash and investments are deposits in trust accounts to collateralize
letters of credit and workers' compensation policies. The long-term
receivable from British Airways resulted from the relinquishment by US
Airways of three U.S. to London routes. See also Notes 2(b) and 11.
(i) FREQUENT TRAVELER PROGRAM
US Airways accrues the estimated incremental cost of travel awards
earned by participants in its "Dividend Miles" frequent traveler program
when requisite mileage award levels are achieved. US Airways also sells
mileage credits to participating partners in Dividend Miles. The resulting
revenues are recorded as Other operating revenues during the period in
which the credits are sold.
In 1998, US Airways and American Airlines, Inc. (American) announced a
marketing relationship that gives customers combined access to both
companies' frequent traveler programs. Under the program, members who
belong to US Airways' Dividend Miles and American's
50
AAdvantage are able to claim awards for airline travel on both airlines and
to combine miles when claiming travel awards on either airline. Each
airline compensates the other when relieved of an obligation to provide a
travel award.
(j) DEFERRED GAINS, NET
Gains on aircraft sale and leaseback transactions are deferred and
amortized over the terms of the leases as a reduction of the related
aircraft rent expense.
(k) PASSENGER TRANSPORTATION REVENUES
Passenger ticket sales are recognized as Passenger transportation
revenues when the transportation service is rendered or the ticket
otherwise expires. At the time of sale, a liability is established (Traffic
balances payable and unused tickets) and subsequently relieved either
through carriage of the passenger, through billing from another air carrier
which provided the service, upon expiration of the ticket or by refund to
the passenger.
(l) STOCK-BASED COMPENSATION
The Company applies the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," (APB 25) to
account for awards of stock-based compensation granted to employees. See
also Note 8(e).
(m) OTHER SELLING EXPENSES
Other selling expenses include credit card fees, computerized
reservations systems fees and advertising and promotional expenses.
Advertising and promotional expenses for 1998, 1997 and 1996 were $36
million, $46 million and $51 million, respectively (such costs are expensed
when incurred).
(n) 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" (SFAS 128). The
Company adopted SFAS 128 during 1997. The Company's EPS figures for 1996
have been restated to conform with the provisions of SFAS 128.
Basic EPS is computed by dividing net income, after deducting
preferred stock dividend requirements, by the weighted average number of
shares of common stock outstanding during the period. Diluted EPS reflects
the maximum dilution that would result after giving effect to dilutive
stock options and to the assumed conversion of any dilutive convertible
preferred stock issuance. The table on the following page presents the
computation of basic and diluted EPS (in millions, except per share
amounts) for the years ended December 31, 1998, 1997 and 1996.
(this space intentionally left blank)
51
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Earnings applicable to common stockholders:
Earnings applicable to common stockholders (basic) $532 $961 $175
Preferred dividend requirement 6 58 48
--- ----- ---
Earnings applicable to common stockholders (diluted) $538 $1,019 $223
=== ===== ===
Common shares:
Weighted average common shares outstanding (basic) 92 78 64
Incremental shares related to outstanding stock options 2 2 1
Incremental shares related to convertible preferred
stock issuances 2 23 30
--- ----- ---
Weighted average common shares outstanding (diluted) 96 103 95
=== ===== ===
EPS-Basic $5.75 $12.32 $2.73
EPS-Diluted $5.60 $9.87 $2.35
Note: EPS amounts may not recalculate due to rounding.
</TABLE>
2. FINANCIAL INSTRUMENTS
(a) TERMS OF CERTAIN FINANCIAL INSTRUMENTS
On January 1, 1998, as part of a comprehensive information technology
services agreement with The SABRE Group, Inc. (TSG), TSG granted US Airways
two tranches of stock options (TSGH Stock Options) to acquire up to
6,000,000 shares of Class A Common Stock, $.01 par value, of The SABRE
Group Holding, Inc. (TSGH Common Stock), TSG's parent company. Each tranche
includes 3,000,000 stock options. Stock options in the first tranche have
an exercise price of $27 and are exercisable from June 30, 1999 until
December 31, 1999, but are subject to a $90 per share cap on the fair
market value of the underlying common stock. Stock options in the second
tranche have an exercise price of $27 and are exercisable during a ten-year
period beginning January 2, 2003, but are subject to a $127 per share cap
on the fair market value of the underlying common stock. Under certain
circumstances, and under certain conditions, US Airways may select an
alternative vehicle of substantially equivalent value in place of receiving
TSGH Common Stock.
The Company uses risk management strategies to reduce its exposure to
certain market uncertainties. US Airways is party to financial contracts
which it believes help to reduce its exposure to significant increases in
the price of aviation fuel. US Airways has also hedged certain foreign-
denominated debt to maturity. US Airways periodically reviews the financial
condition of each counterparty to these financial contracts and believes
that the potential for default by any of the current counterparties is
negligible.
US Airways continually adjusts its aviation fuel procurement strategy
in order to take advantage of the best available prices while at the same
time ensuring that it has an adequate supply of aviation fuel to support
its operations. In addition, US Airways may participate in arrangements
designed to reduce its exposure to significant increases in the price of
aviation fuel. These arrangements have the net effect of increasing or
decreasing US Airways' aviation fuel expense in the period in which they
are settled. While US Airways was not a participant in fuel swap contracts
as of December 31, 1998, US Airways previously entered into fuel swap
contracts that resulted in US Airways receiving or making payments based on
the difference between a fixed price and a variable price per notional
gallon for specified petroleum products. The total notional gallons under
these contracts were approximately 47 million as of December 31, 1997 (US
Airways entered into contracts prior to December 31, 1997 which effectively
closed certain hedging arrangements covering approximately 17 million
gallons). For contracts open as of December 31, 1997, US Airways paid fixed
prices ranging from $0.496 to $0.600 per notional gallon and received a
variable price per gallon based on market prices.
52
An aggregate of $31 million of future principal payments of US
Airways' long-term debt due 1999 through 2000 is payable in Japanese Yen.
This foreign currency exposure has been hedged to maturity by US Airways'
participation in foreign currency contracts. Net settlements will be
recorded as adjustments to Interest expense.
(b) FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the provisions of SFAS 115, the fair values for US
Airways' short-term and marketable equity security investments are
determined based upon quoted market prices. Restricted cash is carried at
cost which approximates fair value. At December 31, 1998 and 1997, US
Airways' long-term investments represent ownership interests in privately
held companies which have no readily determinable market values. The
Company estimated the fair values of its note receivable and long-term debt
by discounting expected future cash flows using current rates offered to
the Company for note receivables and debt with similar maturities. The
estimated fair value of the TSGH Stock Options was calculated using the
Black-Scholes stock option pricing model and is presented in the table
below in accordance with Statement of Financial Accounting Standards No.
119, "Disclosures about Derivative Financial Instruments and Fair Value of
Financial Instruments" (SFAS 119). These financial instruments are
classified as held for "purposes other than trading" under SFAS 119 due
primarily to certain restrictions, including limitations on US Airways'
ability to exercise or sell these stock options. The fair values of foreign
currency and fuel swap contracts are obtained from dealer quotes. These
values represent the estimated amount US Airways would receive or pay to
terminate such agreements as of the valuation date.
The estimated fair values of the Company's financial instruments, none
of which are held for trading purposes, are summarized as follows (in
millions; brackets denote a liability):
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1998 1997
-------------------- --------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Short-term investments (1) $ 598 $ 598 $ 870 $ 870
Investment in marketable equity securities (1) 301 301 190 190
Restricted cash and long-term investments (2) 113 114 72 72
Note receivable (2) 27 27 30 30
TSGH Stock Options - 119 - -
Long-term debt (excludes capital lease obligations) (1,999) (2,244) (2,578) (2,862)
Redeemable preferred stock - - (358) (589)
Foreign currency contracts:
In a net receivable (payable) position - (1) - (3)
Fuel swap contracts:
In a net receivable (payable) position - - - (1)
(1) Classified as "available-for-sale" in accordance with SFAS 115. See also Notes 1(c) and 1(g).
(2) Carrying amount included in Other assets, net on the Company's Consolidated Balance Sheets,
except for the current portion of the note receivable ($6 million) which is included in
Receivables, net.
</TABLE>
3. INCOME TAXES
The Company accounts for income taxes according to the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). The Company files a consolidated federal income tax
return with its wholly-owned subsidiaries.
During 1997, the Company determined that it was appropriate to
significantly reduce the valuation allowance applicable to its deferred tax
assets. The Company believed, based on prior earnings and future earnings
projections, that it was more likely than not that the Company would
53
be able to utilize tax benefits accumulated through December 31, 1997 in
future periods. Accordingly, as of December 31, 1997, previous valuation
allowances were substantially removed, resulting in a net deferred tax
asset and an income tax credit for 1997.
The components of the Company's provision (credit) for income taxes
are as follows (in millions):
1998 1997 1996
---- ---- ----
Current provision:
Federal $155 $ 101 $ 6
State 16 7 3
--- ---- --
Total current provision 171 108 9
--- ---- --
Deferred provision:
Federal 166 (406) -
State 27 (55) 3
--- ---- --
Total deferred provision 193 (461) 3
--- ---- --
Provision (credit) for income taxes $364 $(353) $12
=== ==== ==
In 1998, the Company was subject to federal alternative minimum tax
(AMT). Approximately $494 million in federal regular net operating loss
carryforwards and approximately $661 million in state net operating loss
carryforwards were utilized to reduce the federal and state current tax
liabilities.
The significant components of deferred income tax provision (credit)
for the years ended December 31, 1998, 1997 and 1996 are as follows (in
millions):
1998 1997 1996
---- ---- ----
Deferred tax provision (exclusive of the
other components listed below) $193 $ 181 $ 115
Decrease in the valuation allowance for
deferred tax assets - (642) (112)
--- ---- ----
Total $193 $(461) $ 3
=== ==== ====
A reconciliation of taxes computed at the statutory federal tax rate
on earnings before income taxes to the provision (credit) for income taxes
is provided below (in millions):
1998 1997 1996
---- ---- ----
Tax provision computed at federal statutory rate $316 $ 235 $ 96
Book expenses not deductible for tax purposes 19 17 18
State income tax provision (credit), net of
federal tax benefit 28 (31) 5
Reduction of federal valuation allowance - (569) (104)
Other 1 (5) (3)
--- ---- ----
Provision (credit) for income taxes $364 $(353) $ 12
=== ==== ====
Effective tax rate 40% (52)% 4%
=== ==== ====
(this space intentionally left blank)
54
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, 1998
and 1997 (in millions):
1998 1997
---- ----
Deferred tax assets:
Leasing transactions $ 172 $ 171
Tax benefits purchased/sold 19 31
Gain on sale and leaseback transactions 130 125
Employee benefits 709 683
Net operating loss carryforwards 8 194
Alternative minimum tax credit carryforwards 157 158
Investment tax credit carryforwards - 18
Other deferred tax assets 105 95
----- -----
Total gross deferred tax assets 1,300 1,475
Less valuation allowance (2) (1)
----- -----
Net deferred tax assets 1,298 1,474
Deferred tax liabilities:
Depreciation and amortization 913 941
Other deferred tax liabilities 106 63
----- -----
Total deferred tax liabilities 1,019 1,004
----- -----
Net deferred tax assets $ 279 $ 470
===== =====
The valuation allowance for deferred tax assets increased approximately
$269 thousand in 1998 and decreased approximately $642 million in 1997.
Included in the deferred tax assets at December 31, 1998, among other
items, are $482 million related to obligations of postretirement medical
benefits and $157 million of alternative minimum tax credits, which do not
expire. During 1998, the Company increased deferred tax assets and reduced
goodwill by $2 million to adjust Shuttle's deferred tax assets acquired on
December 30, 1997. There were no federal regular or alternative minimum tax
net operating loss carryforwards remaining at December 31, 1998. The
Company had state net operating loss carryforwards of $260 million as of
December 31, 1998. In prior years, investment tax credit benefits were
recorded using the "flow through" method as a reduction of the federal
income tax provision. No new investment tax credits were generated during
1998, 1997 or 1996, and all prior year investment tax credits were used by
December 31, 1998. Certain changes in stock ownership can result in a
limitation on the amount of net operating loss and tax credit carryovers
that can be utilized each year. The Company determined it has undergone
such an ownership change that did not impact the utilization of federal tax
attributes during 1998. Furthermore, the Company does not believe that
alternative minimum tax credits available as of December 31, 1998 will be
limited in future years as a result of the ownership change. The federal
income tax returns of the Company through 1986 have been examined and
settled with the Internal Revenue Service.
The Company believes that a significant portion of the deferred tax
assets will be realized through projected taxable income and reversals of
existing taxable temporary differences. The deferred tax assets and
liabilities disclosed above exclude tax assets and liabilities which arise
as a result of including certain transactions in the equity section of the
balance sheet, net of tax. These tax attributes include a noncurrent
deferred tax liability of $95 million and $56 million as of December 31,
1998 and 1997, respectively, for unrealized gains on available-for-sale
investments pursuant to SFAS 115 and a noncurrent deferred tax asset of $33
million and $3 million as of December 31, 1998 and 1997, respectively,
relating to the equity adjustment for the minimum pension liability for US
Airways' defined benefit plans.
(this space intentionally left blank)
55
The following table is a summary of pretax book income and taxable
income prior to net operating loss carryforwards for the last three years
(in millions):
1998 1997 1996
---- ------ ----
Pretax book income $902 $ 672 $275
Taxable income $975 $1,053 $285
The reasons for significant differences between taxable income and
pretax book income in 1997 primarily relate to employee pension and
postretirement benefit costs, certain aircraft impairment charges and lease
accruals, and other employee related accruals. See also Note 14.
4. LONG-TERM DEBT, INCLUDING CAPITAL LEASE OBLIGATIONS
Details of long-term debt are as follows (in millions):
December 31,
-----------------
- -
1998 1997
---- ----
Senior Debt:
10% Senior Notes due 2003 $ - $ 300
9 5/8% Senior Notes due 2001 175 175
5.7% to 11.7% Equipment Financing Agreements,
Installments due 1999 to 2016 1,795 2,045
8.6% Airport Facility Revenue Bond due 2022 28 28
7.4% Aircraft Purchase Deposit Financing* - 29
Other 1 1
----- -----
1,999 2,578
Capital Lease Obligations 27 34
----- -----
Total 2,026 2,612
Less Current Maturities (71) (186)
----- -----
$1,955 $2,426
===== =====
* See related information under Note 6(c) (regarding settlement of
litigation between the Company and The Boeing Company (Boeing)).
Maturities of long-term debt and debt under capital leases for the
next five years (in millions):
1999 $ 71
2000 115
2001 240
2002 69
2003 191
Thereafter 1,340
-----
$2,026
=====
Interest rates on $92 million principal amount of long-term debt as of
December 31, 1998 are subject to adjustment to reflect prime rate and other
rate changes.
Equipment financings totaling $1.8 billion were collateralized by
aircraft and engines with a net book value of approximately $1.9 billion as
of December 31, 1998.
In 1998, the Company retired early certain long-term debt with a
principal amount of $434 million, including US Airways' 10% Senior Notes.
The retirement of the 10% Senior Notes resulted in a cash outflow of $315
million, including prepayment penalties of $15 million.
5. EMPLOYEE PENSION AND BENEFIT PLANS
Substantially all of the Company's employees meeting certain service
and other requirements are eligible to participate in various pension,
medical, life insurance, disability and survivorship and employee stock
ownership plans.
56
(a) DEFINED BENEFIT AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors several qualified and nonqualified defined
benefit plans and other postretirement benefit plans for certain employees.
Liabilities related to pension plans covering foreign employees are
calculated in accordance with generally accepted accounting principles and
funded in accordance with the laws of the individual country.
The following table sets forth changes in the fair value of plan
assets, benefit obligations and the funded status of the plans as of
September 30, 1998 and 1997, (except for subsidiaries other than
US Airways which are as of December 31, 1998 and 1997), in addition to the
amounts recognized in the Company's Consolidated Balance Sheets as of
December 31, 1998 and 1997, respectively (in millions):
<TABLE>
<CAPTION>
Other
Defined Benefit Postretirement
Pension Plans (1) Benefits
----------------- ---------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Fair value of plan assets at the beginning of the period $ 3,154 $2,492 $ - $ -
Actual return on plan assets 254 590 - -
Acquisition - 30 - -
Employer contributions 39 171 31 28
Plan participants' contributions - - 2 1
Gross benefits paid (210) (129) (33) (29)
------ ----- ----- ------
Fair value of plan assets at the end of the period 3,237 3,154 - -
------ ----- ------ ------
Benefit obligation at the beginning of the period 3,912 3,168 1,018 951
Service cost 144 131 37 35
Interest cost 296 259 77 71
Plan participants' contributions - - 2 1
Plan amendments - 39 - -
Actuarial (gain) loss 531 295 128 (32)
Acquisition (2) - 34 - 21
Settlements 1 - - -
Special termination benefits (3) - 115 - -
Gross benefits paid (4) (210) (129) (33) (29)
------ ----- ------ ------
Benefit obligation at the end of the period 4,674 3,912 1,229 1,018
------ ----- ------ ------
Funded status of the plan (1,437) (758) (1,229) (1,018)
Unrecognized actuarial (gain) loss 1,018 476 66 (62)
Unrecognized prior service cost 91 97 (117) (130)
Unrecognized transition obligation (20) (25) - -
Contributions for October to December 21 2 27 7
------ ----- ------ ------
Net liability recognized in the Company's
Consolidated Balance Sheets $ (327) $ (208) $(1,253) $(1,203)
====== ===== ====== ======
Components of the amounts recognized in the Company's Consolidated Balance Sheets:
Prepaid benefit cost $ 310 $ 283 $ - $ -
Accrued benefit cost (637) (491) (1,253) (1,203)
Adjustment for minimum pension liability (180) (111) - -
Intangible asset 95 95 - -
Accumulated other comprehensive income 85 16 - -
------ ------ ------ ------
Net liability recognized in the Company's
Consolidated Balance Sheets $ (327) $ (208) $(1,253) $(1,203)
====== ====== ====== ======
(1) For plans with accumulated benefit obligations in excess of plan assets the aggregate
accumulated benefit obligations and plan assets were $3,640 million and $3,179 million,
respectively, as of September 30, 1998, and $608 million and $457 million, respectively, as of
September 30, 1997 (except for subsidiaries other than US Airways which are as of
December 31, 1998 and 1997, respectively).
(notes to the tables are continued on the following page)
57
(notes are continued from preceding page)
(2) The Company purchased Shuttle in 1997. See Note 1(a).
(3) Related to an early retirement plan offered to US Airways' pilots, recorded in accordance with
Statement of Financial Accounting Standards No. 88 "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits" (SFAS 88).
(4) Gross benefits paid in 1998 include lump sum payments for pilots made pursuant to the special
termination benefits charge of $115 million in 1997. See (3) above.
</TABLE>
The following table presents the weighted average assumptions used to
determine the actuarial present value of Pension Benefits and Other
Postretirement Benefits:
Other
Defined Benefit Postretirement
Pension Plans Benefits
---------------- ---------------
1998 1997 1998 1997
---- ---- ---- ----
Discount rate 6.8% 7.5% 6.8% 7.5%
Expected return on plan assets 9.5% 9.5% NA NA
Rate of compensation increase 3.3% 3.3% 4.6% 4.7%
The assumed health care cost trend rate is 4.5% in 1999 and
thereafter. The assumed health care cost trend rate has a significant
effect on amounts reported for retiree health care plans. A 1% change in
the health care cost trend would have the following effects on Other
Postretirement Benefits as of September 30, 1998 (in millions):
1% Increase 1% Decrease
----------- -----------
Effect on total service and interest costs $ 17 $ (13)
Effect on postretirement benefit obligation $163 $(126)
Total periodic cost for Pension Benefits and Other Postretirement
Benefits (in millions):
Other
Defined Benefit Postretirement
Pension Plans Benefits
------------------ ----------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
Service cost $ 144 $ 131 $ 148 $ 37 $ 35 $ 44
Interest cost 296 259 254 77 71 75
Expected return on plan assets (279) (237) (218) - - -
Amortization of:
Transition asset (5) (5) (5) - - -
Prior service cost 4 6 4 (12) (12) (12)
Actuarial (gain)/loss 17 17 36 (1) (4) 1
---- ---- ---- --- --- ---
Net periodic cost 177 171 219 101 90 108
Settlements/curtailments 1 - - - - -
Special termination benefits - 115 - - - -
---- ---- ---- --- --- ---
Total periodic cost $ 178 $ 286 $ 219 $101 $ 90 $108
==== ==== ==== === === ===
The Company recorded a $1 million charge to Personnel costs for the
termination of two pension plans in 1998 and a $115 million charge to
Personnel costs in 1997 related to an early retirement program offered to
325 US Airways pilots. These charges were recorded in accordance with
SFAS 88.
See Note 8(f) for the amount included within other comprehensive
income arising from a change in the additional minimum pension liability.
(b) DEFINED CONTRIBUTION PENSION PLANS
Expenses related to these plans, excluding expenses related to the US
Airways Employee Stock Ownership Plan (ESOP) and any profit sharing
contributions, were approximately $40 million, $59 million and $56 million
for the years 1998, 1997 and 1996, respectively. Expenses for 1998 include
58
a $17 million credit related to a favorable legal settlement regarding
employer matching contributions. See Notes 5(d) and 5(e) for information
related to the Company's ESOP and profit sharing contributions.
(c) POSTEMPLOYMENT BENEFITS
The Company provides certain postemployment benefits to its employees.
Such benefits include disability-related and workers' compensation benefits
and severance payments for certain employees. The Company accrues for the
cost of such benefit expenses once an appropriate triggering event has
occurred.
(d) EMPLOYEE STOCK OWNERSHIP PLAN
In August 1989, US Airways established an ESOP. US Airways Group sold
2,200,000 shares of its common stock to an Employee Stock Ownership Trust
(the Trust) to hold on behalf of US Airways' employees, exclusive of
officers, in accordance with the terms of the Trust and the ESOP. The
trustee placed those shares in a suspense account pending their release and
allocation to employees. US Airways provided financing to the Trust in the
form of a 9 3/4% loan for $111 million for its purchase of shares and US
Airways contributed an additional $2 million to the Trust. US Airways makes
a yearly contribution to the Trust sufficient to cover the Trust's debt
service requirement. The contributions are made in amounts equal to the
periodic loan payments as they come due, less dividends available for loan
payment. Since the Company did not pay dividends on any shares held by the
Trust for the years ended December 31, 1998, 1997 and 1996, the Trust did
not utilize dividends to service its debt during those periods. The initial
maturity of the loan is 30 years. As the loan is repaid over time, the
trustee systematically releases shares of the common stock from the
suspense account and allocates them to participating employees. Each
participant's allocation is based on the participant's compensation, the
total compensation of all ESOP participants and the total number of shares
being released. For each year after 1989, a minimum of 71,933 shares are
released from the suspense account and allocated to participant accounts.
If US Airways Group's return on sales equals or exceeds four percent in a
given year, more shares are released and repayment of the loan is
accelerated. See also Note 5(e) regarding the profit sharing component of
US Airways' ESOP. Annual contributions made by US Airways, and therefore
loan repayments made by the Trust, were $27 million in 1998, and $11
million in each of 1997 and 1996. The interest portion of these
contributions was $10 million in 1998, 1997 and 1996, respectively.
Approximately 946,000 shares of US Airways Group common stock have been
released or committed to be released as of December 31, 1998. US Airways
recognized compensation expense related to the ESOP of $8 million in 1998,
$11 million in 1997 and $4 million in 1996 based on shares allocated to
employees (the "shares allocated" method). Deferred compensation related
to the ESOP amounted to approximately $65 million, $72 million and $84
million as of December 31, 1998, 1997 and 1996, respectively.
See Note 1(l) with respect to the Company's accounting policies for
stock-based compensation.
(e) PROFIT SHARING PLANS
In exchange for temporary wage and salary reductions and other
concessions during a twelve month period in 1992 and 1993, including
certain ongoing work rule and medical benefits concessions and the freeze
of the defined benefit plan for certain non-contract employees, certain US
Airways employees participated in a profit sharing program and were granted
stock options to purchase US Airways Group common stock (see related
discussion under Note 8(e)). This profit sharing program was designed to
recompense those US Airways employees whose pay was reduced in an amount
equal to (i) two times salary foregone plus (ii) one time salary foregone
(subject to a minimum of $1,000) for the freeze of the defined benefit
pension plan for certain non-contract employees. US Airways recognized
charges of $214 million related to this program,
59
including $122 million in 1996. Cash distributions to participants of $214
million were made under this program. After a first quarter 1997 payment of
$129 million, US Airways' obligations under this profit sharing program
were satisfied and this program ceased.
US Airways' ESOP and Defined Contribution Retirement Program (DCRP)
each have profit sharing components. Under the ESOP, each eligible US
Airways employee receives shares of US Airways Group common stock based on
his or her compensation relative to the total compensation of all
participants and the number of shares of US Airways Group common stock in
the allocation pool. When US Airways Group's return on sales equals or
exceeds certain prescribed levels, US Airways increases its contribution,
which effectively increases the number of shares of US Airways Group common
stock in the allocation pool (see Note 5(d)). US Airways' ESOP-related
expenses included $4 million and $7 million in 1998 and 1997, respectively,
related to this profit sharing program. US Airways did not make any
provision for profit sharing contributions in connection with the profit
sharing component of the ESOP during 1996. Under the DCRP, US Airways makes
additional contributions to participant accounts when US Airways Group
achieves certain prescribed pre-tax margin levels (see Note 5(b)). US
Airways' 1998, 1997 and 1996 results of operations reflect expenses of $27
million, $24 million and $5 million, respectively, for the profit sharing
component of the DCRP.
6. COMMITMENTS AND CONTINGENCIES
(a) COMMITMENTS TO PURCHASE FLIGHT EQUIPMENT
On October 31, 1997, the Company entered into agreements with AVSA,
S.A.R.L. (AVSA), an affiliate of aircraft manufacturer Airbus Industrie
G.I.E. (Airbus), and CFM International, Inc. (CFMI) for the acquisition of
up to 400 Airbus A320-Family aircraft and accompanying jet engines. The
A320-Family aircraft are single-aisle aircraft that include the Airbus
A319, A320 and A321.
As of December 31, 1998, the Company had 122 A320-Family aircraft on
firm order, 112 aircraft subject to reconfirmation prior to scheduled
delivery and options for 160 additional aircraft. With respect to the firm-
order aircraft, 33 are expected to be delivered in 1999 and 89 are expected
to be delivered in the years 2000 through 2002 (43 of the aircraft
scheduled for delivery in the years 2000 to 2002 time period are subject to
cancellation with 18 month notice and payment of a cancellation fee).
During the fourth quarter of 1998, US Airways accepted delivery of and
placed into operational service six A319 aircraft acquired under these
agreements. The Company anticipates that the new Airbus single-aisle
aircraft will replace, at a minimum, US Airways' B737-200, DC-9-30 and MD-
80 aircraft. US Airways has an agreement with GE Engine Services, Inc. for
the maintenance of the engines that power these aircraft.
In July 1998, the Company reached an agreement with Airbus for the
purchase of up to 30 widebody A330-300 aircraft. The agreement includes
seven firm aircraft orders, seven aircraft subject to reconfirmation prior
to scheduled delivery and options for 16 additional aircraft. Of the seven
firm-order A330-300 aircraft, six are scheduled for delivery in the year
2000 and one in early 2001. Orders subject to reconfirmation are for
aircraft that are tentatively scheduled for delivery beginning in the
fourth quarter of 2000. The Company can substitute other Airbus widebody
aircraft for the A330-300s, including the A330-200 or members of the A340-
Series, for orders other than the first seven aircraft. In October 1998,
the Company reached an agreement with Pratt & Whitney for jet engines to
power these aircraft and to provide long-term maintenance for the engines.
These new widebody aircraft are expected to eventually supplant US Airways'
B767-200ER fleet in transatlantic markets.
As of December 31, 1998, the minimum determinable payments associated
with the Company's aircraft acquisition agreements for Airbus aircraft
(including progress payments,
60
payments at delivery, buyer-furnished equipment, spares, capitalized
interest, penalty payments, cancellation fees and/or nonrefundable
deposits) were estimated at $1.3 billion in 1999, $2.1 billion in 2000 and
$9 million in 2001.
US Airways has a commitment to purchase hush-kits for certain of its
B737-200 aircraft. The installation of hush-kits will allow these aircraft
to meet certain statutory noise level requirements. The expected payments
associated with this commitment are approximately $21 million, all of which
are expected to occur in 1999.
In February 1999, the Company signed a letter of intent to purchase
nine new Dash 8 aircraft in 1999 from Bombardier Aerospace, the
manufacturer of these aircraft. In addition, upon completion of a
definitive purchase agreement, the Company plans to extend the leases on
ten Dash 8 aircraft currently operated by the Company's regional airline
subsidiaries (the leases are scheduled to expire in 1999).
(b) LEASES
The Company's airline subsidiaries lease certain aircraft, engines and
ground equipment, in addition to the majority of their ground facilities.
Ground facilities include executive offices, maintenance facilities and
ticket and administrative offices. Public airports are utilized for flight
operations under lease arrangements with the municipalities or agencies
owning or controlling such airports. Substantially all leases provide that
the lessee shall pay taxes, maintenance, insurance and certain other
operating expenses applicable to the leased property. Some leases also
include renewal and purchase options. The Company subleases certain leased
aircraft and ground facilities under noncancelable operating leases
expiring in various years through the year 2018. See also Note 6(a).
The following amounts related to capital leases are included in
property and equipment (in millions):
December 31,
-------------
1998 1997
---- ----
Flight equipment $ 82 $ 81
Less accumulated amortization (60) (55)
--- ---
$ 22 $ 26
=== ===
As of December 31, 1998, obligations under capital and noncancelable
operating leases for future minimum lease payments (in millions):
Capital Operating
Leases Leases
------ --------
1999 $10 $ 794
2000 7 763
2001 5 761
2002 5 698
2003 5 688
Thereafter 4 5,413
-- -----
Total minimum lease payments 36 9,117
Less sublease rental receipts - (62)
-----
Total minimum operating lease payments $9,055
=====
Less amount representing interest (9)
--
Present value of future minimum capital
lease payments 27
Less current obligations under capital leases (7)
--
Long-term obligations under capital leases $20
==
For 1998, 1997 and 1996, rental expense under operating leases was
$755 million, $804 million and $787 million, respectively. Rental expense
for 1998, 1997 and 1996 excludes credits of $3 million, $1 million and $23
million, respectively, related to US Airways' subleasing of British
61
Aerospace Bae-146-200 (Bae-146) aircraft (see Note 14). Rental expense for
1997 also excludes $5 million related to expenses recognized by US Airways
in conjunction with certain efficiency measures (see Note 14(b)).
The Company's airline subsidiaries also lease certain owned flight
equipment under noncancelable operating leases that expire in the years
1999 and 2000. The future minimum rental receipts associated with these
leases are $7 million in 1999 and $1 million in 2000.
The following amounts relate to aircraft leased under such agreements
as reflected in flight equipment (in millions):
December 31,
--------------
1998 1997
---- ----
Flight equipment $ 52 $ 53
Less accumulated amortization (37) (32)
--- ---
$ 15 $ 21
=== ===
(c) LEGAL PROCEEDINGS
US Airways is involved in legal proceedings arising out of an aircraft
accident in September of 1994 near Pittsburgh in which 127 passengers and
five crew members lost their lives. With respect to this accident, the
National Transportation Safety Board (NTSB) held hearings in January and
November of 1995, and is scheduled to hold a final hearing on March 23,
1999 before issuing its final accident investigation report. Wrongful death
cases are pending in a consolidated multi-district litigation in U.S.
District Court for the Western District of Pennsylvania and in state court
in Cook County, Illinois. Although US Airways has settled over 80% of the
cases and claims arising from the Pittsburgh accident, it expects that it
will be at least a year before all of the settlements and/or 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 September 1997, Boeing filed suit against US Airways in state court
in King County, Washington seeking unspecified damages, estimated at
approximately $220 million, for alleged breach of two aircraft purchase
agreements concerning, respectively, eight B757-200 aircraft and 40 B737-
Series aircraft. On October 31, 1997, US Airways filed an answer and
counterclaims to Boeing's complaint denying liability and seeking recovery
from Boeing of approximately $35 million in equipment purchase deposits. On
April 23, 1998 the parties reached a settlement terminating all obligations
with respect to both purchase agreements. Pursuant to the settlement, the
litigation has been dismissed with prejudice as to both Boeing's claims and
US Airways' counterclaims.
In October 1995, US Airways terminated for cause an agreement with In-
Flight Phone Corporation (IFPC). IFPC was US Airways' provider of on-board
telephone and interactive data systems. The IFPC system had been installed
in approximately 80 aircraft prior to the date of termination of the
agreement. On December 6, 1995, IFPC filed suit against US Airways in
Illinois state court seeking equitable relief and damages in excess of $186
million. US Airways believes that its termination of its agreement with
IFPC was appropriate and that it is owed significant damages from IFPC. US
Airways has filed a counterclaim against IFPC seeking compensatory damages
in excess of $25 million and punitive damages in excess of $25 million. In
January 1997, IFPC filed for protection from its creditors under Chapter 11
of the Bankruptcy Code. The parties stipulated to lift the automatic stay
provided for in the Bankruptcy Code which could allow IFPC's and US
Airways' claims to be fully litigated. The Company is unable to predict at
this time the ultimate resolution or potential financial impact of these
proceedings on the Company's financial condition or results of operations.
62
On July 30, 1996, the Company and US Airways initiated a lawsuit in
U.S. District Court for the Southern District of New York against British
Airways, BritAir Acquisition Corp., Inc., American and American's parent
company, AMR Corp. The Company and US Airways claimed that British Airways,
in pursuit of an alliance with American, is responsible for breaches of
fiduciary duty to the Company and US Airways and violated certain
provisions of the January 21, 1993 Investment Agreement between the Company
and British Airways (the Investment Agreement). The lawsuit also claims
that the defendants have committed violations of U.S. antitrust laws. In
response to the defendants' Motion to Dismiss, the Court sustained
US Airways' claims for breach of contract against British Airways. The
Court dismissed the remaining claims against British Airways and all claims
against American. On February 6, 1998, British Airways filed its answer to
the complaint along with counterclaims against the Company and US Airways.
British Airways' counterclaims alleged that US Airways breached various
provisions of the Investment Agreement and that US Airways breached the
Code Share Agreement between British Airways and US Airways by providing
certain allegedly confidential information to specific third parties. In
addition, British Airways seeks a declaratory judgment regarding certain
payment obligations under its wet lease arrangement with US Airways.
British Airways claimed damages of $16.7 million for the termination of the
code share relationship and an unspecified amount of damages for its
remaining claims. On January 29, 1999, the Company, US Airways and British
Airways jointly filed a pretrial order with the Court, and on February 5,
1999, the Court placed the lawsuit on its trial-ready calendar. On February
5, 1999, British Airways filed a motion for summary judgment seeking
dismissal of the Company's and US Airways' claims and a finding that the
Company and US Airways are liable for breach of the Code Share Agreement.
Subsequently, the Company and US Airways filed a memorandum of law opposing
British Airways' motion. The Company is unable to predict at this time the
ultimate resolution or potential financial impact of these proceedings on
the Company's financial condition or results of operations.
In May 1995, the Company, US Airways and the Retirement Income Plan
for US Airways, Inc. (the Pilots Pension Plan) were sued in federal
district court for the District of Columbia by 481 active and retired
pilots alleging that defendants had incorrectly interpreted the Pilots
Pension Plan provisions and erroneously calculated benefits under the
Pilots Pension Plan. The plaintiffs sought damages in excess of $70
million. In May 1996, the court issued a decision granting US Airways'
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 Pilots Pension Plan was
collectively bargained. The court retained jurisdiction over one count of
the complaint alleging a violation of a disclosure requirement under the
Employee Retirement Income Security Act. The plaintiffs have 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 plaintiff's 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 United States Court of Appeals
for the District of Columbia. In February 1999, the United States Court of
Appeals upheld the District Court's decision originally granted in May 1996
in US Airways' favor.
In February of 1998 a purported class action complaint was filed by a
travel agency in Puerto Rico against seven major U.S. airlines, including
US Airways. The complaint alleges that the defendant airlines are
undercompensating Puerto Rican travel agents in connection with the agents'
sale of travel. The plaintiffs allege that the airlines are contractually
obligated to pay a 10% commission and that the defendant airlines breached
that contract as a result of the introduction of commission caps limiting
commission payable with respect to a single trip to a stated dollar amount
and reducing certain commissions to 8%. The plaintiffs have stated their
damages for the class in the amount of $150 million. On December 22, 1998,
after the filing of various motions by the defendants and some preliminary
discussions, the plaintiffs dismissed this action without the payment of
any amount by US Airways.
63
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. The City and
County of San Francisco has identified US Airways as a potentially
responsible party. The City and County of San Francisco and US Airways
recently entered into an agreement in principle to resolve this matter and
expect to finalize the agreement by April 1, 1999.
(d) GUARANTEES
US Airways guarantees the payment of principal and interest on special
facility revenue bonds issued by certain municipalities to build or improve
airport and maintenance facilities. Under related lease arrangements, US
Airways is required to make rental payments sufficient to pay maturing
principal and interest payments on the bonds. As of December 31, 1998 the
principal amount of these bonds outstanding was $77 million.
(e) CONCENTRATION OF CREDIT RISK
The Company invests available cash in money market securities of
various banks, commercial paper of financial institutions and other
companies with high credit ratings and securities backed by the United
States government.
As of December 31, 1998, most of the Company's receivables related to
tickets sold to individual passengers through the use of major credit cards
or to tickets sold by other airlines and used by passengers on the
Company's airline subsidiaries. These receivables are short-term, generally
being settled within 17 days after sale. Bad debt losses, which have been
minimal in the past, have been considered in establishing allowances for
doubtful accounts.
The Company does not believe it is subject to any significant
concentration of credit risk.
7. REDEEMABLE PREFERRED STOCK
As of December 31, 1998, the Company had no outstanding redeemable
preferred stock. As discussed below, the Company retired two series of
redeemable preferred stock during May 1997 and a third series during March
1998.
As of December 31, 1997, 358,000 shares of the Company's 9 1/4% Series
H Senior Cumulative Convertible Preferred Stock, without par value (Series
H Preferred Stock), were outstanding. The Series H Preferred Stock was
issued in exchange for the Company's 9 1/4% Series A Cumulative Convertible
Redeemable Preferred Stock, without par value (Series A Preferred Stock),
during August 1997. The terms of Series H Preferred Stock were
substantially similar to the terms of the Series A Preferred Stock. On
March 12, 1998, the holders of the Company's Series H Preferred Stock
exercised their right to convert those shares into shares of the Company's
Common Stock. As a result of the conversion transactions, the Company
issued 9.2 million shares of Common Stock and retired its Series H
Preferred Stock.
On May 21, 1997, British Airways Plc (British Airways) converted
28,059.364 shares of Series F Cumulative Convertible Senior Preferred
Stock, without par value (Series F Preferred Stock) into 14.5 million
shares of Common Stock, which it then sold to third parties. On May 22,
1997, US Airways Group repurchased the remaining outstanding shares of
Series F Preferred Stock (1,940.636 shares) and all of the Series T-1
Cumulative Convertible Exchangeable Senior Preferred Stock, without par
value (Series T-1 Preferred Stock), and the Series T-2 Cumulative
Convertible Exchangeable Senior Preferred Stock, without par value (Series
T-2 Preferred Stock) (the Series T-1 Preferred Stock and the Series T-2
Preferred Stock are collectively referred to herein as the Series T
Preferred Stock) for $126 million (which included a premium of $5 million
for the shares
64
of Series F Preferred Stock repurchased and $1 million for the Series T
Preferred Stock). British Airways' holdings stemmed from a 1993 investment
agreement between the two companies which was terminated in March 1997. The
Company believes that British Airways held no ownership interest in the
Company after May 22, 1997.
The Company paid dividends totaling $6 million, $81 million and $48
million to the holders of the Series H Preferred Stock (including amounts
related to the former Series A Preferred Stock) during 1998, 1997 and 1996,
respectively. In addition, the Company paid dividends totaling $44 million
and $35 million on its Series F and Series T Preferred Stock during 1997
and 1996, respectively. Dividend payments during 1997 and 1996 for all
three series included dividends deferred from prior periods and accrued
dividends (interest) on deferred dividends. The Company deferred dividend
payments on all its outstanding preferred stock issuances beginning with
dividends payable on September 30, 1994. After a March 1997 dividend
payment, the Company had paid all dividends in arrears and had resumed
regular quarterly dividend payments on its outstanding redeemable preferred
stock issuances. As mentioned above, the Series H Preferred Stock was
converted into shares of Common Stock during March 1998 and the Series F
and Series T Preferred Stock were converted into shares of Common
Stock/repurchased during May 1997.
8. STOCKHOLDERS' EQUITY
(a) PREFERRED STOCK AND SENIOR PREFERRED STOCK
As of December 31, 1998, the Company had 5.0 million authorized shares
of Preferred Stock, without nominal or par value, and 3.0 million
authorized shares of Senior Preferred Stock, without nominal or par value,
none of which were issued and outstanding. See also Note 7.
(b) SERIES B PREFERRED STOCK
During August 1997, the Company notified the holders of its publicly-
held Series B Cumulative Convertible Preferred Stock (Series B Preferred
Stock) that it would redeem all 4,263,000 outstanding depositary shares
representing shares of Series B Preferred Stock on September 15, 1997 at
$51.75 per depositary share plus accrued dividends of $0.3646 per
depositary share. Because conversion into Common Stock was financially
advantageous to the holders, all but approximately 6,000 depositary shares
were converted prior to the redemption date resulting in the issuance of
10.6 million shares of Common Stock.
The Company paid dividends totaling $56 million to the holders of the
Series B Preferred Stock during 1997 prior to its conversion/redemption.
The Company did not make any dividend payments on the Series B Preferred
Stock during 1996. Dividend payments during 1997 included dividends
deferred from prior periods. The Company deferred dividend payments on all
its outstanding preferred stock issuances beginning with dividends payable
on September 30, 1994. After an April 1997 dividend payment, the Company
had paid all dividends in arrears and had resumed regular quarterly
dividend payments on this preferred stock issuance.
(c) COMMON STOCK
As of December 31, 1998, the Company had 150.0 million authorized
shares of common stock, par value $1.00 per share (Common Stock), of which
101.2 million shares were issued (including shares of Common Stock held in
treasury as discussed in Note 8(d)) and 19.1 million shares were reserved
for offerings under employee stock purchase, stock option, stock incentive
and employee retirement plans.
65
The Company has not paid dividends on its Common Stock since the
second quarter of 1990. There can be no assurance when or if the Company
will resume dividend payments on its Common Stock.
The Company, organized under the laws of the State of Delaware, is
subject to Sections 160 and 170 of the Delaware General Corporation Law
(Delaware Law) with respect to the payment of dividends on or the
repurchase or redemption of its capital stock. As of December 31, 1998, the
Company does not believe that Delaware Law placed any material restrictions
on the Company's ability to pay dividends or its ability to repurchase or
redeem its capital stock.
See Notes 7 and 8(b) for information related to preferred stock
converted into Common Stock during 1998 and 1997.
(d) TREASURY STOCK
The Company held 17.4 million shares and 40,000 shares of Common Stock
in treasury as of December 31, 1998 and 1997, respectively.
The Company announced and completed three common stock purchase plans
during 1998, one authorized for 2.3 million shares to offset stock options
granted to US Airways' pilots in January 1998, one authorized for $500
million of Common Stock and one authorized for 5.0 million shares. The
Company purchased 14.5 million shares of stock under these three plans. In
November 1998, the Company announced a fourth common stock purchase plan
that authorized the purchase of up to $500 million of Common Stock. As of
December 31, 1998, the Company had purchased 3.5 million shares for $178.4
million under the fourth plan.
During 1998 and 1997, employees surrendered 91,000 shares and 125,000
shares of Common Stock, respectively, to the Company in lieu of cash
payments to satisfy tax withholding requirements related to the vesting of
certain Common Stock grants. The Company has typically reissued such shares
upon the exercise of stock options held by employees.
(e) STOCK-BASED COMPENSATION
As of December 31, 1998, approximately 18.2 million shares of Common
Stock were reserved for future grants of Common Stock or the possible
exercise of stock options issued under the Company's five stock option and
incentive plans. The Company accounts for stock-based compensation using
the intrinsic value method as prescribed under APB 25. In accordance with
APB 25, the Company recognized compensation expense (an element of
Personnel costs) related to Common Stock grants of $7 million, $6 million
and $12 million in 1998, 1997 and 1996, respectively, and compensation
expense related to stock option grants of $12 million, $1 million and $8
million in 1998, 1997 and 1996, respectively. In addition, the Company
recognized compensation expense related to stock appreciation rights
(SARs), the Company's only variable stock-based compensation instrument, of
$1 million, $33 million and $42 million in 1998, 1997 and 1996,
respectively. Deferred compensation related to Common Stock grants was $22
million and $7 million as of December 31, 1998 and 1997, respectively, and
deferred compensation related to stock option grants was $13 million and $1
million as of December 31, 1998 and 1997. Deferred compensation is
amortized as Personnel costs over the applicable vesting period. The
Company granted 0.5 million, 0.2 million and 0.6 million shares of Common
Stock during 1998, 1997 and 1996, respectively. The weighted average fair
value per share of Common Stock granted in 1998, 1997 and 1996 was $52, $25
and $17, respectively.
A new five-year labor contract between US Airways and its pilots
became effective January 1, 1998. A provision of the labor contract
established the 1998 Pilot Stock Option Plan of US Airways Group, Inc.
(1998 Plan). The 1998 Plan authorizes the Company to grant in six
66
separate series 11.5 million stock option awards to its pilots over the
five-year life of the labor contract (with exercise prices established
based on the fair market value of the Company's common stock over a time
period preceding each grant). Options granted under the first series and
second through fifth series are subject to a two-year and one-year vesting
period, respectively. Options granted under the last series are not subject
to any vesting period. All awards under the 1998 Plan expire ten years
after grant.
The 1997 Stock Incentive Plan of US Airways Group, Inc. (1997 Plan),
which became effective during March 1997, authorizes the Company to grant
Common Stock and stock option awards to non-officer key employees provided
that no more than 750,000 shares of Common Stock are issued as a result of
the awards. The 1996 Stock Incentive Plan of US Airways Group, Inc. (1996
Plan), which became effective during May 1996 and encompasses the Company's
former 1988 Stock Incentive Plan of USAir Group, Inc., authorizes the
Company to grant Common Stock and stock option awards to key employees
provided that no more than 8.4 million shares of Common Stock are issued as
a result of the awards. All stock option awards under the 1997 Plan and
1996 Plan expire after a period of ten years and one month from date of
grant. Under both plans, the Company uses its discretion in setting the
vesting rate of each award. All awards granted prior to December 31, 1998
have a vesting period of five years or less.
Under the 1992 Stock Option Plan of US Airways Group, Inc. (1992
Plan), certain employees whose pay was reduced, generally during a 12 month
period in 1992 and 1993, received stock options to purchase 50 shares of
Common Stock at a price of $15 per share for each $1,000 of salary
reduction. Participating employees had five years from the grant date to
exercise such stock options (see Note 5(e) for related information).
Effective November 1, 1996, the Company added a SAR feature to the 1992
Plan and granted SARs to stock option holders on a one-for-one basis. For
each SAR, the holder was entitled to receive a cash distribution equal to
the excess of the fair market value of a share of Common Stock above $15.
The exercise of any SAR canceled its tandem stock option and, conversely,
the exercise of any stock option canceled its tandem SAR. The SARs had the
same expiration date as the tandem stock options. In August 1998, the
remaining awards under the 1992 Plan expired and the plan ceased. The 1984
Stock Option and Stock Appreciation Rights Plan of US Airways Group, Inc.
(1984 Plan) authorized the Company to grant stock option and SAR awards to
key employees provided that no more than 600,000 shares of Common Stock
were issued as a result of the awards. All awards under the 1984 Plan
expire after a period of ten years and one month from date of grant. No
SARs awarded under the 1984 Plan were outstanding as of December 31, 1998.
The Company may no longer grant awards under the 1992 and 1984 Plans. All
awards previously granted under both of these plans have vested.
The US Airways Group, Inc. Nonemployee Director Stock Incentive Plan
(Director Plan), which became effective during May 1996, authorizes the
Company to grant stock option awards to each nonemployee director provided
that no more than 70,000 shares of Common Stock are issued as a result of
the awards. All stock option awards under the Director Plan expire after
ten years from date of grant and are subject to a one-year vesting period.
(this space intentionally left blank)
67
The following table summarizes stock option transactions pursuant to
the Company's various stock option and incentive plans for the years ended
December 31, 1998, 1997 and 1996:
1998 1997 1996
---------------- ---------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- -------- ------- -------- ------- --------
(000) (000) (000)
Stock Options
- -------------
Outstanding at
beginning of year 4,633 $18 9,782 $17 8,426 $17
Granted (1) 2,598 $61 951 $27 97 $17
Granted (2) 2,300 $51 - - 2,415 $13
Exercised (704) $20 (2,119) $19 (435) $15
Forfeited (3)(4) (945) $53 (3,795) $16 (673) $16
Expired (14) $15 (186) $24 (48) $32
----- ------ -----
Outstanding at
end of year 7,868 $37 4,633 $18 9,782 $17
Exercisable at
end of year 2,558 2,792 7,802
(1) Exercise price equal to the fair market value of a share of Common
Stock
at date of grant; includes 466,250, 50,000 and 20,000 stock options
that
were repriced during 1998, 1997 and 1996, respectively.
(2) Exercise price was lower than the fair market value of a share of
Common
Stock at measurement date for grant.
(3) Activity during 1998, 1997 and 1996 includes cancellation of repriced
stock options. See (1) above.
(4) Activity during 1998, 1997 and 1996 includes 0.1 million, 3.5 million
and
0.6 million stock options, respectively, that were forfeited as a
result
of their tandem SAR being exercised.
The weighted average fair value per stock option for stock options
which have an exercise price equal to the fair market value of a share of
Common Stock at date of grant was $34, $18 and $12 for 1998, 1997 and 1996,
respectively. The weighted average fair value per stock option for stock
options which have an exercise price lower than the fair market value of a
share of Common Stock at date of grant was $41 and $13 for 1998 and 1996,
respectively (no such grants during 1997).
Stock Options Stock Options
Outstanding Exercisable
---------------------------------- ---------------------
Weighted
Number Average Weighted Weighted
of Options Remaining Average Average
Range of Outstanding Contractual Exercise Number Exercise
Exercise Prices at 12/31/98 Life Price Exercisable Price
- --------------- ----------- ----------- -------- ----------- --------
(000) (years) (000)
$ 4.00 to $12.00 89 5.9 $ 8 89 $ 8
$12.01 to $20.00 2,516 7.1 $14 1,901 $13
$20.01 to $40.00 936 6.4 $25 428 $24
$40.01 to $60.00 3,415 9.3 $50 139 $47
$60.01 to $76.00 912 9.6 $70 - -
During 1995, the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), which requires the use of fair value
techniques to determine compensation expense associated with stock-based
compensation. Although the Company has opted to continue to apply the
provisions of APB 25 to determine compensation expense, as permitted under
SFAS 123, the Company is obligated to disclose certain information
including pro forma net income and earnings per share as if SFAS 123 had
been adopted by the Company to measure compensation expense. Had
compensation cost been measured in accordance with SFAS 123, the Company's
68
net income and earnings per common share would have been reduced to the pro
forma numbers indicated in the table below. In order to calculate the pro
forma net income information presented below, the Company used the Black-
Scholes stock option-pricing model with the following weighted-average
assumptions for 1998, 1997 and 1996, respectively: stock volatility of
51.4%, 52.6% and 50.1%; risk-free interest rates of 5.5%, 6.6% and 6.2%;
expected stock option life of eight years, eight years and nine years; and
no dividend yield.
1998 1997 1996
---- ---- ----
(in millions, except per share data)
Net Income As reported $538 $1,025 $263
Pro forma $507 $1,018 $248
Earnings Applicable to As reported $532 $961 $175
Common Stockholders Pro forma $500 $954 $159
EPS-Basic (1) As reported $5.75 $12.32 $2.73
Pro forma $5.41 $12.23 $2.49
EPS-Diluted (1) As reported $5.60 $9.87 $2.35
Pro forma $5.33 $9.83 $2.21
(1) The Company's EPS figures (as reported and pro forma) for 1996 have
been
restated to conform with SFAS 128 (see Note 1(n)).
The pro forma net income and EPS information presented above reflects
stock options granted during 1995 and in later years. Therefore, the full
impact of calculating compensation expense for stock options under SFAS 123
is not reflected in the pro forma net income and earnings per common share
amounts above because compensation expense is recognized over the stock
option's vesting period and compensation expense for stock options granted
prior to January 1, 1995 is not considered.
(f) ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX EFFECT
The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income"(SFAS 130), effective January 1,
1998. SFAS 130 establishes standards for the reporting and presentation of
comprehensive income and its components in financial statements.
Comprehensive income encompasses net income and "other comprehensive
income," which includes all other non-owner transactions and events that
change stockholders' equity. The Company's other comprehensive income
includes unrealized gains on available-for-sale securities and an
adjustment for minimum pension liability, both shown net of income tax
effects.
Unrealized gains on available-for-sale securities are accounted for in
accordance with SFAS 115. The Company records an adjustment to
Stockholders' Equity (Deficit) to reflect differences between the fair
value of investments in marketable equity securities and short-term
investments (both types of investments are considered "available-for-
sale" under SFAS 115) and their respective carrying values at each balance
sheet date. In accordance with SFAS 87, the Company recorded an Adjustment
for minimum pension liability as of December 31, 1998, 1997 and 1996. SFAS
87 requires the recognition of an additional minimum pension liability for
each defined benefit plan for which the accumulated benefit obligation
exceeds the fair value of the plan's assets and accrued pension costs. An
offsetting intangible asset is recognized for each additional minimum
pension liability recorded. Because each intangible asset recognized is
limited to the amount of unrecognized prior service cost, any balance is
reflected as a reduction of Stockholders' Equity (Deficit).
69
As presented in the accompanying Consolidated Statements of Changes in
Stockholders' Equity (Deficit), the Company recognized comprehensive income
of $572 million for the year ended December 31, 1998, including net income
of $538 million and other comprehensive income of $34 million. For the year
ended December 31, 1997, the Company recognized comprehensive income of
$1,151 million, including net income of $1,025 million and other
comprehensive income of $126 million. For the year ended December 31, 1996,
the Company recognized comprehensive income of $306 million, including net
income of $263 million and other comprehensive income of $43 million.
The components of other comprehensive income and the related income
tax effects are as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- ------------------------- ------------------------
Before Tax Net Before Tax Net Before Tax Net
tax effect of tax tax effect of tax tax effect of tax
effect (expense) effect effect (expense) effect effect (expense) effect
------ --------- ------ ------ --------- ------ ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized gain on
available-for-sale
securities:
Unrealized gains during
the period $112 $(39) $ 73 $160 $(56) $104 $ - $ - $ -
Reclassification
adjustment for gains
included in net income
during the period - - - - - - - - -
--- --- --- --- --- --- --- --- ---
Net unrealized gains 112 (39) 73 160 (56) 104 - - -
Change in adjustment for
minimum pension
liability (69) 30 (39) 19 3 22 43 - 43
--- --- --- --- --- --- --- --- ---
Other comprehensive
income $ 43 $ (9) $ 34 $179 $(53) $126 $ 43 $ - $ 43
=== === === === === === === === ===
</TABLE>
9. OPERATING SEGMENTS AND RELATED DISCLOSURES
In 1998, the Company adopted Statement of Financial Accounting
Standards No. 131 "Disclosure about Segments of an Enterprise and Related
Information" (SFAS 131). SFAS 131 establishes standards for reporting
information about operating segments in annual financial statements and
requires selected information about operating segments in interim financial
statements. SFAS 131 also establishes standards for related disclosures
about products and services, and geographic areas. Operating segments are
defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
The Company has two reportable operating segments: US Airways and US
Airways Express. The US Airways segment includes the operations of US
Airways (excluding USAM) and Shuttle. 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. Both reportable operating segments are
engaged in the business of transporting passengers, property and mail, but
have different operating and economic characteristics. US Airways offers
air transportation using exclusively jets. Its cost structure is higher
than US Airways Express due to, among other things, higher labor and
operating equipment costs. US Airways Express provides air transportation
using primarily turboprop aircraft. Its route network is designed to feed
traffic into US Airways' route system at several points, primarily at US
Airways' hubs. All Other (as presented in the table on the following page)
reflects the activity of subsidiaries other than those included in the
Company's two reportable operating segments. See also Notes 1 (a) and 1
(b).
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (see Note 1).
Intersegment sales are accounted for at fair value as if the sales were to
third parties. The Company evaluates segment performance based on several
factors, of which the primary financial measure is income before taxes.
70
<TABLE>
Financial information for each reportable operating segment is set forth
below (millions):
<CAPTION>
Year ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Operating Revenues:
US Airways external $7,956 $7,842 $7,485
US Airways intersegment 62 55 74
US Airways Express external 727 616 584
US Airways Express intersegment 26 26 35
All Other 5 56 73
Intersegment elimination (88) (81) (109)
----- ----- -----
$8,688 $8,514 $8,142
===== ===== =====
Depreciation and amortization:
US Airways $ 304 $ 387 $ 303
US Airways Express 14 14 13
All Other - - -
----- ----- -----
$ 318 $ 401 $ 316
===== ===== =====
Interest income:
US Airways $ 182 $ 114 $ 80
US Airways Express 2 2 3
All Other 22 25 29
Intercompany elimination (95) (33) (37)
----- ----- -----
$ 111 $ 108 $ 75
===== ===== =====
Interest expense:
US Airways $ 235 $ 267 $ 284
US Airways Express 4 5 5
All Other 79 17 15
Intercompany elimination (95) (33) (37)
----- ----- -----
$ 223 $ 256 $ 267
===== ===== =====
Equity in earnings of affiliates:
US Airways $ - $ - $ -
US Airways Express - - -
All Other (1) 1 30 37
----- ----- -----
$ 1 $ 30 $ 37
===== ===== =====
Income (Loss) Before Taxes:
US Airways $ 775 $ 338 $ 107
US Airways Express 155 118 54
All Other (1) (28) 216 114
----- ----- -----
$ 902 $ 672 $ 275
===== ===== =====
Assets (2):
US Airways $7,164 $7,893 $7,234
US Airways Express 167 177 193
All Other 539 302 104
----- ----- -----
$7,870 $8,372 $7,531
===== ===== =====
Capital Expenditures:
US Airways $ 624 $ 271 $ 176
US Airways Express 5 8 4
All Other 13 1 1
----- ----- -----
$ 642 $ 280 $ 181
===== ===== =====
(1) See related information in Note 10.
(2) Substantially all located in the United States.
Information concerning operating revenues (based on RPMs and yield) in
principal geographic areas is as follows (millions):
1998 1997 1996
---- ---- ----
United States $8,143 $7,977 $7,818
Foreign 545 537 324
----- ----- -----
$8,688 $8,514 $8,142
===== ===== =====
</TABLE>
71
10. USAM'S SALE OF CERTAIN INVESTMENTS
As of December 31, 1996 and prior to the events described below, USAM
owned 11% of the Galileo International Partnership (GIP) and approximately
21% of the Apollo Travel Services Partnership (ATS). GIP owned and
operated the Galileo CRS and ATS marketed the Galileo CRS in the U.S. and
Mexico.
On July 30, 1997, Galileo completed an initial public offering (IPO)
and used the proceeds, together with the proceeds of bank financing, to
purchase ATS. Immediately preceding the IPO, GIP was merged with and into a
wholly-owned limited liability company subsidiary of Galileo and USAM
received common stock shares in Galileo in the same proportion as its
partnership interest in GIP. As part of the IPO, USAM sold some of its
Galileo shares and its interest in Galileo was reduced from 11% to
approximately 6.7%. USAM received proceeds of $62 million and recognized a
pre-tax gain of $50 million from the sell-down of its interest in Galileo
and received proceeds of $162 million and recognized a pre-tax gain of $130
million in connection with the ATS sale.
As of December 31, 1998, USAM owned approximately 6.7% of Galileo and
11% of GJP. USAM applies the provisions of SFAS 115 to account for its
remaining investment in Galileo, which is classified as "available-for-
sale."
USAM received distributions from GIP and GJP of $2 million and $1
million, respectively, during 1998, and $13 million and $1 million,
respectively, during 1997. USAM also received a distribution from ATS of $5
million in 1997.
11. RELATED PARTY TRANSACTIONS
US Airways wet leased B767-200ER aircraft, including cockpit and cabin
crews, to British Airways in order to serve three routes between the U.S.
and London beginning in June 1993 and ending in May 1996. During 1996, US
Airways recognized other operating revenues of $13 million related to these
arrangements which were offset by an equal amount of other operating
expenses. US Airways also had various agreements with British Airways for
ground handling at certain airports, contract training and other services.
US Airways recognized other operating revenues of $2 million for the first
five months of 1997 and $6 million for the year 1996 related to services US
Airways performed for British Airways.
US Airways terminated the code share and other business arrangements
between the two companies effective March 29, 1997. See Note 7 for
additional information related to the Company's relationship with British
Airways.
During 1998 and 1997, employees surrendered 91,000 shares and 125,000
shares of Common Stock, respectively, to the Company in lieu of cash
payments to satisfy tax withholding requirements related to the vesting of
certain Common Stock grants (see also Note 8(d)).
(this space intentionally left blank)
72
12. VALUATION AND QUALIFYING ACCOUNTS
Allowance For
----------------------------------
Uncollectible Inventory
Accounts Obsolescence
------------- ------------
(in millions)
Balance as of December 31, 1995 $ 12 $164
Additions charged to expense 11 11
Amounts charged to allowance (11) (29)
--- ---
Balance as of December 31, 1996 12 146
Additions charged to expense 14 10
Amounts charged to allowance (9) (9)
Other (1) 1 1
--- ---
Balance as of December 31, 1997 18 148
Additions charged to expense 9 12
Amounts charged to allowance (5) (45)
--- ---
Balance as of December 31, 1998 $ 22 $115
=== ===
(1) Reserves of Shuttle, which was acquired by US Airways Group in 1997
(see Note 1(a)).
<TABLE>
13. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in millions, except per share amounts)
<S> <C> <C> <C> <C>
1998
Operating Revenues $2,063 $2,297 $2,208 $2,121
Operating Income $ 192 $ 374 $ 270 $ 178
Net Income $ 98 $ 194 $ 142 $ 104
Earnings Applicable to
Common Stockholders $ 92 $ 194 $ 142 $ 104
Earnings per Common Share
Basic $ 0.98 $ 1.99 $ 1.54 $ 1.20
Diluted $ 0.96 $ 1.95 $ 1.51 $ 1.18
1997
Operating Revenues $2,101 $2,213 $2,115 $2,085
Operating Income $ 176 $ 256 $ 83 $ 70
Net Income $ 153 $ 206 $ 187 $ 479
Earnings Applicable to
Common Stockholders $ 132 $ 182 $ 176 $ 471
Earnings per Common Share
Basic $ 2.05 $ 2.53 $ 2.10 $ 5.16
Diluted $ 1.45 $ 1.92 $ 1.82 $ 4.66
See also Note 14.
Note: The sum of the four quarters may not equal the totals for the year due
to rounding.
</TABLE>
14. NONRECURRING ITEMS AND SIGNIFICANT QUARTERLY ADJUSTMENTS
(a) 1998
The Company's results for 1998 include one nonrecurring item recorded
by US Airways during the third quarter related to the early termination of
leases for two BAe-146 aircraft. US Airways reversed $3 million of
previously accrued rent obligations related to these aircraft (recorded as
a credit to Aircraft rent expense).
73
(b) 1997
The Company's results for 1997 include certain nonrecurring items
recorded by US Airways: (i) $122 million in Personnel costs (including a
fourth quarter charge of $115 million related to an early retirement
program for pilots (see also Note 5(a)) and a second quarter charge of $7
million related to estimated employee severance payments due to efficiency
measures US Airways announced during May 1997); (ii) a $1 million credit to
Aircraft rent due to the reversal of previously accrued lease obligations
upon the subleasing of an additional BAe-146 aircraft, recognized in the
second quarter (see also Note 14(c) below); (iii) $5 million in Other rent
and landing fees (including a third quarter charge of $2 million to write-
down certain equipment to be disposed of and a second quarter charge of $3
million to write-off lease obligations at certain facilities to be
abandoned (net of any anticipated sublease revenues), both related to the
May 1997 efficiency measures); (iv) $89 million in Depreciation and
amortization (including third quarter charges of $11 million related to the
May 1997 efficiency measures to write-down certain equipment to be disposed
of and a $59 million SFAS 121 impairment charge resulting from US Airways'
September 1997 decision to retire its remaining DC-9-30 aircraft over the
next several years, and second quarter charges of $1 million to write-off
certain leasehold improvements and an $18 million SFAS 121 impairment
charge to write-down certain DC-9-30 aircraft, both related to the May 1997
efficiency measures); and (v) $180 million in Gains on sales of interests
in affiliates which resulted from USAM's sale of certain investments as
discussed in Note 10. The Company also recognized certain tax benefits in
1997, as discussed in Note 3.
(c) 1996
The Company's results for 1996 include two nonrecurring items recorded
by US Airways during the second quarter of 1996 related to US Airways'
subleasing of eleven non-operating BAe-146 aircraft. US Airways reversed $23
million of previously accrued rent obligations related to these aircraft
against Aircraft rent expense and reversed $7 million against Aircraft
maintenance expense related to previously accrued lease return provisions.
(this space intentionally left blank)
74
ITEM 8B. CONSOLIDATED FINANCIAL STATEMENTS FOR US AIRWAYS, INC.
INDEPENDENT AUDITORS' REPORT
The Stockholder and Board of Directors
US Airways, Inc.:
We have audited the accompanying consolidated balance sheets of US Airways,
Inc. and subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of operations, cash flows, and changes in
stockholder's equity (deficit) for each of the years in the three year
period ended December 31, 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of US
Airways, Inc. and subsidiary as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in
the three year period ended December 31, 1998, in conformity with generally
accepted accounting principles.
KPMG LLP
Washington, D. C.
February 24, 1998
(this space intentionally left blank)
75
<TABLE>
US Airways, Inc.
Consolidated Statements of Operations
Year Ended December 31,
- -----------------------------------------------------------------------------
(in millions)
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Operating Revenues
Passenger transportation $7,021 $7,112 $6,799
US Airways Express transportation revenues 711 605 145
Cargo and freight 164 177 159
Other 660 607 601
---- ----- ----
Total Operating Revenues 8,556 8,501 7,704
Operating Expenses
Personnel costs 2,888 3,012 3,041
Aviation fuel 575 761 781
Commissions 474 554 547
Aircraft rent 381 416 387
Other rent and landing fees 381 402 394
Aircraft maintenance 357 387 312
Other selling expenses 336 346 331
Depreciation and amortization 290 385 301
US Airways Express capacity purchases 550 486 93
Other 1,334 1,166 1,148
----- ----- -----
Total Operating Expenses 7,566 7,915 7,335
----- ----- -----
Operating Income 990 586 369
Other Income (Expense)
Interest income 182 112 76
Interest expense (224) (260) (284)
Interest capitalized (10) 12 8
Equity in earnings of affiliates 1 30 37
Gains on sales of interests in affiliates - 180 -
Other, net (3) 13 (15)
---- ----- ----
Other Income (Expense), Net (54) 87 (178)
---- ----- ----
Income Before Taxes 936 673 191
Provision (Credit) for Income Taxes 377 (379) 8
---- ----- ----
Net Income $ 559 $1,052 $ 183
==== ===== ====
See accompanying Notes to Consolidated Financial Statements.
76
</TABLE>
<TABLE>
US Airways, Inc.
Consolidated Balance Sheets
December 31,
- ----------------------------------------------------------------------------
(dollars in millions, except per share amount)
<CAPTION>
ASSETS 1998 1997
---- ----
<S> <C> <C>
Current Assets
Cash $ 21 $ 17
Cash equivalents 583 1,075
Short-term investments 598 870
Receivables, net 351 296
Receivables from related parties, net 169 195
Materials and supplies, net 202 200
Deferred income taxes 291 150
Prepaid expenses and other 174 132
---- ----
Total Current Assets 2,389 2,935
Property and Equipment
Flight equipment 4,924 4,968
Ground property and equipment 886 851
Less accumulated depreciation and amortization (2,528) (2,429)
----- -----
3,282 3,390
Purchase deposits - 70
----- -----
Total Property and Equipment, Net 3,282 3,460
Other Assets
Goodwill, net 457 473
Other intangibles, net 391 283
Investment in marketable equity securities 301 190
Receivable from parent company 306 210
Deferred income taxes - 221
Other assets, net 572 493
----- ----
Total Other Assets 2,027 1,870
----- -----
$7,698 $8,265
===== =====
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities
Current maturities of long-term debt $ 71 $ 186
Accounts payable 379 297
Traffic balances payable and unused tickets 757 702
Accrued aircraft rent 155 177
Accrued salaries, wages and vacation 323 306
Other accrued expenses 470 463
----- -----
Total Current Liabilities 2,155 2,131
Long-term Debt, Net of Current Maturities 1,954 2,425
Deferred Credits and Other Liabilities
Accrued aircraft rent 330 319
Deferred gains, net 335 330
Postretirement benefits other than pensions, noncurrent 1,217 1,152
Noncurrent employee benefit liabilities and other 1,105 806
----- -----
Total Deferred Credits and Other Liabilities 2,987 2,607
Commitments and Contingencies
Stockholder's Equity
Common stock, par value $1 per share, authorized
1,000 shares, issued and outstanding 1,000 shares - -
Paid-in capital 2,431 2,425
Retained earnings (deficit) (855) (1,414)
Receivable from parent company (1,099) -
Accumulated other comprehensive income,
net of income tax effect 125 91
----- -----
Total Stockholder's Equity 602 1,102
----- -----
$7,698 $8,265
===== =====
See accompanying Notes to Consolidated Financial Statements.
77
</TABLE>
<TABLE>
US Airways, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
- ------------------------------------------------------------------------------
(in millions)
<CAPTION>
1998 1997 1996
---- ---- ----
<C> <S> <S> <S>
Cash and Cash equivalents at beginning of year $1,092 $ 950 $ 880
----- ----- ----
Cash flows from operating activities
Net income 559 1,052 183
Adjustments to reconcile net income to net cash
provided by (used for) operating activities
Depreciation and amortization 290 385 301
Losses (gains) on dispositions of property (17) (15) 2
Gains on sales of interests in affiliates - (180) -
Amortization of deferred gains and credits (26) (26) (26)
Other 19 26 22
Changes in certain assets and liabilities
Decrease (increase) in receivables (31) (80) (13)
Decrease (increase) in materials
and supplies, prepaid expenses
and pension assets (108) 29 (32)
Decrease (increase) in deferred income taxes 184 (422) -
Increase (decrease) in traffic
balances payable and unused tickets 55 (14) 78
Increase (decrease) in accounts payable
and accrued expenses 243 (219) 319
Increase (decrease) in postretirement
benefits other than pensions, noncurrent 66 58 76
----- ----- ----
Net cash provided by (used for)
operating activities 1,234 594 910
Cash flows from investing activities
Capital expenditures (489) (194) (176)
Transfer of aircraft purchase deposits
to parent company - 7 -
Proceeds from the sale-leaseback of aircraft 189 - -
Proceeds from dispositions of property 112 82 22
Proceeds from sales of interests in affiliates - 224 -
Decrease (increase) in short-term investments 275 (235) (604)
Decrease (increase) in restricted cash
and investments (41) 18 11
Funding of parent company's common stock purchases (1,081) - -
Funding of parent company's purchase
of Shuttle, Inc. - (210) -
Funding of parent company's aircraft
purchase deposits (135) (84) -
Payment of debt for affiliated company - - (43)
Collection on note receivable from
affiliated company - - 43
Other 4 28 (6)
----- ----- ----
Net cash provided by (used for)
investing activities (1,166) (364) (753)
Cash flows from financing activities
Issuances of debt - - 103
Principal payments on long-term debt (556) (88) (190)
----- ----- ----
Net cash provided by (used for)
financing activities (556) (88) (87)
----- ----- ----
Net increase (decrease) in Cash and Cash equivalents (488) 142 70
----- ----- ----
Cash and Cash equivalents at end of year $ 604 $1,092 $ 950
===== ===== ====
Noncash investing and financing activities
Net unrealized gain on available-for-sale
securities, net of income tax effect $ 73 $ 104 $ -
Reduction of aircraft-related purchase deposits $ 61 $ - $ -
Reduction of parent company receivable-
assignment of aircraft purchase
rights by parent company $ 22 $ - $ -
Issuances of debt - refinancing of debt
secured by aircraft $ - $ - $ 160
Reductions of debt - refinancing of debt
secured by aircraft $ - $ - $ 154
Reduction of parent company debt -
aircraft acquisitions $ - $ - $ 69
Issuances of debt - aircraft acquisitions $ - $ - $ 29
Supplemental Information
Cash paid during the year for interest,
net of amount capitalized $ 233 $ 246 $ 258
Net cash paid during the year for income taxes $ 228 $ 95 $ 11
See accompanying Notes to Consolidated Financial Statements.
78
</TABLE>
<TABLE>
<CAPTION>
US Airways, Inc.
Consolidated Statements of Changes in Stockholder's Equity (Deficit)
Three Years Ended December 31, 1998
- -------------------------------------------------------------------------------------------------------------------------
(in millions)
Accumulated other comprehensive
income, net of income tax effect
-----------------------------------
Unrealized Adjustment
Receivable gain on for
Retained from available- minimum
Common Paid-in earnings parent for-sale pension Comprehensive
stock capital (deficit) company securities * liability * Total income
----- ------- --------- ------- ------------ ---------- ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1995 $ - $2,416 $(2,649) $ - $ - $(78) $ (311)
Adjustment for minimum pension
liability * - - - - - 43 43 $ 43
Net income - - 183 - - - 183 183
--- ----- ------ ------ --- --- ------ -----
Total comprehensive income $ 226
=====
Balance as of December 31, 1996 - 2,416 (2,466) - - (35) (85)
Unrealized gain on available-
for-sale securities * - - - - 104 - 104 $ 104
Adjustment for minimum pension
liability * - - - - - 22 22 22
Tax benefit from employee
stock option exercises - 9 - - - - 9 -
Net income - - 1,052 - - - 1,052 1,052
--- ----- ------ ------ --- --- ------ -----
Total comprehensive income $1,178
=====
Balance as of December 31, 1997 - 2,425 (1,414) - 104 (13) 1,102
Unrealized gain on available-
for-sale securities * - - - - 73 - 73 $ 73
Adjustment for minimum pension
liability * - - - - - (39) (39) (39)
Tax benefit from employee
stock option exercises - 6 - - - - 6 -
Funding of parent company's
common stock purchases - - - (1,099) - - (1,099) -
Net income - - 559 - - - 559 559
--- ----- ------ ------ --- --- ------ -----
Total comprehensive income $ 593
Balance as of December 31, 1998 $ - $2,431 $ (855) $(1,099) $177 $(52) $ 602 =====
=== ===== ====== ====== === === ======
* Net of income tax effect
See accompanying Notes to Consolidated Financial Statements.
79
</TABLE>
US AIRWAYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION AND NATURE OF OPERATIONS
The accompanying Consolidated Financial Statements include the
accounts of US Airways, Inc. (US Airways) and its wholly-owned subsidiary
USAM Corp. (USAM). US Airways is a wholly-owned subsidiary of US Airways
Group, Inc. (US Airways Group). All significant intercompany accounts and
transactions have been eliminated. However, as discussed further in Note
10, US Airways' financial results are significantly influenced by related
party transactions.
US Airways is a major United States air carrier engaged primarily in
the business of transporting passengers, property and mail. US Airways
operates predominantly in the Eastern U.S. with major connecting hubs at
airports in Charlotte, Philadelphia and Pittsburgh. US Airways also has
substantial operations at Baltimore/Washington International Airport,
Boston's Logan International Airport, New York's LaGuardia Airport and
Washington's Ronald Reagan Washington National Airport. US Airways enplaned
58 million passengers during 1998 and is currently the sixth largest
domestic air carrier, as ranked by total revenue passenger miles (RPMs).
As of December 31, 1998, USAM owned approximately 6.7% of Galileo
International, Inc. (Galileo), which provides electronic global
distribution services for the travel industry and 11% of the Galileo Japan
Partnership (GJP). GJP markets the Galileo Computer Reservation System
(Galileo CRS) in Japan. USAM accounts for its investment in Galileo using
the cost method (see Note 1(g)). USAM accounts for its investment in GJP
using the equity method because it is represented on the board of directors
and therefore participates in policy making processes. Until July 1997, as
discussed in Note 9, USAM held interests in the Galileo International
Partnership and the Apollo Travel Services Partnership and accounted for
these investments using the equity method.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Certain 1997 and 1996 amounts have been reclassified to conform with
1998 classifications.
(b) OPERATING ENVIRONMENT
Most of US Airways' operations are in competitive markets. Competitors
include other air carriers along with other methods of transportation.
US Airways has the highest unit operating costs among the major
domestic air carriers. The growth and expansion of competitors with lower
cost and fare structures in its markets has put considerable pressure on US
Airways to reduce its operating costs in order to maintain competitiveness.
In addition, although a competitive strength in some regards, the
concentration of significant operations in the Eastern U.S. results in US
Airways being susceptible to changes in certain regional conditions that
may have an adverse effect on its results of operations and financial
condition. In addition, US Airways' parent company has agreements to
acquire up to 430 new Airbus aircraft, accompanying jet engines and
ancillary assets. These agreements are expected to increase US Airways'
financing needs and result in a significant increase in its financial
80
obligations (see Note 6(a) for additional information).
Personnel costs represent US Airways' largest expense category. As of
December 31, 1998, US Airways employed approximately 38,200 full-time
equivalent employees. Approximately 35,175 (87%) of US Airways' employees
are covered by collective bargaining agreements with various unions or will
be covered by collective bargaining agreements for which initial
negotiations are in progress. A new five-year contract between US Airways
and its pilots became effective January 1, 1998. US Airways' contracts with
its mechanics and related employees, flight attendants, flight crew
training instructors, flight simulator engineers and dispatch employees are
currently amendable; talks with respect to new contracts are ongoing. US
Airways is also negotiating with representatives of its fleet service and
passenger service employees with respect to initial labor contracts.
US Airways cannot predict the ultimate outcome of any of these negotiations
or the timing of any new agreements. US Airways believes that its new
contract with its pilots is helping it to address its high cost structure.
US Airways operations are largely dependent on the availability of
aviation fuel. The availability and price of aviation fuel is largely
determined by actions generally outside of US Airways' control. US Airways
has a diversified aviation fuel supplier network and uses certain risk
management techniques (see Note 2(a)) in order to help ensure aviation fuel
availability and partially protect itself from temporary aviation fuel
price fluctuations.
(c) CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
All highly liquid investments purchased within three months of
maturity are classified as Cash equivalents. Short-term investments consist
primarily of certificates of deposit and commercial paper purchased with
maturities greater than three months but less than one year.
US Airways classifies securities underlying its Cash equivalents and
Short-term investments as "available-for-sale" in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115). Cash equivalents are
stated at cost, which approximates fair value due to the highly liquid
nature and short maturities of the underlying securities. Short-term
investments are stated at fair value with the offsetting unrecognized gain
or loss reflected as a separate component of Stockholder's Equity within
Accumulated other comprehensive income, net of income tax effect. See also
Note 7(c).
(d) MATERIALS AND SUPPLIES, NET
Inventories of materials and supplies are valued at the lower of cost
or fair value. Costs are determined using average costing methods and are
charged to operations as consumed. An allowance for obsolescence is
provided for flight equipment expendable and repairable parts.
(e) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost or, if acquired under capital
lease, at the lower of the present value of minimum lease payments or fair
value of the asset at the inception of the lease. Interest expenses related
to the acquisition of certain property and equipment are capitalized as an
additional cost of the asset or as a leasehold improvement if the asset is
leased. Costs of major improvements are capitalized for both owned and
leased assets. Maintenance and repairs are recognized as operating expenses
as incurred.
Depreciation and amortization expense for principal asset
classifications is calculated on a straight-line basis to an estimated
residual value. Depreciable lives are 17-20 years for operating flight
equipment, 30 years for facilities and 5-10 years for other ground property
and equipment. Improvements to leased assets are depreciated over the term
of the lease of the related asset. The
81
cost of property acquired under capital lease is amortized on a straight-
line basis to Depreciation and amortization expense over the term of the
lease. When property and equipment is sold or retired any gain or loss is
recognized in the Other, net category of Other Income (Expense).
US Airways monitors the recoverability of the carrying value of its
long-lived assets. Under the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of" (SFAS 121), US Airways
recognizes an "impairment charge" when the net undiscounted future cash
flows from an asset's use (including any proceeds from disposition) are
less than the asset's carrying value and the asset's carrying value exceeds
its fair value. The impairment charge reflects writing-down the asset to
fair value. See Note 13(b) for impairment charges recognized by US Airways
during 1997.
(f) GOODWILL AND OTHER INTANGIBLES, NET
Goodwill, the cost in excess of fair value of identified net assets
acquired, is amortized on a straight-line basis over 40 years. The $629
million goodwill resulting from the acquisitions of Pacific Southwest
Airlines (Pacific Southwest) and Piedmont Aviation, Inc. (Piedmont
Aviation), both in 1987, is amortized as Depreciation and amortization
expense. As of December 31, 1998 and 1997, accumulated amortization related
to the Pacific Southwest and Piedmont Aviation acquisitions was $176
million and $160 million, respectively. Goodwill of $4 million resulting
from USAM's computer reservation system investment is being amortized as a
component of Other Income (Expense), consistent with the classification of
the related income from this investment. As of December 31, 1998 and 1997,
USAM's related accumulated amortization was $1 million. US Airways
periodically evaluates whether goodwill is impaired by comparing the
goodwill balances with estimated future undiscounted cash flows which, in
US Airways' judgment, are attributable to the goodwill. This analysis is
performed separately for the goodwill that resulted from each acquisition.
Other intangible assets consist mainly of purchased operating rights
at various airports, capitalized software costs and the intangible asset
associated with the underfunded amounts of certain pension plans. The cost
of operating rights and capitalized software costs are amortized on a
straight-line basis over the expected periods of benefit as Depreciation
and amortization expense. Operating rights, which are valued at purchase
cost or appraised value if acquired with Pacific Southwest or Piedmont
Aviation, are amortized over periods ranging from ten to 25 years and
capitalized software costs are amortized over five years. The intangible
pension asset is recognized in accordance with Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for Pensions" (SFAS
87) (see Note 7(c)). As of December 31, 1998 and 1997, accumulated
amortization related to other intangible assets was $165 million and $149
million, respectively.
Based on the most recent analyses, US Airways believes that goodwill
and other intangible assets were not impaired as of December 31, 1998.
(g) INVESTMENT IN MARKETABLE EQUITY SECURITIES
USAM's investment in Galileo, which is accounted for under the cost
method, is classified as "available-for-sale" under SFAS 115 and recorded
at fair value. See also Notes 2(b), 7(c) and 9.
(h) OTHER ASSETS, NET
Other assets, net consist primarily of noncurrent pension assets, the
unamortized balance of deferred compensation, restricted cash and
investments, unamortized debt issuance costs and a long-term receivable
from British Airways Plc (British Airways). Deferred compensation resulted
mainly from US Airways' establishment of an employee stock ownership plan
(ESOP) in 1989 (see
82
Note 5(d). Restricted cash and investments are deposits in trust accounts
to collateralize letters of credit and workers' compensation policies. The
long-term receivable from British Airways resulted from the relinquishment
by US Airways of three U.S. to London routes.
Other than the deferred compensation that arose from the establishment
of the ESOP, US Airways accounts for deferred compensation and the related
amortization by applying the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). In
accordance with APB 25, deferred compensation related to grants of US
Airways Group common stock to employees (Stock Grants) is recognized based
on the fair market value of the stock on the date of grant. Except on
limited occasions, no deferred compensation is recognized when options to
purchase US Airways Group common stock are granted to employees (Option
Grants) because the exercise price of the stock options is set equal to the
fair market value of the underlying stock on the date of grant. Any
deferred compensation is amortized as Personnel costs over the applicable
vesting period.
US Airways recognized expenses related to Stock Grants of $7 million,
$6 million and $12 million in 1998, 1997 and 1996, respectively, and
expenses related to Option Grants of $12 million, $1 million and $8 million
in 1998, 1997 and 1996, respectively. Deferred compensation related to
Stock Grants was $22 million and $7 million as of December 31, 1998 and
1997, respectively, and deferred compensation related to Option Grants was
$13 million and $1 million as of December 31, 1998 and 1997, respectively.
Expenses and deferred compensation related to Option Grants increased in
1998 due to the grant of 2.3 million stock options to US Airways' pilots.
In addition, US Airways recognized expenses related to stock appreciation
rights (SARs) tied to the fair market value of US Airways Group common
stock of $1 million, $33 million and $42 million in 1998, 1997 and 1996,
respectively, as the result of a SAR feature granted to stock option
holders under US Airways Group's 1992 Stock Option Plan.
The weighted average fair value per stock option for stock options
which have an exercise price equal to the fair value of a share of US
Airways Group common stock at date of grant was $34, $18, and $11 for 1998,
1997 and 1996, respectively. The weighted average fair value per stock
option for stock options which have an exercise price lower than the fair
value of a share of US Airways Group common stock at date of grant was $41
for 1998 and $13 for 1996 (no such grants during 1997).
During 1995, the Financial Accounting Standards Board adopted
Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS 123).
This statement requires the use of fair value techniques to determine
compensation expense associated with stock-based compensation. As mentioned
above, US Airways applies the provisions of APB 25 to determine
compensation expense, as permitted under SFAS 123. However, US Airways is
obligated to disclose certain information including pro forma net income as
if SFAS 123 had been adopted to measure compensation expense. Had
compensation cost been measured in accordance with SFAS 123, US Airways
estimates that its net income for 1998 would have been reduced from $559
million to $528 million, its net income for 1997 would have been reduced
from $1,052 million to $1,045 million, and its net income for 1996 would
have been reduced from $183 million to $168 million. In order to calculate
this pro forma net income information, US Airways used the Black-Scholes
stock option-pricing model with the following weighted-average assumptions
for 1998, 1997 and 1996, respectively: stock volatility of US Airways Group
common stock of 51.4%, 52.6% and 50.1%; risk-free interest rates of 5.5%,
6.6% and 6.2%; expected stock option life of eight years, eight years and
nine years; and no dividend yield (0%).
The pro forma net income information reflects stock options granted
after December 31, 1994 only. Therefore, the full impact of calculating
compensation expense for stock options under SFAS 123 is not reflected in
the pro forma net income amounts above because compensation expense is
recognized over the stock option's vesting period and compensation expense
for stock options
83
granted prior to January 1, 1995 is not considered.
(i) FREQUENT TRAVELER PROGRAM
US Airways accrues the estimated incremental cost of travel awards
earned by participants in its "Dividend Miles" frequent traveler program
when requisite mileage award levels are achieved. US Airways also sells
mileage credits to participating partners in Dividend Miles. The resulting
revenues are recorded as Other operating revenues during the period in
which the credits are sold.
In 1998, US Airways and American Airlines, Inc. (American) announced a
marketing relationship that gives customers combined access to both
companies' frequent traveler programs. Under the program, members who
belong to US Airways' Dividend Miles and American's AAdvantage are able to
claim awards for airline travel on both airlines and to combine miles when
claiming travel awards on either airline. Each airline compensates the
other when relieved of an obligation to provide a travel award.
(j) DEFERRED GAINS, NET
Gains on aircraft sale and leaseback transactions are deferred and
amortized over the terms of the leases as a reduction of the related
aircraft rent expense.
(k) PASSENGER TRANSPORTATION REVENUES
Passenger ticket sales are recognized as Passenger transportation
revenues when the transportation service is rendered or the ticket
otherwise expires. At the time of sale, a liability is established (Traffic
balances payable and unused tickets) and subsequently relieved through
carriage of the passenger, through billing from another air carrier which
provided the service, upon expiration of the ticket or by refund to the
passenger.
Effective October 1, 1996, US Airways began purchasing all of the
capacity (available seat miles) generated by US Airways Group's three
wholly-owned regional air carriers and, concurrently, recognizing revenues,
"US Airways Express transportation revenues," when transportation service
is rendered by these affiliates or the related tickets otherwise expire.
Liabilities related to tickets sold for travel on these air carriers, as
well as for travel on Shuttle are also included in US Airways' Traffic
balances payable and unused tickets and are subsequently eliminated in the
same manner as described above. See Note 10(b) for additional information
related to US Airways' transactions with its affiliates.
In January 1998, US Airways began purchasing the capacity of Mesa
Airlines, Inc. (Mesa) in certain markets. Mesa operates regional jet
aircraft in these markets as part of US Airways Express.
(l) OTHER SELLING EXPENSES
Other selling expenses include credit card fees, computerized
reservations systems fees and advertising and promotional expenses.
Advertising expenses for 1998, 1997 and 1996 were $36 million, $46 million
and $51 million, respectively (such costs are expensed when incurred).
2. FINANCIAL INSTRUMENTS
(a) TERMS OF CERTAIN FINANCIAL INSTRUMENTS
On January 1, 1998, as part of a comprehensive information technology
services agreement with The SABRE Group, Inc. (TSG), TSG granted US Airways
two tranches of stock options (TSGH Stock Options) to acquire up to
6,000,000 shares of Class A Common Stock, $.01 par value, of The
84
SABRE Group Holding, Inc. (TSGH Common Stock), TSG's parent company. Each
tranche includes 3,000,000 stock options. Stock options in the first
tranche have an exercise price of $27 and are exercisable from June 30,
1999 until December 31, 1999, but are subject to a $90 per share cap on the
fair market value of the underlying common stock. Stock options in the
second tranche have an exercise price of $27 and are exercisable during a
ten-year period beginning January 2, 2003, but are subject to a $127 per
share cap on the fair market value of the underlying common stock. Under
certain circumstances, and under certain conditions, US Airways may select
an alternative vehicle of substantially equivalent value in place of
receiving TSGH Common Stock.
US Airways uses risk management strategies to reduce its exposure to
certain market uncertainties. US Airways is party to financial contracts
which it believes help to reduce its exposure to significant increases in
the price of aviation fuel. US Airways has also hedged certain foreign-
denominated debt to maturity. US Airways periodically reviews the financial
condition of each counterparty to these financial contracts and believes
that the potential for default by any of the current counterparties is
negligible.
US Airways continually adjusts its aviation fuel procurement strategy
in order to take advantage of the best available prices while at the same
time ensuring that it has an adequate supply of aviation fuel to support
its operations. In addition, US Airways may participate in arrangements
designed to reduce its exposure to significant increases in the price of
aviation fuel. These arrangements have the net effect of increasing or
decreasing US Airways' aviation fuel expense in the period in which they
are settled. While US Airways was not a participant in fuel swap contracts
as of December 31, 1998, US Airways previously entered into fuel swap
contracts that resulted in US Airways receiving or making payments based on
the difference between a fixed price and a variable price per notional
gallon for specified petroleum products. The total notional gallons under
these contracts were approximately 47 million as of December 31, 1997 (US
Airways entered into contracts prior to December 31, 1997 which effectively
closed certain hedging arrangements covering approximately 17 million
gallons). For contracts open as of December 31, 1997, US Airways paid fixed
prices ranging from $0.496 to $0.600 per notional gallon and received a
variable price per gallon based on market prices.
An aggregate of $31 million of future principal payments of US
Airways' long-term debt due in 1999 and 2000 is payable in Japanese Yen.
This foreign currency exposure has been hedged to maturity by US Airways'
participation in foreign currency contracts. Net settlements are recorded
as adjustments to Interest expense.
(b) FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the provisions of SFAS 115, the fair values for US
Airways' short-term and marketable equity security investments are
determined based upon quoted market prices. Restricted cash is carried at
cost which approximates fair value. At December 31, 1998 and 1997, US
Airways' long-term investments represent ownership interests in privately
held companies which have no readily determinable market values. US Airways
estimated the fair values of its note receivable and long-term debt by
discounting expected future cash flows using current rates offered to US
Airways for note receivables and debt with similar maturities. The
estimated fair value of the TSGH Stock Options was calculated using the
Black-Scholes stock option pricing model and is presented in the table
presented on the following page in accordance with Statement of Financial
Accounting Standards No. 119, "Disclosures about Derivative Financial
Instruments and Fair Value of Financial Instruments" (SFAS 119). These
financial instruments are classified as held for "purposes other than
trading" under SFAS 119 due primarily to certain restrictions, including
limitations on US Airways' ability to exercise or sell these stock options.
The fair values of foreign currency and fuel swap contracts are obtained
from dealer quotes. These values represent the estimated amount US Airways
would receive or pay to terminate such agreements as of the valuation date.
85
<TABLE>
The estimated fair values of US Airways' financial instruments, none of which are held for
trading purposes, are summarized as follows (in millions; brackets denote a liability):
<CAPTION>
December 31,
---------------------------------------------
1998 1997
--------------------- ---------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Short-term investments (1) $ 598 $ 598 $ 870 $ 870
Investment in marketable
equity securities (1) 301 301 190 190
Restricted cash and long-term
Investments 113 114 72 72
Note receivable (2) 27 27 30 30
TSGH Stock Options - 119 - -
Long-term debt (excludes
capital lease obligations) (1,998) (2,243) (2,577) (2,861)
Foreign currency contracts:
In a net receivable
(payable) position - (1) - (3)
Fuel swap contracts:
In a net receivable
(payable) position - - - (1)
(1) Classified as "available-for-sale" in accordance with SFAS 115. See
also Notes 1(c) and 1(g).
(2) Current carrying amount included in Other assets, net on US Airways'
Consolidated Balance Sheets, except for the current portion of the note
receivable ($6 million) which is included in Receivables, net.
</TABLE>
3. INCOME TAXES
US Airways accounts for income taxes according to the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). US Airways files a consolidated federal income tax
return with its parent company, US Airways Group. US Airways Group and its
wholly-owned subsidiaries have executed a tax sharing agreement (Tax
Sharing Agreement) which allocates tax and tax items, such as net operating
losses and tax credits between members of the group based on their
proportion of taxable income and other items. This tax sharing and
allocation impacts the deferred tax assets and liabilities reported by each
corporation on a separate company basis. Accordingly, US Airways' tax
expense is based on its taxable income, taking into consideration its
allocated tax loss carryforwards and tax credit carryforwards.
During 1997, US Airways determined that it was no longer appropriate
to apply a valuation allowance to its deferred tax assets. US Airways
believed, based on prior earnings and projections of future earnings, that
it was more likely than not that the Company would be able to utilize tax
benefits accumulated through December 31, 1997 in future periods.
Accordingly, at December 31, 1997, previous valuation allowances were
removed, resulting in a net deferred income tax asset and an income tax
credit for 1997. As of December 31, 1997, the Receivables from related
parties, net line item on US Airways' Consolidated Balance Sheets included
$78 million related to certain tax attributes of US Airways used by other
US Airways Group subsidiaries during 1997 and in prior years. These amounts
were settled through intercompany receivables/payables accounts in January
1998 (see Note 10 for related information).
The components of the provision (credit) for income taxes are as
follows (in millions):
1998 1997 1996
---- ---- ----
Current provision:
Federal $179 $ 118 $4
State 14 7 3
--- --- --
Total current provision 193 125 7
--- --- --
Deferred provision:
Federal 157 (447) --
State 27 (57) 1
--- --- --
Total deferred provision 184 (504) 1
--- --- --
Provision (credit) for income taxes $377 $(379) $8
=== === ==
86
In 1998, US Airways was subject to federal regular income tax.
Approximately $297 million in federal regular tax net operating loss
carryforwards, $51 million in alternative minimum tax (AMT) credits and
$658 million in state net operating loss carryforwards were utilized to
reduce the federal and state current tax liabilities.
The significant components of deferred income tax provision (credit)
for the years ended December 31, 1998, 1997 and 1996 are as follows (in
millions):
1998 1997 1996
---- ---- ----
Deferred tax provision (exclusive of the
other components listed below) $ 184 $ 191 $ 91
Decrease in the valuation allowance for
deferred tax assets - (695) (90)
--- --- --
Total $ 184 $(504) $ 1
=== === ==
A reconciliation of taxes computed at the statutory federal tax rate
on earnings before income taxes to the provision (credit) for income taxes
is provided below (in millions):
1998 1997 1996
---- ---- ----
Tax provision computed at federal statutory rate $328 $ 236 $ 67
Book expenses not deductible for tax purposes 17 15 17
State income tax provision (credit), net of
federal tax benefit 27 (32) 2
Reduction of federal valuation allowance - (595) (75)
Other 5 (3) (3)
--- --- --
Provision (credit) for income taxes $377 $(379) $ 8
=== === ==
Effective tax rate 40% (56)% 4%
=== === ==
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, 1998
and 1997 (in millions):
1998 1997
---- ----
Deferred tax assets:
Leasing transactions $ 171 $ 170
Tax benefits purchased/sold 26 41
Gain on sale and leaseback transactions 129 124
Employee benefits 694 668
Net operating loss carryforwards 6 125
Alternative minimum tax credit carryforwards 99 157
Investment tax credit carryforwards - 11
Other deferred tax assets 95 87
----- -----
Total gross deferred tax assets 1,220 1,383
Less valuation allowance - -
----- -----
Net deferred tax assets 1,220 1,383
Deferred tax liabilities:
Depreciation and amortization 875 902
Other deferred tax liabilities 104 56
----- -----
Total deferred tax liabilities 979 958
----- -----
Net deferred tax assets $ 241 $ 425
===== =====
The valuation allowance for deferred tax assets decreased
approximately $695 million in 1997.
Included in the deferred tax assets at December 31, 1998, among other
items, are $471 million related to obligations of postretirement medical
benefits, and $99 million of alternative minimum tax credits which do not
expire. There were no federal regular or alternative minimum tax net
operating loss carryforwards remaining at December 31, 1998. The Company
had state net operating loss carryforwards of $222 million as of December
31, 1998. In prior years, investment tax credit benefits were recorded
using the "flow through" method as a reduction of the federal
87
income tax provision. No new investment tax credits were generated during
1998, 1997 or 1996 and all prior year investment tax credits were used by
December 31, 1998. Certain changes in stock ownership can result in
limitation on the amount of net operating loss and tax credit carryovers
that can be utilized each year. US Airways determined it has undergone such
an ownership change that did not impact the utilization of federal tax
attributes during 1998. Furthermore, US Airways does not believe that
alternative minimum tax credits available as of December 31, 1998 will be
limited in future years as a result of the ownership change. The federal
income tax returns of US Airways through 1986 have been examined and
settled with the Internal Revenue Service.
US Airways believes that a significant portion of the deferred tax
assets will be realized through projected taxable income and reversals of
existing taxable temporary differences. The deferred tax assets and
liabilities disclosed above exclude tax assets and liabilities which arise
as a result of including certain transactions in the equity section of the
balance sheet, net of tax. These tax attributes include a noncurrent
deferred tax liability of $95 million and $56 million as of December 31,
1998 and 1997, respectively, for unrealized gains on available-for-sale
investments pursuant to SFAS 115 and a noncurrent deferred tax asset of $33
million and $3 million as of December 31, 1998 and 1997, respectively,
relating to the equity adjustment for the minimum pension liability for US
Airways' defined benefit plans.
The following table is a summary of pretax book income and taxable
income prior to net operating loss carryforwards for the last three years
(in millions):
1998 1997 1996
---- ---- ----
Pretax book income $936 $ 673 $191
Taxable income (loss) $989 $1,037 $186
The reasons for significant differences between taxable income and
pretax book income in 1997 primarily relate to employee pension and
postretirement benefit costs, certain aircraft impairment charges and lease
accruals, and other employee related accruals. See also Note 13.
4. LONG-TERM DEBT, INCLUDING CAPITAL LEASE OBLIGATIONS
Details of long-term debt are as follows (in millions):
December 31,
-------------
1998 1997
---- ----
Senior Debt:
10% Senior Notes due 2003 $ - $ 300
9 5/8% Senior Notes due 2001 175 175
5.7% to 11.7% Equipment Financing Agreements,
Installments due 1999 to 2016 1,795 2,045
8.6% Airport Facility Revenue Bond due 2022 28 28
7.4% Aircraft Purchase Deposit Financing* - 29
----- -----
1,998 2,577
Capital Lease Obligations 27 34
----- -----
Total 2,025 2,611
Less Current Maturities (71) (186)
----- -----
$1,954 $2,425
===== =====
* See related information under Note 6(c) (regarding settlement of
litigation between US Airways and The Boeing Company (Boeing)).
(this space intentionally left blank)
88
Maturities of long-term debt and debt under capital leases for the
next five years (in millions):
1999 $ 71
2000 115
2001 240
2002 69
2003 190
Thereafter 1,340
-----
$2,025
=====
Interest rates on $92 million principal amount of long-term debt as of
December 31, 1998 are subject to adjustment to reflect prime rate and other
rate changes.
Equipment financings totaling $1.8 billion were collateralized by
aircraft and engines with a net book value of approximately $1.9 billion as
of December 31, 1998.
In 1998, US Airways retired early certain long-term debt with a
principal amount of $434 million, including US Airways' 10% Senior Notes.
The retirement of the 10% Senior Notes resulted in a cash outflow of $315
million, including prepayment penalties of $15 million.
5. EMPLOYEE PENSION AND BENEFIT PLANS
Substantially all of US Airways' employees meeting certain service and
other requirements are eligible to participate in various pension, medical,
life insurance, disability and survivorship and employee stock ownership
plans.
(a) DEFINED BENEFIT AND OTHER POSTRETIREMENT BENEFIT PLANS
US Airways sponsors several qualified and nonqualified defined benefit
plans and other postretirement benefit plans for certain employees.
Liabilities related to pension plans covering foreign employees are
calculated in accordance with generally accepted accounting principles and
funded in accordance with the laws of the individual country.
(this space intentionally left blank)
89
The following table sets forth changes in the fair value of plan
assets, benefit obligations and the funded status of the plans as of
September 30, 1998 and 1997, in addition to the amounts recognized in US
Airways' Consolidated Balance Sheets as of December 31, 1998 and 1997,
respectively (in millions):
<TABLE>
<CAPTION>
Other
Defined Benefit Postretirement
Pension Plans (1) Benefits
----------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Fair value of plan assets at the
beginning of the period $ 3,101 $ 2,474 $ - $ -
Actual return on plan assets 246 587 - -
Employer contributions 33 169 30 28
Plan participants' contributions - - 2 1
Gross benefits paid (201) (129) (32) (29)
------ ------ ------ ------
Fair value of plan assets at the end
of the period 3,179 3,101 - -
------ ------ ------ ------
Benefit obligation at the beginning
of the period 3,850 3,143 996 950
Service cost 139 128 36 35
Interest cost 292 258 76 71
Plan participants' contributions - - 2 1
Plan amendments - 39 - -
Actuarial (gain) loss 526 296 127 (32)
Special termination benefits (2) - 115 - -
Gross benefits paid (3) (201) (129) (32) (29)
------ ------ ------ ------
Benefit obligation at the end
of the period 4,606 3,850 1,205 996
------ ------ ------ ------
Funded status of the plan (1,427) (749) (1,205) (996)
Unrecognized actuarial (gain) loss 1,019 477 66 (62)
Unrecognized prior service cost 90 97 (118) (130)
Unrecognized transition obligation (20) (26) - -
Contributions for October to December 21 2 27 7
------ ------ ------ ------
Net amount recognized in US Airways'
Consolidated Balance Sheets $ (317) $ (199) $(1,230) $(1,181)
====== ====== ====== ======
Components of the amounts recognized in US Airways' Consolidated Balance Sheets:
Other
Defined Benefit Postretirement
Pension Plans (1) Benefits
----------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
Prepaid benefit cost $ 310 $ 282 $ - $ -
Accrued benefit cost (627) (481) (1,230) (1,181)
Adjustment for minimum pension liability (180) (111) - -
Intangible asset 95 95 - -
Accumulated other comprehensive income 85 16 - -
------ ------ ------ ------
Net amount recognized in US Airways'
Consolidated Balance Sheets $ (317) $ (199) $(1,230) $(1,181)
====== ====== ====== ======
(1) For plans with accumulated benefit obligations in excess of plan assets,
the aggregate accumulated benefit obligations and plan assets were
$3,640 million and $3,179 million, respectively, as of September 30,
1998, and $585 million and $435 million, respectively, as of September
30, 1997.
(2) Related to an early retirement plan offered to US Airways' pilots,
recorded in accordance with Statement of Financial Accounting Standards
No. 88 "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits" (SFAS 88).
(3) Gross benefits paid in 1998 include lump sum payments for pilots made
pursuant to the special termination benefits charge of $115 million in
1997. See (2) above.
(this space intentionally left blank)
90
</TABLE>
The following table presents the weighted average assumptions used to
determine the actuarial present value of Pension Benefits and Other
Postretirement Benefits:
Other
Defined Benefit Postretirement
Pension Plans Benefits
----------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
Discount rate 6.8% 7.5% 6.8% 7.5%
Expected return on plan assets 9.5% 9.5% NA NA
Rate of compensation increase 3.3% 3.3% 4.6% 4.7%
The assumed health care cost trend rate is 4.5% in 1999 and
thereafter. The assumed health care cost trend rate has a significant
effect on amounts reported for retiree health care plans. A 1% change in
the health care cost trend would have the following effects on Other
Postretirement Benefits as of September 30, 1998 (in millions):
1% Increase 1% Decrease
----------- -----------
Effect on total service and interest costs $ 17 $ (13)
Effect on postretirement benefit obligation $162 $(124)
Total periodic cost for Pension Benefits and Other Postretirement
Benefits (in millions):
Other
Defined Benefit Postretirement
Pension Plans Benefits
-------------------- --------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
Service cost $ 139 $ 128 $ 145 $ 36 $ 34 $ 44
Interest cost 292 258 252 76 71 74
Expected return on plan assets (274) (236) (217) - - -
Amortization of:
Transition asset (5) (5) (5) - - -
Prior service cost 4 6 4 (12) (12) (12)
Actuarial (gain) / loss 16 17 37 (1) (3) 1
---- ---- ---- --- --- ---
Net periodic cost 172 168 216 99 90 107
Special termination benefits - 115 - - - -
---- ---- ---- --- --- ---
Total periodic cost $ 172 $ 283 $ 216 $ 99 $ 90 $107
==== ==== ==== === === ===
US Airways recorded a $115 million charge to Personnel costs in 1997
related to an early retirement program offered to 325 US Airways pilots.
These charges were recorded in accordance with SFAS 88.
See Note 7(c) for the amount included within other comprehensive
income arising from a change in the additional minimum pension liability.
(b) DEFINED CONTRIBUTION PENSION PLANS
Expenses related to these plans, excluding expenses related to US
Airways' ESOP and any profit sharing contributions, were approximately $36
million, $57 million and $54 million for the years 1998, 1997 and 1996,
respectively. Expenses for 1998 include a $17 million credit related to a
favorable legal settlement regarding employer matching contributions. See
Notes 5(d) and 5(e) for information related to US Airways' ESOP and profit
sharing contributions.
(c) POSTEMPLOYMENT BENEFITS
US Airways provides certain postemployment benefits to its employees.
Such benefits include disability-related and workers' compensation benefits
and severance payments for certain employees. US Airways accrues for the
cost of such benefit expenses once an appropriate triggering event has
occurred.
91
(d) EMPLOYEE STOCK OWNERSHIP PLAN
In August 1989, US Airways established an ESOP. US Airways Group sold
2,200,000 shares of its common stock to an Employee Stock Ownership Trust
(the Trust) to hold on behalf of US Airways' employees, exclusive of
officers, in accordance with the terms of the Trust and the ESOP. The
trustee placed those shares in a suspense account pending their release and
allocation to employees. US Airways provided financing to the Trust in the
form of a 9 3/4% loan for $111 million for its purchase of shares and US
Airways contributed an additional $2 million to the Trust. US Airways makes
a yearly contribution to the Trust sufficient to cover the Trust's debt
service requirement. The contributions are made in amounts equal to the
periodic loan payments as they come due, less dividends available for loan
payment. Since US Airways Group did not pay dividends on any shares held by
the Trust for the years ended December 31, 1998, 1997 and 1996, the Trust
did not utilize dividends to service its debt during those periods. The
initial maturity of the loan is 30 years. As the loan is repaid over time,
the trustee systematically releases shares of the common stock from the
suspense account and allocates them to participating employees. Each
participant's allocation is based on the participant's compensation, the
total compensation of all ESOP participants and the total number of shares
being released. For each year after 1989, a minimum of 71,933 shares are
released from the suspense account and allocated to participant accounts. If
US Airways Group's return on sales equals or exceeds four percent in a given
year, more shares are released and repayment of the loan is accelerated. See
also Note 5(e) regarding the profit sharing component of US Airways' ESOP.
Annual contributions made by US Airways, and therefore loan repayments made
by the Trust, were $27 million in 1998, and $11 million in each of 1997 and
1996. The interest portion of these contributions was $10 million in 1998,
1997 and 1996, respectively. Approximately 946,000 shares of US Airways
Group common stock have been released or committed to be released as of
December 31, 1998. US Airways recognized compensation expense related to the
ESOP of $8 million in 1998, $11 million in 1997 and $4 million in 1996 based
on shares allocated to employees (the "shares allocated" method). Deferred
compensation related to the ESOP amounted to approximately $65 million, $72
million and $84 million as of December 31, 1998, 1997 and 1996,
respectively.
See Note 1(h) with respect to US Airways' accounting policies for
stock-based compensation.
(e) PROFIT SHARING PLANS
In exchange for temporary wage and salary reductions and other
concessions during a twelve month period in 1992 and 1993, including certain
ongoing work rule and medical benefits concessions and the freeze of the
defined benefit plan for certain non-contract employees, certain US Airways
employees participated in a profit sharing program and were granted stock
options to purchase US Airways Group common stock (see related discussion
under Note 1(h)). This profit sharing program was designed to recompense
those US Airways employees whose pay was reduced in an amount equal to (i)
two times salary foregone plus (ii) one time salary foregone (subject to a
minimum of $1,000) for the freeze of the defined benefit pension plan for
certain non-contract employees. US Airways recognized charges of $214
million related to this program, including $122 million in 1996. Cash
distributions to participants of $214 million were made under this program.
After a first quarter 1997 payment of $129 million, US Airways' obligations
under this profit sharing program were satisfied and this program ceased.
US Airways' ESOP and Defined Contribution Retirement Program (DCRP)
each have profit sharing components. Under the ESOP, each eligible US
Airways employee receives shares of US Airways Group common stock based on
his or her compensation relative to the total compensation of all
participants and the number of shares of US Airways Group common stock in
the allocation pool. When US Airways Group's return on sales equals or
exceeds certain prescribed levels, US Airways increases its contribution,
which effectively increases the number of shares of US Airways Group common
stock in the allocation pool (see Note 5(d)). US Airways' ESOP-
92
related expenses included $4 million and $7 million in 1998 and 1997,
respectively, related to this profit sharing program. US Airways did not
make any provision for profit sharing contributions in connection with the
profit sharing component of the ESOP during 1996. Under the DCRP, US Airways
makes additional contributions to participant accounts when US Airways Group
achieves certain prescribed pre-tax margin levels (see Note 5(b)). US
Airways' 1998, 1997 and 1996 results of operations reflect expenses of $27
million, $24 million and $5 million, respectively, for the profit sharing
component of the DCRP.
6. COMMITMENTS AND CONTINGENCIES
(a) COMMITMENTS TO PURCHASE FLIGHT EQUIPMENT
On October 31, 1997, US Airways Group entered into agreements with
AVSA, S.A.R.L. (AVSA), an affiliate of aircraft manufacturer Airbus
Industrie G.I.E. (Airbus), and CFM International, Inc. (CFMI) for the
acquisition of up to 400 Airbus A320-Family aircraft and accompanying jet
engines. The A320-Family aircraft are single-aisle aircraft that include the
Airbus A319, A320 and A321.
As of December 31, 1998, US Airways Group had 122 A320-Family aircraft
on firm order, 112 aircraft subject to reconfirmation prior to scheduled
delivery and options for 160 additional aircraft. With respect to the firm-
order aircraft, 33 are expected to be delivered in 1999 and 89 are expected
to be delivered in the years 2000 through 2002 (43 of the aircraft
scheduled for delivery in the years 2000 to 2002 time period are subject to
cancellation with 18 month notice and payment of a cancellation fee).
During the fourth quarter of 1998, US Airways accepted delivery of and
placed into operational service six A319 aircraft acquired under US Airways
Group's purchase agreements with AVSA and CFMI. Although the agreements
with AVSA and CFMI represent a commitment of US Airways' parent company,
US Airways anticipates that the new Airbus single-aisle aircraft will
replace, at a minimum, its B737-200, DC-9-30 and MD-80 aircraft. US Airways
has an agreement with GE Engine Services, Inc. for the maintenance of the
engines that power these aircraft.
In July 1998, US Airways Group reached an agreement with Airbus for
the purchase of up to 30 widebody A330-300 aircraft. The agreement includes
seven firm aircraft orders, seven aircraft subject to reconfirmation prior
to scheduled delivery and options for 16 additional aircraft. Of the seven
firm-order A330-300 aircraft, six are scheduled for delivery in the year
2000 and one in early 2001. Orders subject to reconfirmation are for
aircraft that are tentatively scheduled for delivery beginning in the
fourth quarter of 2000. US Airways Group can substitute other Airbus
widebody aircraft for the A330-300s, including the A330-200 or members of
the A340-Series, for orders other than the first seven aircraft. In October
1998, US Airways Group reached an agreement with Pratt & Whitney for jet
engines to power these aircraft and to provide long-term maintenance for
the engines. These new widebody aircraft are expected to eventually
supplant US Airways' B767-200ER fleet in transatlantic markets.
As of December 31, 1998, the minimum determinable payments associated
with US Airways Group's aircraft acquisition agreements for Airbus aircraft
(including progress payments, payments at delivery, buyer-furnished
equipment, spares, capitalized interest, penalty payments, cancellation
fees and/or nonrefundable deposits) were estimated at $1.3 billion in 1999,
$2.1 billion in 2000 and $9 million in 2001.
US Airways has a commitment to purchase hush-kits for certain of its
B737-200 aircraft. The installation of hush-kits will allow these aircraft
to meet certain statutory noise level requirements. The expected payments
associated with this commitment are approximately $21 million, all of which
are expected to occur in 1999.
93
See Note 10(a) for information related to transactions between US
Airways and its parent company.
(b) LEASES
US Airways leases certain aircraft, engines and ground equipment, in
addition to the majority of its ground facilities. Ground facilities include
executive offices, maintenance facilities and ticket and administrative
offices. Public airports are utilized for flight operations under lease
arrangements with the municipalities or agencies owning or controlling such
airports. Substantially all leases provide that the lessee shall pay taxes,
maintenance, insurance and certain other operating expenses applicable to
the leased property. Some leases also include renewal and purchase options.
US Airways subleases certain leased aircraft and ground facilities under
noncancelable operating leases expiring in various years through the year
2023.
The following amounts related to capital leases are included in
property and equipment (in millions):
December 31,
-----------------------
1998 1997
----- -----
Flight equipment $ 82 $ 81
Less accumulated amortization (60) (55)
---- ---
$ 22 $ 26
===== =====
As of December 31, 1998, obligations under capital and noncancelable
operating leases for future minimum lease payments were as follows (in
millions):
Capital Operating
Leases Leases
------- --------
1999 $ 10 $ 721
2000 7 708
2001 5 709
2002 5 654
2003 5 665
Thereafter 4 5,376
---- -----
Total minimum lease payments 36 8,833
Less sublease rental receipts - (110)
-----
Total minimum operating lease payments $8,723
=====
Less amount representing interest (9)
----
Present value of future minimum capital lease payments 27
Less current obligations under capital leases (7)
----
Long-term obligations under capital leases $ 20
====
For 1998, 1997 and 1996, rental expense under operating leases was
approximately $695 million, $741 million and $731 million, respectively.
Rental expense for 1998, 1997 and 1996 excludes credits of $3 million, $1
million and $23 million, respectively, related to US Airways' subleasing of
British Aerospace BAe-146-200 (BAe-146) aircraft (see Notes 13). Rental
expense for 1997 also excludes $5 million related to expenses recognized by
US Airways in conjunction with certain efficiency measures (see Note 13(b)).
US Airways also leases certain owned flight equipment to both third and
related parties (see Notes 10(b) and 10(c)) under noncancelable operating
leases which expire in the years 1999 through 2002. The future minimum
rental receipts associated with these leases are: $11 million-1999; $5
million-2000; $4 million-2001; and $2 million-2002.
94
The following amounts relate to aircraft leased under such agreements
as reflected in flight equipment (in millions):
December 31,
-------------------
1998 1997
---- ----
Flight equipment $ 85 $ 86
Less accumulated amortization (53) (46)
---- ----
$ 32 $ 40
==== ====
(c) LEGAL PROCEEDINGS
US Airways is involved in legal proceedings arising out of an aircraft
accident in September of 1994 near Pittsburgh in which 127 passengers and
five crew members lost their lives. With respect to this accident, the
National Transportation Safety Board (NTSB) held hearings in January and
November of 1995, and is scheduled to hold a final hearing on March 23, 1999
before issuing its final accident investigation report. Wrongful death cases
are pending in a consolidated multi-district litigation in U.S. District
Court for the Western District of Pennsylvania and in state court in Cook
County, Illinois. Although US Airways has settled over 80% of the cases and
claims arising from the Pittsburgh accident, it expects that it will be at
least a year before all of the settlements and/or 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 US Airways' financial condition or results of operations.
In September 1997, Boeing filed suit against US Airways in state court
in King County, Washington seeking unspecified damages, estimated at
approximately $220 million, for alleged breach of two aircraft purchase
agreements concerning, respectively, eight B757-200 aircraft and 40 B737-
Series aircraft. On October 31, 1997, US Airways filed an answer and
counterclaims to Boeing's complaint denying liability and seeking recovery
from Boeing of approximately $35 million in equipment purchase deposits. On
April 23, 1998 the parties reached a settlement terminating all obligations
with respect to both purchase agreements. Pursuant to the settlement, the
litigation has been dismissed with prejudice as to both Boeing's claims and
US Airways' counterclaims.
In October 1995, US Airways terminated for cause an agreement with In-
Flight Phone Corporation (IFPC). IFPC was US Airways' provider of on-board
telephone and interactive data systems. The IFPC system had been installed
in approximately 80 aircraft prior to the date of termination of the
agreement. On December 6, 1995, IFPC filed suit against US Airways in
Illinois state court seeking equitable relief and damages in excess of $186
million. US Airways believes that its termination of its agreement with IFPC
was appropriate and that it is owed significant damages from IFPC. US
Airways has filed a counterclaim against IFPC seeking compensatory damages
in excess of $25 million and punitive damages in excess of $25 million. In
January 1997, IFPC filed for protection from its creditors under Chapter 11
of the Bankruptcy Code. The parties stipulated to lift the automatic stay
provided for in the Bankruptcy Code which could allow IFPC's and US Airways'
claims to be fully litigated. US Airways is unable to predict at this time
the ultimate resolution or potential financial impact of these proceedings
on its financial condition or results of operations.
On July 30, 1996, US Airways Group and US Airways initiated a lawsuit
in U.S. District Court for the Southern District of New York against British
Airways, BritAir Acquisition Corp., Inc., American and American's parent
company, AMR Corp. US Airways Group and US Airways claimed that British
Airways, in pursuit of an alliance with American, is responsible for
breaches of fiduciary duty to US Airways Group and US Airways and violated
certain provisions of the January 21, 1993 Investment Agreement between US
Airways Group and British Airways (the Investment Agreement). The lawsuit
also claims that the defendants have committed violations of U.S. antitrust
laws. In response to the defendants' Motion to Dismiss, the Court sustained
95
US Airways' claims for breach of contract against British Airways. The Court
dismissed the remaining claims against British Airways and all claims
against American. On February 6, 1998, British Airways filed its answer to
the complaint along with counterclaims against the Company and US Airways.
British Airways' counterclaims alleged that US Airways breached various
provisions of the Investment Agreement and that US Airways breached the Code
Share Agreement between British Airways and US Airways by providing certain
allegedly confidential information to specific third parties. In addition,
British Airways seeks a declaratory judgment regarding certain payment
obligations under its wet lease arrangement with US Airways. British Airways
claimed damages of $16.7 million for the termination of the code share
relationship and an unspecified amount of damages for its remaining claims.
On January 29, 1999, the US Airways Group, US Airways and British Airways
jointly filed a pretrial order with the Court, and on February 5, 1999, the
Court placed the lawsuit on its trial-ready calendar. On February 5, 1999,
British Airways filed a motion for summary judgment seeking dismissal of US
Airways' Group's and US Airways' claims and a finding that US Airways Group
and US Airways are liable for breach of the Code Share Agreement.
Subsequently, US Airways Group and US Airways filed a memorandum of law
opposing British Airways' motion. US Airways is unable to predict at this
time the ultimate resolution or potential financial impact of these
proceedings on its financial condition or results of operations.
In May 1995, US Airways Group, US Airways and the Retirement Income
Plan for US Airways, Inc. (the Pilots Pension Plan) were sued in federal
district court for the District of Columbia by 481 active and retired pilots
alleging that defendants had incorrectly interpreted the Pilots Pension Plan
provisions and erroneously calculated benefits under the Pilots Pension
Plan. The plaintiffs sought damages in excess of $70 million. In May 1996,
the court issued a decision granting US Airways' 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 Pilots Pension Plan was collectively bargained. The
court retained jurisdiction over one count of the complaint alleging a
violation of a disclosure requirement under the Employee Retirement Income
Security Act. The plaintiffs have 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 plaintiff's 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
United States Court of Appeals for the District of Columbia. In February
1999, the United States Court of Appeals upheld the District Court's
decision originally granted in May 1996 in US Airways' favor.
In February of 1998 a purported class action complaint was filed by a
travel agency in Puerto Rico against seven major U.S. airlines, including US
Airways. The complaint alleges that the defendant airlines are
undercompensating Puerto Rican travel agents in connection with the agents'
sale of travel. The plaintiffs allege that the airlines are contractually
obligated to pay a 10% commission and that the defendant airlines breached
that contract as a result of the introduction of commission caps limiting
commission payable with respect to a single trip to a stated dollar amount
and reducing certain commissions to 8%. The plaintiffs have stated their
damages for the class in the amount of $150 million. On December 22, 1998,
after the filing of various motions by the defendants and some preliminary
discussions, the plaintiffs dismissed this action without the payment of any
amount by US Airways.
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. The City and
County of San Francisco has identified US Airways as a potentially
responsible party. The City and County of San Francisco and US Airways
recently entered into an agreement in principle to resolve this matter and
expect to finalize the agreement by April 1, 1999.
96
(d) GUARANTEES
As of December 31, 1998, US Airways guaranteed payments of debt and
lease obligations of Piedmont Airlines, Inc. (Piedmont) and PSA Airlines,
Inc. (PSA), both wholly-owned subsidiaries of US Airways Group, totaling $47
million.
US Airways also guarantees the payment of principal and interest on
special facility revenue bonds issued by certain municipalities to build or
improve airport and maintenance facilities. Under related lease
arrangements, US Airways is required to make rental payments sufficient to
pay maturing principal and interest payments on the bonds. As of
December 31, 1998 the principal amount of these bonds outstanding was $77
million.
(e) CONCENTRATION OF CREDIT RISK
US Airways invests available cash in money market securities of various
banks, commercial paper of financial institutions and other companies with
high credit ratings and securities backed by the United States government.
As of December 31, 1998, most of US Airways' receivables related to
tickets sold to individual passengers through the use of major credit cards
or to tickets sold by other airlines and used by passengers on US Airways or
its regional airline affiliates. These receivables are short-term, generally
being settled within 17 days after sale. Bad debt losses, which have been
minimal in the past, have been considered in establishing allowances for
doubtful accounts.
US Airways does not believe it is subject to any significant
concentration of credit risk.
7. STOCKHOLDER'S EQUITY AND DIVIDEND RESTRICTIONS
(a) COMMON STOCK AND DIVIDEND RESTRICTIONS
US Airways Group owns all of US Airways' outstanding common stock, par
value $1 (US Airways Common Stock). US Airways' board of directors has not
authorized the payment of dividends on US Airways' Common Stock since 1988.
Currently, the amount of dividends that US Airways can pay on its
common stock is limited by covenants contained in its 9 5/8% Senior Notes.
However, these covenants do not restrict US Airways from loaning or
advancing funds to US Airways Group.
US Airways, organized under the laws of the State of Delaware, may
also be subject to certain legal restrictions on its ability to pay
dividends on or repurchase or redeem its own shares of capital stock.
(b) RECEIVABLE FROM PARENT COMPANY
See Note 10(a).
(c) ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX EFFECT
US Airways adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130), effective January 1,
1998. SFAS 130 establishes standards for the reporting and presentation of
comprehensive income and its components in financial statements.
Comprehensive income encompasses net income and "other comprehensive
income," which includes all other non-owner transactions and events that
change stockholder's equity. US Airways' other comprehensive income
includes unrealized gains on available-for-sale
97
securities and an adjustment for minimum pension liability, both shown net
of income tax effects.
Unrealized gains on available-for-sale securities are accounted for in
accordance with SFAS 115. US Airways records an adjustment to Stockholder's
Equity (Deficit) to reflect differences between the fair value of
investments in marketable equity securities and short-term investments
(both types of investments are considered "available-for-sale" under SFAS
115) and their respective carrying values at each balance sheet date. In
accordance with SFAS 87, US Airways recorded an Adjustment for minimum
pension liability as of December 31, 1998, 1997 and 1996. SFAS 87 requires
the recognition of an additional minimum pension liability for each defined
benefit plan for which the accumulated benefit obligation exceeds the fair
value of the plan's assets and accrued pension costs. An offsetting
intangible asset is recognized for each additional minimum pension
liability recorded. Because each intangible asset recognized is limited to
the amount of unrecognized prior service cost, any balance is reflected as
a reduction of Stockholder's Equity (Deficit).
As presented in the accompanying Consolidated Statements of Changes in
Stockholder's Equity (Deficit), US Airways recognized comprehensive income
of $593 million for the year ended December 31, 1998, including net income
of $559 million and other comprehensive income of $34 million. For the year
ended December 31, 1997, US Airways recognized comprehensive income of
$1,178 million, including net income of $1,052 million and other
comprehensive income of $126 million. For the year ended December 31, 1996,
US Airways recognized comprehensive income of $226 million, including net
income of $183 million and other comprehensive income of $43 million.
The components of other comprehensive income and the related income tax
effects are as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- -------------------- ---------------------
Before Tax Net Before Tax Net Before Tax Net
tax effect of tax tax effect of tax tax effect of tax
effect (expense)effect effect (expense)effect effect (expense) effect
------ -------- ------ ------- -------- ------ ------ -------- -------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
<S>
Unrealized gain on available-
for-sale securities:
Unrealized gains during the
Period $ 112 $ (39) $ 73 $160 $(56) $104 $ - $ - $ -
Reclassification adjustment
for gains included in net
income during the period - - - - - - - - -
---- ---- ---- ---- ---- ---- ---- ---- ----
Net unrealized gains 112 (39) 73 160 (56) 104 - - -
Change in adjustment for
minimum pension liability (69) 30 (39) 19 3 22 43 - 43
---- ---- ---- ---- ---- ---- ---- ---- ----
Other comprehensive income
$ 43 $ (9) $ 34 $179 $(53) $126 $ 43 $ - $ 43
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
8. OPERATING SEGMENTS AND RELATED DISCLOSURES
In 1998, US Airways adopted Statement of Financial Accounting Standards
No. 131 "Disclosure about Segments of an Enterprise and Related Information"
(SFAS 131). SFAS 131 establishes standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial statements. SFAS
131 also establishes standards for related disclosures about products and
services, and geographic areas. Operating segments are defined as components
of an enterprise about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
98
US Airways has two reportable operating segments: US Airways and US
Airways Express. The US Airways segment includes the operations of US
Airways (excluding USAM). 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. As explained in Note 1(k), effective October 1,
1996, US Airways began purchasing all the capacity generated by US Airways
Group's three wholly-owned regional carriers. Both reportable operating
segments are engaged in the business of transporting passengers, property
and mail, but have different operating and economic characteristics. US
Airways offers air transportation using exclusively jets. Its cost structure
is higher than US Airways Express due to, among other things, higher labor
and operating equipment costs. US Airways Express provides air
transportation using primarily turboprop aircraft. Its route network is
designed to feed traffic into US Airways' route system at several points,
primarily at US Airways' hubs. All Other (as presented in the table below)
reflects the activity of USAM. See also Notes 1 (a) and 1 (b).
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies (see Note 1). The Company
evaluates segment performance based on several factors, of which the primary
financial measure is income before taxes.
Financial information for each reportable operating segment is set
forth below (millions):
Year ended December 31,
------------------------
1998 1997 1996
---- ---- ----
Operating Revenues:
US Airways $ 7,845 $ 7,896 $ 7,559
US Airways Express 711 605 145
---- ----- -----
$ 8,556 $ 8,501 $ 7,704
===== ===== =====
Depreciation and amortization expense:
US Airways $ 290 $ 385 $ 301
US Airways Express - - -
----- ----- -----
$ 290 $ 385 $ 301
===== ===== =====
Interest income:
US Airways $ 182 $ 114 $ 80
US Airways Express - - -
All Other 11 7 -
Intercompany eliminations (11) (9) (4)
----- ----- -----
$ 182 $ 112 $ 76
===== ===== =====
Interest expense:
US Airways $ 235 $ 267 $ 284
US Airways Express - - -
All Other - 2 4
Intercompany eliminations (11) (9) (4)
----- ----- -----
$ 224 $ 260 $ 284
===== ===== =====
Equity in earnings of affiliates:
US Airways $ - $ - $ -
US Airways Express - - -
All Other (1) 1 30 37
----- ----- -----
$ 1 $ 30 $ 37
===== ===== =====
Income (Loss) Before Taxes:
US Airways $ 764 $ 338 $ 107
US Airways Express 161 119 52
All Other (1) 11 216 32
----- ----- -----
$ 936 $ 673 $ 191
===== ===== =====
Assets (2):
US Airways $ 7,392 $ 8,072 $ 7,347
US Airways Express - - -
All Other 306 194 63
----- ----- -----
$ 7,698 $ 8,266 $ 7,410
===== ===== =====
(table is continued on following page)
99
(table is continued from preceding page)
Capital Expenditures:
US Airways $ 624 $ 271 $ 176
US Airways Express - - -
All Other - - -
--- --- ---
$ 624 $ 271 $ 176
==== ==== ====
(1)See related information in Note 9.
(2)Substantially all located in the United States.
Information concerning operating revenues (based on RPMs and yield) in
principal geographic areas is as follows (millions):
1998 1997 1996
------ ----- -----
United States $ 8,015 $ 7,966 $ 7,382
Foreign 541 535 322
----- ----- -----
$ 8,556 $ 8,501 $ 7,704
===== ===== =====
9. USAM'S SALE OF CERTAIN INVESTMENTS
As of December 31, 1996 and prior to the events described below, USAM
owned 11% of the Galileo International Partnership (GIP) and approximately
21% of the Apollo Travel Services Partnership (ATS). GIP owned and
operated the Galileo CRS and ATS marketed the Galileo CRS in the U.S. and
Mexico.
On July 30, 1997, Galileo completed an initial public offering (IPO)
and used the proceeds, together with the proceeds of bank financing, to
purchase ATS. Immediately preceding the IPO, GIP was merged with and into a
wholly-owned limited liability company subsidiary of Galileo and USAM
received common stock shares in Galileo in the same proportion as its
partnership interest in GIP. As part of the IPO, USAM sold some of its
Galileo shares and its interest in Galileo was reduced from 11% to
approximately 6.7%. USAM received proceeds of $62 million and recognized a
pre-tax gain of $50 million from the sell-down of its interest in Galileo
and received proceeds of $162 million and recognized a pre-tax gain of $130
million in connection with the ATS sale.
As of December 31, 1998, USAM owned approximately 6.7% of Galileo and
11% of GJP. USAM applies the provisions of SFAS 115 to account for its
remaining investment in Galileo, which is classified as "available-for-
sale."
USAM received distributions from GIP and GJP of $2 million and $1
million, respectively, during 1998, and $13 million and $1 million,
respectively, during 1997. USAM also received a distribution from ATS of
$5 million during 1997.
10. RELATED PARTY TRANSACTIONS
(a) PARENT COMPANY
US Airways provides loans to US Airways Group which arise in the normal
course of business and bear interest at market rates, which are reset
quarterly. US Airways' net receivable from US Airways Group for these loans
were $82 million and $123 million as of December 31, 1998 and 1997,
respectively.
US Airways is currently financing US Airways Group's purchase deposits
for Airbus aircraft at a blended interest rate, which is reset quarterly,
based upon US Airways' outstanding debt and capital lease obligations. The
related short-term receivable from US Airways Group was $132
100
million and $86 million as of December 31, 1998 and 1997, respectively.
On December 30, 1997, US Airways Group purchased Shuttle, Inc.
(Shuttle). US Airways provided the financing for this transaction at an
interest rate of 7.5%, the balance of which was reflected in US Airways'
balance sheet line item Receivable from parent company in Other Assets as of
December 31, 1997. As of December 31, 1998, Receivable from parent company
includes $226 million related to Shuttle's financing and $80 million related
to financing for long-term purchase deposits for Airbus aircraft.
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.
US Airways recorded net interest income of $72 million and $1 million
in 1998 and 1997, respectively, and net interest expense of $20 million in
1996, related to the above transactions.
(b) REGIONAL AIRLINE SUBSIDIARIES OF US AIRWAYS GROUP
Effective October 1, 1996, US Airways began purchasing all of the
capacity (available seat miles or ASMs) generated by US Airways Group's
three wholly-owned regional airline subsidiaries, Allegheny Airlines, Inc.
(Allegheny), Piedmont and PSA, at a rate per ASM that is determined by US
Airways on a monthly basis and, concurrently, recognizing revenues that
result from passengers being carried by these affiliated companies. The
rate per ASM that US Airways pays is based on estimates of the costs
incurred to produce the capacity. US Airways recognized US Airways Express
transportation revenues of $638 million, $605 million and $145 million and
US Airways Express capacity purchases (expenses) of $497 million, $486
million and $93 million in 1998, 1997 and the fourth quarter of 1996,
respectively, related to this program.
US Airways provides various services including passenger handling,
contract training and catering. US Airways recognized other operating
revenues of $60 million, $55 million and $64 million related to these
services for the years 1998, 1997 and 1996, respectively. These regional
airlines also perform passenger and ground handling for US Airways at
certain airports for which US Airways recognized other operating expenses
of $26 million $22 million and $19 million for the years 1998, 1997 and
1996, respectively.
US Airways also leases or subleases certain turboprop aircraft to
these regional airline subsidiaries. US Airways recognized other operating
revenues related to these arrangements of $6 million, $8 million and $14
million for the years 1998, 1997 and 1996, respectively. US Airways entered
into a sale-leaseback arrangement with Allegheny during 1994 involving
certain turboprop aircraft (in return, US Airways subleased these same
aircraft back to Allegheny). This arrangement was terminated in September
1996. US Airways recognized other operating expenses related to the lease
of these aircraft from Allegheny of $6 million for 1996.
US Airways' receivables from and payables to these regional airlines
were $12 million and $39 million, respectively, as of December 31, 1998 and
$19 million and $37 million, respectively, as of December 31, 1997.
Liabilities related to tickets sold for travel on the regional airline
subsidiaries are included in the US Airways' Traffic balances payable and
unused tickets balance sheet line item.
US Airways and Shuttle provide each other with loans which arise in
the normal course of business and bear interest at market rates, which are
reset quarterly. US Airways' net payable to Shuttle for intercompany loan
balances was $11 million as of December 31, 1998.
101
US Airways provides various services to Shuttle including the sale of
frequent traveler mileage credits, the subleasing of certain facilities and
management services. US Airways recognized other operating revenues related
to these services of $10 million during 1998. US Airways receivables from
Shuttle were $9 million and $8 million, as of December 31, 1998 and 1997,
respectively. US Airways' Traffic balances payable and unused tickets
balance sheet line item includes $9 million and $7 million as of December
31, 1998 and 1997, respectively, related to tickets sold for travel on
Shuttle.
(c) OTHER US AIRWAYS GROUP SUBSIDIARIES
US Airways leased certain aircraft to US Airways Group's wholly-owned
subsidiary US Airways Leasing and Sales, Inc. (US Airways Leasing and
Sales). US Airways Leasing and Sales subleased these aircraft to third
parties. This arrangement was terminated in January 1998. US Airways
recognized other operating revenues related to these arrangements of $2
million and $4 million for the years 1997 and 1996, respectively. US
Airways' receivable from US Airways Leasing and Sales was $21 million as of
December 31, 1997 (primarily resulting from the transfer of income tax
benefits as discussed in Note 3).
US Airways purchases a portion of its aviation fuel from US Airways
Group's wholly-owned subsidiary US Airways Fuel Corporation (Fuel Corp.),
which acts as a fuel wholesaler to US Airways in certain circumstances. US
Airways' aviation fuel purchases were $125 million, $183 million and $206
million for the years 1998, 1997 and 1996, respectively. US Airways'
accounts payable to Fuel Corp. was $10 million and $17 million as of
December 31, 1998 and 1997, respectively.
AAL was incorporated in June 1998 and is a wholly-owned subsidiary of
US Airways Group. AAL is a captive insurance company that was formed to
manage a portion of US Airways' airline hull and liability insurance needs.
A portion of the premium paid by US Airways to AAL is commission revenues
to AAL and the remaining premium is used to obtain policies from insurance
underwriters.
(d) BRITISH AIRWAYS
During 1993, US Airways Group and British Airways entered into an
Investment Agreement under which a wholly-owned subsidiary of British
Airways purchased certain series of redeemable convertible preferred stock
from US Airways Group and British Airways entered into code sharing and wet
lease arrangements with US Airways.
US Airways wet leased B767-200ER aircraft, including cockpit and cabin
crews, to British Airways in order to serve three routes between the U.S.
and London beginning in June 1993 and ending in May 1996. During 1996, US
Airways recognized other operating revenues of $13 million related to these
arrangements which were offset by an equal amount of other operating
expenses. US Airways also had various agreements with British Airways for
ground handling at certain airports, contract training and other services.
US Airways recognized other operating revenues of $2 million for the first
five months of 1997 and $6 million for the year 1996 related to services US
Airways performed for British Airways.
US Airways terminated the code share and other business arrangements
between the two companies effective March 29, 1997. In addition, US Airways
believes that British Airways held no ownership interest in US Airways
Group after May 22, 1997.
102
11. VALUATION AND QUALIFYING ACCOUNTS
Allowance For
----------------------------
Uncollectible Inventory
Accounts Obsolescence
-------------- ------------
(in millions)
Balance as of December 31, 1995 $ 12 $162
Additions charged to expense 11 9
Amounts charged to allowance (11) (28)
--- ---
Balance as of December 31, 1996 12 143
Additions charged to expense 14 9
Amounts charged to allowance (9) (9)
--- ---
Balance as of December 31, 1997 17 143
Additions charged to expense 9 10
Amounts charged to allowance (5) (44)
--- ---
Balance as of December 31, 1998 $ 21 $109
=== ===
12. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in millions)
1998
Operating Revenues $2,031 $2,261 $2,177 $2,087
Operating Income $ 189 $ 366 $ 263 $ 171
Net Income $ 101 $ 196 $ 149 $ 114
1997
Operating Revenues $2,090 $2,208 $2,115 $2,087
Operating Income $ 174 $ 259 $ 85 $ 68
Net Income $ 144 $ 202 $ 187 $ 520
See also Note 13.
Note: The sum of the four quarters may not equal the totals for the year
due to
rounding of quarterly results.
13. NONRECURRING ITEMS AND SIGNIFICANT QUARTERLY ADJUSTMENTS
(a) 1998
US Airways' results for 1998 include one nonrecurring item recorded
during the third quarter related to the early termination of leases for two
BAe-146 aircraft. US Airways reversed $3 million of previously accrued rent
obligations related to these aircraft (recorded as a credit to Aircraft
rent expense).
(b) 1997
US Airways' results for 1997 include certain nonrecurring items: (i)
$122 million recorded in Personnel costs (including a fourth quarter charge
of $115 million related to an early retirement program for pilots (see also
Note 5(a)) and a second quarter charge of $7 million related to estimated
employee severance payments due to efficiency measures US Airways announced
during May 1997); (ii) a $1 million credit recorded in Aircraft rent due to
the reversal of previously accrued lease obligations upon the subleasing of
an additional BAe-146 aircraft, recognized in the second quarter (see also
Note 13(c) below); (iii) $5 million recorded in Other rent and landing fees
(including a third quarter charge of $2 million to write-down certain
equipment to be disposed of and a second quarter charge of $3 million to
write-off lease
103
obligations at certain facilities to be abandoned (net of any anticipated
sublease revenues), both related to the May 1997 efficiency measures); (iv)
$89 million recorded in Depreciation and amortization (including third
quarter charges of $11 million related to the May 1997 efficiency measures
to write-down certain equipment to be disposed of and a $59 million SFAS
121 impairment charge resulting from US Airways' September 1997 decision to
retire its remaining DC-9-30 aircraft over the next several years, and
second quarter charges of $1 million to write-off certain leasehold
improvements and an $18 million SFAS 121 impairment charge to write-down
certain DC-9-30 aircraft, both related to the May 1997 efficiency
measures); and (v) $180 million recorded in Gains on sales of interests in
affiliates which resulted from USAM's sale of certain investments as
discussed in Note 9. US Airways also recognized certain tax benefits in
1997, as discussed in Note 3.
(c) 1996
US Airways' results for 1996 include two nonrecurring items recorded
during the second quarter of 1996 related to its subleasing of 11 non-
operating BAe-146 aircraft. US Airways reversed $23 million of previously
accrued rent obligations related to these aircraft against Aircraft rent
expense and reversed $7 million against Aircraft maintenance expense
related to previously accrued lease return provisions.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF US AIRWAYS GROUP
Information regarding this item appears in the Company's definitive
Proxy Statement to be filed pursuant to Regulation 14A relating to the
Company's Annual Meeting of Stockholders on May 19, 1999 and is incorporated
herein by reference. Information concerning executive officers of the
Company is set forth in Part I, Item 1 of this report under the caption
"Executive Officers" in reliance on General Instruction G to Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding this item appears in the Company's definitive
Proxy Statement to be filed pursuant to Regulation 14A relating to the
Company's Annual Meeting of Stockholders on May 19, 1999 and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding this item appears in the Company's definitive
Proxy Statement to be filed pursuant to Regulation 14A relating to the
Company's Annual Meeting of Stockholders on May 19, 1999 and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding this item appears in the Company's definitive
Proxy Statement to be filed pursuant to Regulation 14A relating to the
Company's Annual Meeting of Stockholders on May 19, 1999 and is incorporated
herein by reference.
104
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
CONSOLIDATED FINANCIAL STATEMENTS
(i) The following consolidated financial statements of US Airways Group,
Inc.
are included in Part II, Item 8A of this report:
-Consolidated Statements of Operations for each of the three years
ended December 31, 1998
-Consolidated Balance Sheets as of December 31, 1998 and 1997
-Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1998
-Consolidated Statements of Changes in Stockholders' Equity
(Deficit)
for each of the three years ended December 31, 1998
-Notes to Consolidated Financial Statements
(ii) The following consolidated financial statements of US Airways, Inc. are
included in Part II, Item 8B of this report:
-Consolidated Statements of Operations for each of the three years
ended December 31, 1998
-Consolidated Balance Sheets as of December 31, 1998 and 1997
-Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1998
-Consolidated Statements of Changes in Stockholder's Equity
(Deficit)
for each of the three years ended December 31, 1998
-Notes to Consolidated Financial Statements
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted because they are
not applicable or not required, or because the required information is
either incorporated herein by reference or included in the financial
statements or notes thereto included in this report.
EXHIBITS
Designation Description
- ----------- -----------
3.1 Restated Certificate of Incorporation of US Airways Group, Inc. (US
Airways Group) (incorporated by reference to Exhibit 3.1 to US
Airways
Group's Registration Statement on Form 8-B dated January 27, 1983),
including the Certificate of Amendment dated May 13, 1987
(incorporated by reference to Exhibit 3.1 to US Airways Group's and
US Airways, Inc.'s (US Airways) Quarterly Report on Form 10-Q for the
quarter ended March 31, 1987), the Certificate of Increase dated
June 30, 1987 (incorporated by reference to Exhibit 3 to US Airways
Group's and US Airways' Quarterly Report on Form 10-Q for the quarter
ended June 30, 1987), the Certificate of Increase dated October 16,
1987 (incorporated by reference to Exhibit 3.1 to US Airways Group's
and US Airways' Quarterly Report on Form 10-Q for the quarter ended
September 30, 1987), the Certificate of Increase dated August 7, 1989
(incorporated by reference to Exhibit 3.1 to US Airways Group's
Annual Report on Form 10-K for the year ended December 31, 1989),
the Certificate of Increase dated April 9, 1992 (incorporated by
reference to Exhibit 3.1 to US Airways Group's and US Airways' Annual
Report on Form 10-K for the year ended December 31, 1992), the
Certificate of Increase dated January 21, 1993 (incorporated by
reference to US Airways Group's and US Airways' Annual
105
Report on Form 10-K for the year ended December 31, 1992), and the
Certificate of Amendment dated May 26, 1993 (incorporated by
reference to Appendix II to US Airways Group's Proxy Statement dated
April 26, 1993); and the Certificate of Ownership and Merger merging
Nameco, Inc. into USAir Group, Inc. dated February 17, 1997
(incorporated by reference to Exhibit 3.1 to US Airways Group's
Annual Report on Form 10-K for 1996).
3.2 By-Laws of US Airways Group.
3.3 Restated Certificate of Incorporation of US Airways (incorporated by
reference to Exhibit 3.1 to US Airways' Registration Statement on
Form 8-B dated January 27, 1983); and the Certificate of Amendment to
Restated Certificate of Incorporation of USAir, Inc. dated
February 17, 1997 (incorporated by reference to Exhibit 3.3 to
US Airways' Annual Report on Form 10-K for 1996).
3.4 By-Laws of US Airways.
10.1 Purchase agreement dated October 31, 1997 between US Airways Group
and AVSA, S.A.R.L. (AVSA), an affiliate of aircraft manufacturer
Airbus Industrie G.I.E. (incorporated by reference to Exhibit 10.1 to
US Airways Group's Quarterly Report on Form 10-Q for the three months
ended September 30, 1997) (portions of this exhibit were omitted
pursuant to a request for confidential treatment and filed separately
with the United States Securities and Exchange Commission (SEC)).
10.2 Amendment No. 1 dated June 10, 1998 to purchase agreement dated
October 31, 1997 between US Airways Group and AVSA
(portions of this exhibit have been omitted pursuant to a request for
confidential treatment and filed separately with the SEC).
10.3 Amendment No. 2 dated January 19, 1999 to purchase agreement dated
October 31, 1997 between US Airways Group and AVSA
(portions of this exhibit have been omitted pursuant to a request for
confidential treatment and filed separately with the SEC).
10.4 Purchase agreement dated November 24, 1998 between US Airways Group
and AVSA (portions of this exhibit have been omitted
pursuant to a request for confidential treatment and filed separately
with the SEC).
10.5 Incentive Compensation Plan of US Airways Group, Inc. as amended and
restated January 1, 1997 (incorporated by reference to Exhibit 10.6
to US Airways Group's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.6 US Airways, Inc. Supplementary Retirement Benefit Plan (incorporated
by reference to Exhibit 10.5 to US Airways Group's Annual Report on
Form 10-K for the year ended December 31, 1989).
10.7 US Airways, Inc. Supplemental Executive Defined Contribution Plan
(incorporated by reference to Exhibit 10.6 to US Airways Group's
Annual Report on Form 10-K for the year ended December 31, 1994).
10.8 1998 Pilot Stock Option Plan of US Airways Group, Inc. (incorporated
by reference to Exhibit 10 to US Airways Group's Quarterly Report on
Form 10-Q for the three months ended September 30, 1998).
106
10.9 1997 Stock Incentive Plan of US Airways Group, Inc. as amended and
restated as of November 18, 1997 (incorporated by reference to
Exhibit 10.9 to US Airways Group's Annual Report on Form 10-K for the
year ended December 31, 1997).
10.10 1996 Stock Incentive Plan of US Airways Group, Inc. as amended and
restated as of May 20, 1998 (incorporated by reference to Exhibit 10
to US Airways Group's Quarterly Report on Form 10-Q for the three
months ended June 30, 1998).
10.11 US Airways Group Nonemployee Director Stock Incentive Plan
(incorporated by reference to Exhibit B to US Airways Group's Proxy
Statement dated April 15, 1996).
10.12 US Airways Group Nonemployee Director Deferred Stock Unit Plan
(incorporated by reference to Exhibit 10.12 to US Airways Group's
Annual Report on Form 10-K for the year ended December 31, 1997).
10.13 Amendment No. 1 dated July 22, 1998 to the US Airways Group
Nonemployee Director Deferred Stock Unit Plan.
10.14 Amendment No. 2 dated March 17, 1999 to the US Airways Group
Nonemployee Director Deferred Stock Unit Plan.
10.15 1992 Stock Option Plan of USAir Group (incorporated by reference to
Exhibit A to US Airways Group's Proxy Statement dated March 31,
1992).
10.16 1984 Stock Option and Stock Appreciation Rights Plan of USAir Group
Inc. (incorporated by reference to Exhibit A to US Airways Group's
Proxy Statement dated March 30, 1984).
10.17 Amendment to Employment Agreement between US Airways and its former
Senior Vice President-Finance and Chief Financial Officer
(incorporated by reference to Exhibit 10.2 to US Airways Group's
Quarterly Report on Form 10-Q for the three months ended
September 30, 1997).
10.18 Employment Agreement among US Airways Group and US Airways and the
Chairman of both companies.
10.19 Employment Agreement among US Airways Group and US Airways and the
President and Chief Executive Officer of both companies.
10.20 Employment Agreement between US Airways and its Executive Vice
President-Corporate Affairs and General Counsel (incorporated by
reference to Exhibit 10.13 to US Airways Group's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.21 Agreement between US Airways and its Chairman with respect to
certain employment arrangements.
10.22 Agreement between US Airways and its President and Chief Executive
Officer with respect to certain employment arrangements
107
10.23 Agreement between US Airways and its Executive Vice President-
Corporate Affairs and General Counsel with respect to certain
employment arrangements (incorporated by reference to Exhibit 10.16
to US Airways Group's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.24 Agreement between US Airways and its Senior Vice President-Planning
with respect to certain employment arrangements.
10.25 Employment Agreement between US Airways and its former Executive
Vice President-Human Resources (incorporated by reference to Exhibit
10.22 to US Airways Group's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.26 Agreement between US Airways and its Chairman providing
supplemental retirement benefits (incorporated by reference to
Exhibit 10.23 to US Airways Group's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.27 Amendment to the agreement between US Airways and its Chairman
providing supplemental retirement benefits.
10.28 Agreement between US Airways and its President and Chief Executive
Officer providing supplemental retirement benefits (incorporated
by reference to Exhibit 10.24 to US Airways Group's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.29 Amendment to the agreement between US Airways and its President and
its Chief Executive Officer providing supplemental retirement
benefits
10.30 Agreement between US Airways and its Executive Vice President-
Corporate Affairs and General Counsel providing supplemental
retirement benefits (incorporated by reference to Exhibit 10.25 to
US Airways Group's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.31 Agreement between US Airways and its Senior Vice President-Planning
providing supplemental retirement benefits.
10.32 Employment Agreement between US Airways and its former Executive Vice
President-Human Resources providing retirement benefits (incorporated
by reference to Exhibit 10.30 to US Airways Group's Annual Report on
Form 10-K for the year ended December 31, 1995).
21.1 Subsidiaries of US Airways Group.
21.2 Subsidiaries of US Airways.
23.1 Consent of the Auditors of US Airways Group to the incorporation of
their report concerning certain financial statements contained in
this report in certain registration statements.
23.2 Consent of the Auditors of US Airways to the incorporation of their
report concerning certain financial statements contained in this
report in certain registration statements.
108
24.1 Powers of Attorney signed by the directors of US Airways Group,
authorizing their signatures on this report.
24.2 Powers of Attorney signed by the directors of US Airways, authorizing
their signatures on this report.
27.1 Financial Data Schedule-US Airways Group.
27.2 Financial Data Schedule-US Airways.
REPORTS ON FORM 8-K
Date of Report Subject of Report
- -------------- -----------------
March 5, 1999 News release announcing that pursuant to a secondary offering
made by SOCIETE Internationale de Telcommunications
Aeronatiquies ("SITA"), SITA sold part of its interest in
the international data network service provider Equant n.v.
As member of SITA, US Airways, Inc. is treated as having
indirectly sold approximately 30 percent of its holdings in
Equant n.v. and as a result will recognize a before-tax gain
of $9,944,096.00.
January 20, 1999
Consolidated statements of operations for both US Airways
Group and US Airways for the three months and year ended
December 31, 1998, and select operating and financial
statistics for US Airways for the same periods.
December 4, 1998
Document filed as an Exhibit in connection with, and
incorporated by reference into, US Airways' Registration
Statement on Form S-3 (Registration No. 33-64425). The
registration statement and the Prospectus Supplement, dated
December 4, 1998 to the Prospectus, dated September 28, 1998,
relate to the offering by US Airways of Pass Through
Certificates, Series 1998-1.
December 14, 1998
Documents filed as Exhibits in connection with, and
incorporated by reference into, US Airways' Registration
Statement on Form S-3 (Registration No. 333-64425). The
registration statement, and the Prospectus Supplement, dated
December 4, 1998, to the Prospectus, dated November 17, 1998,
relate to the offering of US Airways Pass Through
Certificates, Series 1998-1.
November 23, 1998
News release announcing US Airways Group's board of directors
authorization for the purchase from time to time in the open
market or in privately negotiated transactions of up to $500
million of the Company's outstanding common stock.
(this space intentionally left blank)
109
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on March
19, 1999.
US AIRWAYS GROUP, INC. (REGISTRANT)
By: /s/ RAKESH GANGWAL
----------------
Rakesh Gangwal, Director, President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of US
Airways Group in the capacities indicated, on March 19, 1999.
By: /s/ RAKESH GANGWAL
---------------
Rakesh Gangwal, Director, President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ THOMAS A. MUTRYN
-----------------
Thomas A. Mutryn, Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
By: *
-----------------------------------
Stephen M. Wolf, Director and Chairman
By: *
-----------------------------------------
Mathias J. DeVito, Director
By: *
----------------------------------------
Peter M. George, Director
By: *
----------------------------------------
George J. W. Goodman, Director
By: *
-----------------------------------------
John W. Harris, Director
By: *
----------------------------------------
Edward A. Horrigan, Jr., Director
(signatures continued on following page)
110
(signatures continued from preceding page)
By: *
----------------------------------------
Robert L. Johnson, Director
By: *
-----------------------------------------
Robert LeBuhn, Director
By: *
-----------------------------------------
John G. Medlin, Jr., Director
By: *
----------------------------------------
Hanne M. Merriman, Director
By: *
-----------------------------------------
Raymond W. Smith, Director
By: /s/ THOMAS A. MUTRYN
----------------------
Thomas A. Mutryn, Attorney-In-Fact
* Signed pursuant to power of attorney filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on March
19, 1999.
US AIRWAYS, INC. (REGISTRANT)
By: /s/ RAKESH GANGWAL
-----------------
Rakesh Gangwal, Director, President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of US
Airways and in the capacities indicated, on March 19, 1999.
By: /s/ RAKESH GANGWAL
----------------
Rakesh Gangwal, Director, President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ THOMAS A. MUTRYN
-------------------
Thomas A. Mutryn, Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
(signatures continued on following page)
111
(signatures continued from preceding page)
By: *
---------------------------------------
Stephen M. Wolf, Director and Chairman
By: *
---------------------------------------
Mathias J. DeVito, Director
By: *
----------------------------------
Peter M. George, Director
By: *
---------------------------------
George J. W. Goodman, Director
By: *
---------------------------------
John W. Harris, Director
By: *
---------------------------------
Edward A. Horrigan, Jr., Director
By: *
---------------------------------
Robert L. Johnson, Director
By: *
--------------------------------
Robert LeBuhn, Director
By: *
---------------------------------
John G. Medlin, Jr., Director
By: *
---------------------------------
Hanne M. Merriman, Director
By: *
-----------------------------------
Raymond W. Smith, Director
By: /s/ THOMAS A. MUTRYN
-----------------------------------
Thomas A. Mutryn, Attorney-In-Fact
* Signed pursuant to power of attorney filed herewith.
112
Exhibit 3.2
BY-LAWS
US AIRWAYS GROUP, INC.
NOVEMBER 18, 1998
***********
ARTICLE I
OFFICES
The registered office of the Corporation shall be in the
City of Wilmington, County of New Castle, Delaware. The
Corporation may have offices within and without the State of
Delaware.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. ANNUAL MEETINGS. The annual meeting of
stockholders for the election of Directors shall be held on the
fourth Wednesday in May, or if that be a legal holiday, on the
next succeeding day not a legal holiday, at nine- thirty o'clock
in the morning, or in any year at such other date and time as may
be designated by the Board of Directors, at which meeting the
stockholders shall elect by ballot, by plurality vote, a Board of
Directors and may transact such other business as may come before
the meeting.
Section 2. SPECIAL MEETINGS. Special meetings of the
stockholders, except those regulated by statue, may be called at
any time by the Chairman or President, and shall, be called by
the President or Secretary on the request, in writing, or by
vote, of a majority of Directors, and by no other person or
persons. No business may be transacted at a special meeting of
the stockholders except as set forth in the notice of such
meeting.
Section 3. LOCATION OF MEETINGS. All meetings of the
stockholders for any purpose may be held, within or without the
State of Delaware, at such time and place as shall be stated in
the notice of the meeting or a duly executed waiver of notice,
and by no other person or persons. No
business may be transacted at a special meeting of the
stockholder except as set forth in the notice of such meeting.
Section 4. LIST OF STOCKHOLDERS. The Secretary shall cause
to be prepared a complete list of stockholders entitled to vote
at any meeting, arranged in alphabetical order and showing the
address of each stockholder and number of shares registered in
the name of each stockholder. The list shall be open to the
examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours for at least ten days
prior to the meeting either at a place within the city where the
meeting is to be held (which place shall be specified in the
notice of meeting) or at the place where the meeting is to be
held. The list shall also be open for inspection by stockholders
during the time and at the place of the meeting.
Section 5. VOTING. Each stockholder entitled to vote
shall, at every meeting of the stockholders, be entitled to one
vote in person or by proxy, signed by him, for each share of
voting stock held by him but no proxy shall be voted on or after
three years from its date, unless it provides for a longer
period. Such right to vote shall be subject to the right of the
Board of Directors to fix a record date for voting stockholders
as hereinafter provided.
Section 6. NOTICE OF STOCKHOLDER BUSINESS. At an annual
meeting of the stockholders held pursuant to Section 1 of this
Article II, only such business shall be conducted as shall have
been brought before the meeting (a) by or at the direction of the
Board of Directors or (b) by any stockholder of the Corporation,
provided such stockholder complies with this Section 6. For
business to be properly brought before an annual meeting by a
stockholder, the stockholder shall give prior written notice
thereof to the Secretary. Such notice shall be received at the
principal executive offices of the Corporation by the Secretary
not less than thirty nor more than sixty days prior to such
annual meeting; provided, however, that in the event that less
than forty days' prior written notice or prior public disclosure
of the date of the meeting is given or made to stockholders, such
notice by the stockholder shall be received by the Secretary not
later than the close of business on the tenth day following the
day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A stockholder's
notice to the
2
Secretary pursuant to this Section 6 shall set forth as to each
matter the stockholder proposes to bring before the annual
meeting: (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the stockholder
proposing such business, (c) the class and number of shares of
the Corporation which are beneficially owned by the stockholder,
and (d) any material interest of the stockholder in such
business. Notwithstanding any provision in these By-Laws to the
contrary, no business shall be conducted at an annual meeting
except in accordance with this Section 6. The Chairman of an
annual meeting shall, if the facts warrant, determine and declare
to the meeting that business was not properly brought before the
meeting in accordance with this Section 6, and if he should so
determine, he shall so declare to the meeting and any such
business shall not be transacted.
Section 7. NOTICE TO STOCKHOLDERS. Notice of all meetings
shall be mailed by the Secretary to each stockholder of record
entitled to vote, at his or her last known post office address,
not less than ten nor more than sixty days prior to any annual or
special meeting.
Section 8. QUORUM. The holders of a majority of the stock
outstanding and entitled to vote shall constitute a quorum but
the holders of a smaller amount may adjourn from time to time
without further notice until a quorum is secured.
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT. In order
that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the
Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and which date shall
not be more than 10 days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any
stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written
notice to the Secretary, request the Board of Directors to fix a
record date. The Board of Directors shall promptly, but in all
events within 10 days after the date on which such a request is
received, adopt a resolution fixing the record date. If no
record date has been fixed by the Board of Directors within 10
days
3
of the date on which such a request is received, the record date
for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the
Board of Directors is required by applicable law, shall be the
first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or any officer or
agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by applicable law,
the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the
close of business on the date on which the Board of Directors
adopts the resolution taking such prior action.
ARTICLE III
DIRECTORS
Section 1. NUMBER. The property and business of the
Corporation shall be managed and controlled by its Board of
Directors, consisting of twelve members. Directors need not be
stockholders.
Section 2. NOTICE OF STOCKHOLDER NOMINEES. Only persons
nominated in accordance with this Section 2 shall be eligible for
election as Directors. Nomination of persons for election to the
Board of Directors of the Corporation may be made at a meeting of
stockholders (a) by or at the direction of the Board of Directors
or (b) by any stockholder of the Corporation entitled to vote for
the election of Directors at the meeting who complies with this
Section 2. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be received at the
principal executive offices of the Corporation by the Secretary
not less than thirty nor more than sixty days prior to the
meeting; provided, however, that in the event less than forty
days' prior written notice or prior public disclosure of the date
of the meeting is given or made to
4
stockholders, such notice by the stockholder shall be received by
the Secretary not later than the close of business on the tenth
day following the day on which such notice of the date of meeting
was mailed or such public disclosure was made. Such
stockholder's notice shall set forth: (a) as to each person whom
the stockholder proposes to nominate for election or re-election
as a Director, all information relating to such person as is
required to be disclosed in solicitation of proxies for election
of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a Director
if elected), and (b) as to the stockholder giving the notice (i)
the name and address, as they appear on the Corporation's books,
of such stockholder and (ii) the class and number of shares of
the Corporation which are beneficially owned by such stockholder.
At the request of the Board of Directors any person nominated by
the Board of Directors for election as a Director shall furnish
to the Secretary that information required by this Section 2 to
be set forth in a stockholder's notice of nomination which per-
tains to the nominee. No person shall be eligible for election
as a Director of the Corporation unless nominated in accordance
with these By-Laws. The Chairman of the stockholders' meeting
shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with these By-Laws,
and if he should so determine, he shall so declare to such
meeting and the defective nomination shall be disregarded.
Section 3. ELECTION, TERM, VACANCIES. The Directors shall
hold office until the next annual election and until their
successors are elected and qualified. They shall be elected by
the stockholders, except that if there be a vacancy in the Board
by reason of death, resignation or otherwise, such vacancy shall
be filled for the unexpired term by the remaining Directors,
though less than a quorum, by a majority vote.
Section 4. POWERS OF DIRECTORS. The business of the
Corporation shall be managed by or under the direction of its
Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these By-
Laws directed or required to be exercised or done by the
5
stockholders.
Section 5. DIRECTORS EMERITI. For the purpose of
conserving, for the benefit of the Corporation, the knowledge,
experience and good will generated by a long period of service in
formulating and implementing the basic policies of the
Corporation or predecessor or affiliated corporations, the Board
of Directors shall have the power in its discretion to appoint
one or more Directors Emeriti. Any person who has served for a
period of not less than ten years on the Board of Directors of
the Corporation or of any predecessor or affiliate of the
Corporation, may be appointed a Director Emeritus by the Board of
Directors for an annual term and shall be eligible for
reappointment annually at the discretion of the Board. The
duties of a Director Emeritus shall consist of being available to
the Chairman and President of the Corporation for consultation
and advice on any matters pertaining to the Corporation which the
Chairman or President may refer to him from time to time.
Directors Emeriti shall be notified of and be invited to attend
the annual meeting of the Board of Directors and such other
meetings as determined by the Chairman or President of the
Corporation and be entitled to be heard at such meetings on
matters pending before the Board of Directors. They shall not be
members of the Board nor be entitled to vote as such nor be
counted as constituting part of a quorum.
Section 6. COMPENSATION. Directors, members of committees
and Directors Emeriti shall receive such compensation as the
Board shall from time to time prescribe.
ARTICLE IV
MEETINGS OF DIRECTORS
Section 1. ANNUAL MEETING. After each annual election of
Directors, the newly elected Directors may meet for the purpose
of organization, the election of Officers, and the transaction of
other business, at such place and time as shall be fixed by the
stockholders at the annual meeting, and, if a majority of the
Directors be present at such place and time, no prior notice of
such meeting shall be required to be given to the Directors. The
place and time of such meeting may also be fixed by written
consent of the Directors.
Section 2. REGULAR MEETINGS. Bi-monthly meetings of the
Board of Directors shall be
6
held in January, March, May, July, September and November in each
year, on the date and at a time and place designated from time to
time by the Board of Directors. The Secretary shall forward to
each Director, at least five days before any such meeting, a
notice of the time and place of the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the
Directors may be called by the Chairman or President on two days'
notice in writing, or on one day's notice by telegraph to each
Director, and shall be called by the President in like manner on
the written request of two or more Directors.
Section 4. LOCATION. Meetings of the Directors may be held
within or without the State of Delaware at such place as is
indicated in the notice of waiver of notice thereof.
Section 5. QUORUM. A majority of the Directors shall
constitute a quorum, but a smaller number may adjourn from time
to time, without further notice, until a quorum is secured.
ARTICLE V
COMMITTEES
Section 1. CREATION. The Board of Directors may, by
resolution or resolutions passed by a majority of the Board,
designate one or more committees each to consist of three or more
Directors of the Corporation. Each such Committee shall have and
may exercise such powers and duties as shall be delegated to it
by the Board of Directors except that no such Committee shall
have power to (a) elect Directors; (b) alter, amend or repeal
these By-Laws or any resolution or resolutions of the Board of
Directors relating to such Committee; (c) declare any dividend or
make any other distribution to the stockholders of the
Corporation; (d) appoint any member of such Committee; or (e)
take any other action which may lawfully be taken only by the
Board.
Section 2. COMMITTEE PROCEDURE. Each such Committee
established by the Board shall meet at stated times or on notice
to all members by any member of such Committee. Each such
Committee shall establish its own rules of procedure. Each such
Committee shall keep regular
7
minutes of its proceedings and report the same to the Board of
Directors.
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify its Directors, Officers and
employees, and shall have the power to indemnify its other
agents, to the full extent permitted by the General Corporation
Law of the State of Delaware, as amended from time to time (but,
in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to
provide on June 29, 1989). Expenses (including attorneys' fees)
incurred by an Officer, Director or employee in defending any
civil, criminal, administrative, or investigative action, suit or
proceeding shall to the fullest extent permitted by law be paid
by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or
on behalf of such Director, Officer or employee to repay such
amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized
hereunder. The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be
exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Restated
Certificate of Incorporation, by-laws, agreement, vote of
stockholders or disinterested directors or otherwise.
8
ARTICLE VII
OFFICERS
Section 1. GENERAL. The Officers of the Corporation shall
be a Chairman of the Board, a Chief Executive Officer, a
President, one or more Vice Presidents, a Secretary, a Treasurer,
a Controller and such other Officers as may from time to time be
chosen by the Board of Directors. The Chief Executive Officer
shall be empowered to appoint and remove from office, at his
discretion, Assistant Vice Presidents and Assistant Secretaries.
Any number of offices may be held by the same person, unless the
certificate of incorporation or these By-Laws otherwise provide.
Section 2. TERM. The Officers of the Corporation shall
hold office until their successors are chosen and qualified. Any
Officer chosen or appointed by the Board of Directors may be
removed either with or without cause at any time by the
affirmative vote of a majority of the whole Board of Directors.
If the office of any Officer other than an assistant officer
becomes vacant for any reason, the vacancy shall be filled by the
affirmative vote of a majority of the whole Board of Directors.
Section 3. CHAIRMAN OF THE BOARD. A Chairman of the Board
shall be chosen from among the Directors. The Chairman of the
Board shall preside at all meetings of the stockholders and
Directors and shall perform such other duties as may be
prescribed by the Board of Directors.
Section 4. CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall have responsibility for the general and active
management of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried
into effect.
Section 5. PRESIDENT. The President shall be the Chief
Operating Officer of the Corporation. The President shall have
such responsibilities and authority as determined by the Chief
Executive Officer of the Corporation.
Section 6. VICE PRESIDENT. The Vice President or Vice
Presidents, in the order designated by the Board of Directors,
shall be vested with all the powers and required to perform
9
all the duties of the President in his absence or disability and
shall perform such other duties as may be prescribed by the Board
of Directors.
Section 7. SECRETARY. The Secretary shall perform all the
duties commonly incident to his office, and keep accurate minutes
of all meetings of the stockholders, the Board of Directors and
the Committees of the Board of Directors, recording all the
proceedings of such meetings in a book kept for that purpose. He
shall give proper notice of meetings of stockholders and
Directors and perform such other duties as the Board of Directors
shall designate.
Section 8. TREASURER. The Treasurer shall have custody of
the funds and securities of the Corporation and shall keep full
and accurate accounts of disbursements and shall deposit all
monies and other valuable effects in the name and to the credit
of the Corporation in such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board or President, taking
proper vouchers for such disbursements, and shall render to the
President and Directors, whenever they may require it, an account
of all his transactions as Treasurer and of the financial
condition of the Corporation. Until such time as a Controller is
elected, the Treasurer shall also maintain adequate records of
all assets, liabilities and transactions of the Corporation and
shall see that adequate audits thereof are currently and
regularly made. He shall cause to be prepared, compiled and
filed such reports, statements, statistics and other data as may
be required by law or prescribed by the President. The Treasurer
shall perform such other duties as the Board of Directors may
from time to time prescribe.
10
ARTICLE VIII
STOCK
Section 1. CERTIFICATES. Certificates of stock of the
Corporation shall be signed by, or in the name of, the
Corporation by the President or a Vice President and the
Secretary or an Assistant Secretary, certifying the number of
shares of the holder thereof. The Board of Directors may appoint
one or more transfer agents and registrars of transfers, which
may be the same agency or agencies, and may require all
certificates to bear the signatures of one of such transfer
agents and one of such registrars of transfers, or as the Board
of Directors may otherwise direct. Where any such certificate is
signed by a transfer agent or transfer clerk and by a registrar,
the signatures of any such President, Vice President, Secretary
or Assistant Secretary may be facsimiles engraved or printed.
The certificates shall bear the seal of the Corporation or a
predecessor corporation or shall bear a facsimile of such seal
engraved or printed.
In case any Officer or Officers who have signed, or whose
facsimile signature or signatures have been used on, any
certificate or certificates of stock, has ceased to be an Officer
or Officers of the Corporation, whether because of death,
resignation or otherwise, before such certificate or certificates
have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon, had not ceased to
be such Officer or Officers of the Corporation.
Section 2. LOST CERTIFICATES. If a certificate of stock is
lost or destroyed, another may be issued in its stead upon proof
of loss or destruction and the giving of a satisfactory bond of
indemnity, in an amount sufficient to indemnify the Corporation
against any claim. A certificate may be issued without requiring
bond when, in the judgment of the Directors, it is proper to do
so.
Section 3. TRANSFERS. All transfers of stock of the
Corporation shall be made upon its
11
books by the holder of the shares in person or by his lawfully
constituted representative, upon surrender of certificates of
stock for cancellation.
Section 4. FIXING RECORD DATE. The Board of Directors may
fix in advance a record date in order to determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for
the purpose of any other lawful action. The record date shall not
be more than sixty nor less than ten days before the date of any
meeting of stockholders nor more than sixty days prior to any
other action.
Section 5. STOCKHOLDERS OF RECORD. The Corporation shall
be entitled to treat the holder of record of any share or shares
of stock as the holder in fact thereof, and accordingly shall not
be bound to recognize any equitable or other claim to or interest
in such share on the part of any other person whether or not it
shall have express or other notice thereof, except as expressly
provided by the laws of the State of Delaware.
ARTICLE IX
GENERAL PROVISIONS
Section 1. FISCAL YEAR. The fiscal year of the Corporation
shall begin the first day of January and end on the 31st day of
December of each year.
Section 2. DIVIDENDS. Dividends upon the capital stock may
be declared by the Board of Directors at any regular or special
meeting and may be paid in cash or in property or in shares of
the capital stock. Before paying any dividend or making any
distribution of profits, the Directors may set apart out of any
of the funds of the Corporation available for dividends a reserve
or reserves for any proper purpose and may alter or abolish any
such reserve or reserves.
Section 3. CHECKS. All checks, drafts or orders for the
payment of money shall be signed by the Treasurer or by such
other Officer, Officers, employee or employees as the Board of
Directors may from time to time designate.
12
Section 4. CORPORATE SEAL. The Corporate Seal shall have
inscribed thereon the name of the Corporation, the year of its
incorporation, and the words "Incorporated Delaware."
ARTICLE X
AMENDMENT TO BY-LAWS
Subject to the provisions of any resolution of Directors
creating any series of preferred stock, the Board of Directors
shall have the power from time to time to make, alter or repeal
By-Laws, but any By-Laws made by the Board of Directors may be
altered, amended or repealed by the stockholders at any annual
meeting of stockholders, or at any special meeting provided that
the notice of such proposed alteration, amendment or repeal is
included in the notice of such special meeting.
ARTICLE XI
RESTATED CERTIFICATE OF INCORPORATION TO GOVERN
Notwithstanding anything to the contrary herein, in the
event any provision contained herein is inconsistent with or
conflicts with a provision of the Corporation's Restated
Certificate of Incorporation, as the same may be from time to
time amended or supplemented (the "Restated Certificate of
Incorporation"), such provision herein shall be superseded by the
inconsistent provision in the Restated Certificate of
Incorporation, to the extent necessary to give effect to such
provision in the Restated Certificate of Incorporation.
13
EXHIBIT 3.4
BY-LAWS
US AIRWAYS, INC.
November 18, 1998
* * * * * * * * *
ARTICLE I
OFFICES
The registered office of the Corporation shall be in the
City of Wilmington, County of New Castle, Delaware. The
Corporation may have offices within and without the State of
Delaware.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. ANNUAL MEETINGS. The annual meeting of
stockholders for the election of Directors shall be held on the
fourth Wednesday in May, or if that be a legal holiday, on the
next succeeding day not a legal holiday, at nine- thirty o'clock
in the morning, or in any year at such other date and time as may
be designated by the Board of Directors, at which meeting the
stockholders shall elect by ballot, by plurality vote, a Board of
Directors and may transact such other business as may come before
the meeting.
Section 2. SPECIAL MEETINGS. Special meetings of the
stockholders may be called at any time by the Chairman or
President, and shall be called by the President or Secretary on
the request, in writing, or by vote, of a majority of Directors,
or at the request, in writing, of stockholders of record owning a
majority in amount of the capital stock outstanding and entitled
to vote.
Section 3. LOCATION OF MEETINGS. All meetings of the
stockholders for any purpose may be held, within or without the
State of Delaware, at such time and place as shall be stated in
the notice of the meeting or a duly executed waiver of notice.
Section 4. LIST OF STOCKHOLDERS. The Secretary shall cause
to be prepared a complete list of stockholders entitled to vote
at any meeting, arranged in alphabetical order and showing the
address of each stockholder and number of shares registered in
the name of each stockholder. The list shall be open to the
examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours for at least ten days
prior to the meeting either at a place within the city where the
meeting is to be held (which place shall be specified in the
notice of meeting) or at the place where the meeting is to be
held. The list shall also be open for inspection by stockholders
during the time and at the place of the meeting.
Section 5. VOTING. Each stockholder entitled to vote
shall, at every meeting of the stockholders, be entitled to one
vote in person or by proxy, signed by him, for each share of
voting stock held by him but no proxy shall be voted on or after
three years from its date, unless it provides for a longer
period. Such right to vote shall be subject to the right of the
Board of Directors to fix a record date for voting stockholders
as hereinafter provided.
Section 6. NOTICE TO STOCKHOLDERS. Notice of all meetings
shall be mailed by the Secretary to each stockholder of record
entitled to vote, at his or her last known post office address,
not less than ten nor more than sixty days prior to any annual or
special meeting.
Section 7. QUORUM. The holders of a majority of the stock
outstanding and entitled to vote shall constitute a quorum but
the holders of a smaller amount may adjourn from time to time
without further notice until a quorum is secured.
ARTICLE III
DIRECTORS
Section 1. NUMBER. The property and business of the
Corporation shall be managed and controlled by its Board of
Directors, consisting of twelve members. Directors need not be
stockholders.
Section 2. ELECTION, TERM, VACANCIES. The Directors shall
hold office until the next annual election and until their
successors are elected and qualified. They shall be elected by
the stockholders, except that if there be a vacancy in the Board
by reason of death, resignation or otherwise, such vacancy shall
be filled for the unexpired term by the remaining Directors,
though less than a quorum, by a majority vote.
Section 3. POWERS OF DIRECTORS. The business of the
Corporation shall be managed by or under the direction of its
Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these by-
laws directed or required to be exercised or done by the
stockholders.
Section 4. DIRECTORS EMERITI. For the purpose of
conserving, for the benefit of the Corporation, the knowledge,
experience and good will generated by a long period of service in
formulating and implementing the basic policies of the
Corporation or corporations merged into the corporation, the
Board of Directors shall have the power in its discretion to
appoint one or more Directors Emeriti. Any person who has served
for a period of not less than ten years on the Board of Directors
of the Corporation or of any predecessor or affiliate of the
Corporation, may be appointed a Director Emeritus by the Board of
Directors for an annual term and shall be eligible for
reappointment annually at the discretion of the Board. The
duties of a Director Emeritus shall consist of being available to
the Chairman and President of the Corporation for consultation
and advice on any matters pertaining to the Corporation which the
Chairman or President may refer to him from time to time.
Directors Emeriti shall be notified of and be invited to attend
the annual meeting of the Board of Directors and such other
meetings as determined by the Chairman or President of the
Corporation and be entitled to be heard at such meetings on
matters pending before the Board of Directors. They shall not be
members of the Board nor be entitled to vote as such nor be
counted as constituting part of a quorum.
Section 5. COMPENSATION. Directors, members of committees
and Directors Emeriti shall receive such compensation as the
Board shall from time to time prescribe.
ARTICLE IV
MEETINGS OF DIRECTORS
Section 1. ANNUAL MEETING. After each annual election of
Directors, the newly elected Directors may meet for the purpose
of organization, the election of Officers, and the transaction of
other business, at such place and time as shall be fixed by the
stockholders at the annual meeting, and, if a majority of the
Directors be present at such place and time, no prior notice of
such meeting shall be required to be given to the Directors. The
place and time of such meeting may also be fixed by written
consent of the Directors.
Section 2. REGULAR MEETINGS. Bi-monthly meetings of the
Board of Directors shall be held in January, March, May, July,
September and November in each year, on the date and at a time
and place designated from time to time by the Board of Directors.
The Secretary shall forward to each Director, at least five days
before any such meeting, a notice of the time and place of the
meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the
Directors may be called by the Chairman or President on two days'
notice in writing, or on one day's notice by telegraph to each
Director, and shall be called by the President in like manner on
the written request of two or more Directors.
Section 4. LOCATION. Meetings of the Directors may be held
within or without the State of Delaware at such place as is
indicated in the notice of waiver of notice thereof.
Section 5. QUORUM. A majority of the Directors shall
constitute a quorum, but a smaller number may adjourn from time
to time, without further notice, until a quorum is secured.
ARTICLE V
COMMITTEES
Section 1. CREATION. The Board of Directors may, by
resolution or resolutions passed by a majority of the Board,
designate one or more committees each to consist of three or more
Directors of the Corporation. Each such Committee shall have and
may exercise such powers and duties as shall be delegated to it
by the Board of Directors except that no such Committee shall
have power to (a) elect Directors; (b) alter, amend or repeal
these By-Laws or any resolution or resolutions of the Board of
Directors relating to such Committee; (c) declare any dividend or
make any other distribution to the stockholders of the
Corporation; (d) appoint any member of such Committee; or (e)
take any other action which may lawfully be taken only by the
Board.
Section 2. COMMITTEE PROCEDURE. Each such Committee
established by the Board shall meet at stated times or on notice
to all members by any member of such Committee. Each such
Committee shall establish its own rules of procedure. Each such
Committee shall keep regular minutes of its proceedings and
report the same to the Board of Directors.
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify its Directors, Officers and
employees, and shall have the power to indemnify its other
agents, to the full extent permitted by the General Corporation
Law of the State of Delaware, as amended from time to time, (but,
in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to
provide on June 29, 1989). Expenses (including attorneys' fees)
incurred by an Officer, Director or employee in defending any
civil, criminal, administrative, or investigative action, suit or
proceeding shall to the fullest extent permitted by law be paid
by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or
on behalf of such Director, Officer or employee to repay such
amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized
hereunder. The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be
exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Restated
Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
ARTICLE VII
OFFICERS
Section 1. GENERAL. The Officers of the Corporation shall
be a Chairman of the Board, a Chief Executive Officer, a
President, one or more Vice Presidents, a Secretary, a Treasurer,
a Controller and such other Officers as may from time to time be
chosen by the Board of Directors. The Chief Executive Officer
shall be empowered to appoint and remove from office, at his
discretion, Assistant Vice Presidents and Assistant Secretaries.
Any number of offices may be held by the same person, unless the
certificate of incorporation or these By-laws otherwise provide.
Section 2. TERM. The Officers of the Corporation shall
hold office until their successors are chosen and qualified. Any
Officer chosen or appointed by the Board of Directors may be
removed either with or without cause at any time by the
affirmative vote of a majority of the whole Board of Directors.
If the office of any Officer other than an assistant officer
becomes vacant for any reason, the vacancy shall be filled by the
affirmative vote of a majority of the whole Board of Directors.
Section 3. CHAIRMAN OF THE BOARD. A Chairman of the Board
shall be chosen from among the Directors. The Chairman of the
Board shall preside at all meetings of the stockholders and
Directors and shall perform such other duties as may be
prescribed by the Board of Directors.
Section 4. CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall have responsibility for the general and active
management of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried
into effect.
Section 5. PRESIDENT. The President shall be the Chief
Operating Officer of the Corporation. The President shall have
such responsibilities and authority as determined by the Chief
Executive Officer of the Corporation.
Section 6. VICE PRESIDENT. The Vice President or Vice
Presidents, in the order designated by the Board of Directors,
shall be vested with all the powers and required to perform all
the duties of the President in his absence or disability and
shall perform such other duties as may be prescribed by the Board
of Directors.
Section 7. SECRETARY. The Secretary shall perform all the
duties commonly incident to his office, and keep accurate minutes
of all meetings of the stockholders, the Board of Directors and
the Committees of the Board of Directors, recording all the
proceedings of such meetings in a book kept for that purpose. He
shall give proper notice of meetings of stockholders and
Directors and perform such other duties as the Board of Directors
shall designate.
Section 8. TREASURER. The Treasurer shall have custody of
the funds and securities of the Corporation and shall keep full
and accurate accounts of disbursements and shall deposit all
monies and other valuable effects in the name and to the credit
of the Corporation in such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board or President, taking
proper vouchers for such disbursements, and shall render to the
President and Directors, whenever they may require it, an account
of all his transactions as Treasurer and of the financial
condition of the Corporation. The Treasurer shall perform such
other duties as the Board of Directors may from time to time
prescribe.
Section 9. CONTROLLER. The Controller shall maintain
adequate records of all assets, liabilities and transactions of
the Corporation and shall see that adequate audits thereof are
currently and regularly made. He shall cause to be prepared,
compiled and filed such reports, statements, statistics and other
data as may be required by law or prescribed by the President and
shall perform such other duties as may be prescribed by the Board
of Directors.
ARTICLE VIII
STOCK
Section 1. CERTIFICATES. Certificates of stock of the
Corporation shall be signed by, or in the name of, the
Corporation by the President or a Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary, certifying the number of shares of the
holder thereof. The Board of Directors may appoint a transfer
agent, and a registrar of transfers, which may be the same
agency, and may require all certificates to bear the signatures
of such transfer agent and such registrar of transfers, or as the
Board of Directors may otherwise direct. Where any such
certificate is signed by a transfer agent or transfer clerk and
by a registrar, the signatures of any such President, Vice
President, Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary may be facsimiles engraved or printed. The
certificates shall bear the seal of the Corporation or shall bear
a facsimile of such seal engraved or printed.
In case any Officer or Officers who have signed, or whose
facsimile signature or signatures have been used on, any
certificate or certificates of stock, has ceased to be an Officer
or Officers of the Corporation, whether because of death,
resignation or otherwise, before such certificate or certificates
have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon, had not ceased to
be such Officer or Officers of the Corporation.
Section 2. LOST CERTIFICATES. If a certificate of stock is
lost or destroyed, another may be issued in its stead upon proof
of loss or destruction and the giving of a satisfactory bond of
indemnity, in an amount sufficient to indemnify the Corporation
against any claim. A certificate may be issued without requiring
bond when, in the judgment of the Directors, it is proper to do
so.
Section 3. TRANSFERS. All transfers of stock of the
Corporation shall be made upon its books by the holder of the
shares in person or by his lawfully constituted representative,
upon surrender of certificates of stock for cancellation.
Section 4. FIXING RECORD DATE. The Board of Directors may
fix in advance a record date in order to determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for
the purpose of any other lawful action. The record date shall not
be more than sixty nor less than ten days before the date of any
meeting of stockholders nor more than sixty days prior to any
other action.
Section 5. STOCKHOLDERS OF RECORD. The Corporation shall
be entitled to treat the holder of record of any share or shares
of stock as the holder in fact thereof, and accordingly shall not
be bound to recognize any equitable or other claim to or interest
in such share on the part of any other person whether or not it
shall have express or other notice thereof, except as expressly
provided by the laws of Delaware.
ARTICLE IX
GENERAL PROVISIONS
Section 1. FISCAL YEAR. The fiscal year of the Corporation
shall begin the first day of January and end on the 31st day of
December of each year.
Section 2. DIVIDENDS. Dividends upon the capital stock may
be declared by the Board of Directors at any regular or special
meeting and may be paid in cash or in property or in shares of
the capital stock. Before paying any dividend or making any
distribution of profits, the Directors may set apart out of any
of the funds of the Corporation available for dividends a reserve
or reserves for any proper purpose and may alter or abolish any
such reserve or reserves.
Section 3. CHECKS. All checks, drafts or orders for the
payment of money shall be signed by the Treasurer or by such
other Officer, Officers, employee or employees as the Board of
Directors may from time to time designate.
Section 4. CORPORATE SEAL. The Corporate Seal shall have
inscribed thereon the name of the Corporation, the year of its
incorporation, and the words "Incorporated Delaware."
ARTICLE X
AMENDMENT OF BY-LAWS
Subject to the provisions of any resolution of Directors
creating any series of preferred stock, the Board of Directors
shall have the power from time to time to make, alter or repeal
by-laws, but any by-laws made by the Board of Directors may be
altered, amended or repealed by the stockholders at any annual
meeting of stockholders, or at any special meeting provided that
the notice of such proposed alteration, amendment or repeal is
included in the notice of such special meeting.
Exhibit 10.2
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted text has been marked with a triple
asterisk ("***") and has been filed separately with the Securities and
Exchange Commission.
AMENDMENT NO. 1
dated as of June 10, 1998
TO THE AIRBUS A319/A320/A321 PURCHASE AGREEMENT
dated as of October 31, 1997
between
AVSA, S.A.R.L.
and
US Airways Group, Inc.
AMENDMENT NO. 1
This Amendment No. 1 (hereinafter referred to as the "Amendment") is
entered into as of June 10, 1998, by and between AVSA, S.A.R.L, a societe a
responsabilite limitee organized and existing under the laws of the
Republic of France, having its registered office located at 2, Rond Point
Maurice Bellonte, 31700 Blagnac, France (hereinafter referred to as the
"Seller") and US Airways Group, Inc., a corporation organized and existing
under the laws of the State of Delaware, United States of America, having
its executive offices located at 2345 Crystal Drive, Arlington, VA 22227
(hereinafter referred to as the "Buyer");
WITNESSETH
WHEREAS, the Buyer and the Seller entered into an Airbus A319/A320/A321
Purchase Agreement, dated as of October 31, 1997, relating to the sale by
the Seller and the purchase by the Buyer of certain Airbus Industrie A319,
A320 and A321 model Aircraft (the "Aircraft"), which agreement, together
with all Exhibits, Appendices, and Letter Agreements attached thereto is
hereinafter called the "Agreement."
WHEREAS, the Buyer and the Seller agree to amend Clause 9 of the Agreement
and make other amendments to the Agreement.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS :
1. DEFINITIONS
Capitalized terms used herein and not otherwise defined in this
Amendment will have the meaning assigned to them in the Agreement.
The terms "herein," "hereof," and "hereunder" and words of similar
import refer to this Amendment.
2. DELIVERY DATES
2.1 The Buyer and the Seller hereby agree to
(i) amend the delivery schedules for Firm A319 Aircraft, Firm A320
Aircraft and Reconfirmable A319 Aircraft, and
(ii) ***
2.2 Therefore,
(i) Subclauses 9.1.1 and 9.1.2 of the Agreement are hereby
superseded and replaced by the following quoted text, and
(ii) ***
QUOTE
9.1.1 The Buyer will accept the Aircraft, during the months and years
set forth below in this Subclause 9.1.1.
(i) Firm A319 Aircraft
Firm A319 Month of
Aircraft No. Delivery
- ------------ --------
*** ***
(ii) Firm A320 Aircraft
Firm A320 Month of
Aircraft No. Delivery
- ------------ --------
*** ***
(iii) Reconfirmable A319 Aircraft
Reconfirmable Month of
A319 Aircraft No. Delivery
- ----------------- --------
*** ***
9.1.2 [INTENTIONALLY LEFT BLANK]
UNQUOTE
2.3 On signature of this Amendment, the Buyer will make all Predelivery
Payments due as a result of the rescheduling of Aircraft as set forth
above under Subparagraphs 2.1 and 2.2.
2.4 The Buyer and the Seller hereby agree to replace Subclause 9.1.4 of
the Agreement with the following paragraph.
QUOTE
9.1.4 ***
UNQUOTE
3. DELIVERY SCHEDULE
3.1 In addition to the Seller's obligations set forth in Paragraph 3 of
Letter Agreement No. 2 to the Agreement and in Paragraph 3 of Letter
Agreement No. 3 to the Agreement, the Buyer and the Seller hereby
agree ***.
3.2 The Buyer and the Seller hereby agree to replace Subparagraph 3.1 of
Letter Agreement No.2 to the Agreement with the following paragraph.
QUOTE
***
UNQUOTE
3.3 The Buyer and the Seller hereby agree to amend the first paragraph of
Paragraph 2 of Letter Agreement No. 3 to the Agreement by replacing
such first paragraph with the following quoted text.
QUOTE
***
UNQUOTE
4. PERFORMANCE GUARANTEES
The Buyer and the Seller hereby agree to amend Subparagraphs 2.2,
2.2.1, 2.2.3 and 2.2.7 of Letter Agreements Nos. 8A, 8B and 8C by
replacing the "Original Text" with the "New Text" listed in the table
below. For ease of reference, these changes have been incorporated
into amended versions of Letter Agreements Nos. 8A, 8B and 8C
attached to this Amendment as Exhibits 1, 2 and 3 entitled "Amended
Letter Agreement No. 8A," "Amended Letter Agreement No. 8B" and
"Amended Letter Agreement No. 8C." Exhibits 1, 2 and 3 hereby
supersede and replace Letter Agreements Nos. 8A, 8B and 8C attached
to the Agreement
<TABLE>
<CAPTION>
=====================================================================================================
SUBPARAGRAPH ORIGINAL TEXT NEW TEXT
-------------------------------------------------------------------------------
A319 A320 A321 A319 A320 A321
=====================================================================================================
<C> <C> <C> <C> <C> <C> <C>
2.2 *** *** *** *** *** ***
2.2.1 17 feet 17 feet 17 feet 151 feet 151 feet 151 feet
2.2.3 445 lb 500 lb 670 lb 380 lb 410 lb 570 lb
2.2.7 7,140 lb 7,500 lb 8, 760 lb 6,630 lb 6,930 lb 7,940 lb
</TABLE>
5. EFFECT OF THE AMENDMENT
The Agreement will be deemed to be amended to the extent herein
provided, and, except as specifically amended hereby, will continue
in full force and effect in accordance with its original terms. The
Amendment supersedes any previous understandings, commitments, or
representations whatsoever, whether oral or written, related to the
subject matter of this Amendment.
Both parties agree that this Amendment will constitute an integral,
nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this
Amendment will be governed by the provisions of said Agreement,
except that if the Agreement and this Amendment have specific
provisions which are inconsistent, the specific provisions contained
in this Amendment will govern.
6. ASSIGNMENT
This Amendment and the rights and obligations of the Buyer hereunder
will not be assigned or transferred in any manner without the prior
written consent of the Seller, and any attempted assignment or
transfer in contravention of the provisions of this Paragraph 6 will
be void and of no force or effect. Notwithstanding the preceding
sentence, the terms of Subclauses 19.5 and 19.6 of the Agreement will
apply to this Amendment.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance by signing in the space provided below.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
----------------------
Its: Director Contracts
Date: November 24, 1998
Agreed and Accepted
US Airways Group, Inc.
By: /s/ Thomas A. Fink
----------------------
Its: Treasurer
Date: November 24, 1998
A319-112
CFM 56-5B-6 ENGINES
EXHIBIT 1
AMENDED LETTER AGREEMENT NO. 8A
As of June 10, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: A319-112 PERFORMANCE GUARANTEES
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A319/A320/A321 Purchase Agreement
dated as of October 31, 1997 (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Amended Letter
Agreement No. 8A (the "Letter Agreement") certain additional terms and
conditions regarding the sale of the Aircraft. Capitalized terms used
herein and not otherwise defined in this Letter Agreement will have the
meanings assigned thereto in the Agreement. The terms "herein," "hereof"
and "hereunder" and words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
The Seller, in its capacity as "Buyer" under its arrangement with
the Manufacturer, has negotiated and obtained the following performance and
weight guarantees (the "Guarantees") from the Manufacturer, in its capacity
as "Seller" with respect to the Aircraft, subject to the terms, conditions,
limitations and restrictions all as hereinafter set out. The Seller hereby
guarantees to the Buyer the performance by the Manufacturer of the
Manufacturer's obligations and assigns to the Buyer and the Buyer hereby
accepts, as to each A319 Aircraft delivered to the Buyer under the
Agreement, all of the rights and obligations of the Seller with respect to
such A319 Aircraft in the Seller's capacity as "Buyer" as aforesaid under
the said Guarantees and the Seller subrogates the Buyer into all such
rights and obligations in respect of such A319 Aircraft. The Seller hereby
warrants to the Buyer that it has all the requisite authority to make the
foregoing assignment and effect the foregoing subrogation to and in favor
of the Buyer and that it will not enter into any amendment of the
provisions so assigned or subrogated without the prior written consent of
the Buyer.
Capitalized terms used in the following quoted provisions and not
otherwise defined herein will have the meanings assigned thereto in the
Agreement except that the term "Seller" refers to the Manufacturer and the
term "Buyer" refers to the Seller (as defined in the Agreement).
QUOTE
PREAMBLE
The guarantees defined below (the "Guarantees") are applicable to
the A319 Aircraft as described in the Technical Specification
J.000.02000 Issue 3 dated 29 March 1995 amended by Specification
Change Notices for:
i) the fitting CFM International CFM 56-5B-6 propulsion systems
ii) the increase in the Maximum Take-Off Weight to 166,450 lb (75,500
kg)
without taking into account any further changes thereto as provided
in the Agreement.
Notwithstanding the foregoing the Seller reserves the right to
increase the Design Weights above the weights shown in the
Specification in order to satisfy the Guarantees.
1 GUARANTEED PERFORMANCE
1.1 Take-off
1.1.1 FAR take-off field length at an A319 Aircraft gross weight of
166,450 lb (75,500 kg) at the start of ground run at sea level
pressure altitude at a temperature of 84(degree)F will be not more
than a guaranteed value of 8,980 feet.
1.1.2 When operated under the following conditions (representative of
PHX 08R):
Pressure altitude : 1,133 ft
Ambient temperature : 100(degree)F
Take-off run available ("TOR") : 10,300 feet
Take-off distance available : 10,300 feet
Accelerate-stop distance available : 10,300 feet
Slope : 0.20% uphill
Wind : Zero
Obstacles (height and distance : 15 feet/1,438 feet
from end of TOR) : 418 feet/17,285 feet
the maximum permissible weight at the start of ground run will be
not less than a guaranteed value of 158,250 lb.
1.1.3 When operated under the following conditions (representative of
DEN 09):
Pressure altitude : 5,431 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 12,000 feet
Take-off distance available : 12,000 feet
Accelerate-stop distance available : 12,000 feet
Slope : 0.01% uphill
Wind : Zero
Obstacles : None
the maximum permissible weight at the start of ground run will be
not less than a guaranteed value of 158,700 lb.
1.2 Second Segment
The A319 Aircraft will meet FAR 25 regulations for one engine
inoperative climb after take-off, undercarriage retracted, at a
weight corresponding to the stated weight at the start of ground
run at the altitude and temperature and in the configuration of
flap angle and safety speed required to comply with the
performance guaranteed in Subparagraph 1.1.
1.3 Initial Cruise Altitude
At an A319 Aircraft gross weight of 145,000 lb in ISA+10(degree)C
conditions the pressure altitude for:
1) Level flight at a true Mach number of 0.78 using a thrust not
exceeding maximum cruise thrust
2) A rate of climb of not less than 300 ft/min at a true Mach
number of 0.78 using a thrust not exceeding maximum climb
thrust
3) A buffet maneuver margin of not less than 0.3g at a true Mach
number of 0.78
will be not less than a guaranteed value of 37,000 ft.
1.4 Speed
Level flight speed at an A319 Aircraft gross weight of 145,000 lb
at a pressure altitude of 35,000 ft in ISA+10(degree)C conditions
using a thrust not exceeding maximum cruise thrust will be not
less than a guaranteed true Mach number of 0.805.
1.5 Specific Range
1.5.1 The nautical miles per pound of fuel at an A319 Aircraft gross
weight of 145,000 lb at a pressure altitude of 35,000 ft in
ISA+10(degree)C conditions at a true Mach number of 0.78 will be
not less than a guaranteed value of 0.0833 nm/lb.
1.5.2 The nautical miles per pound of fuel at an A319 Aircraft gross
weight of 140,000 lb at a pressure altitude of 37,000 ft in
ISA+10(degree)C conditions at a true Mach number of 0.78 will be
not less than a guaranteed value of 0.0867 nm/lb.
1.6 En-route One Engine Inoperative
The A319 Aircraft will meet FAR regulations minimum en-route climb
one engine inoperative and the other operating at the maximum
continuous thrust with anti-icing off at an A319 Aircraft gross
weight of 145,000 lb in the cruise configuration in
ISA+10(degree)C conditions at a guaranteed pressure altitude of
not less than 16,000 ft.
1.7 Landing Field Length
1.7.1 FAR certified wet landing field length at an A319 Aircraft gross
weight of 134,480 lb (61,000 kg) at sea level pressure altitude
will be not greater than 5,720 feet.
1.7.2 FAR certified wet landing field length at an A319 Aircraft gross
weight of 134,480 lb (61,000 kg) at a pressure altitude of 5,431
ft will be not greater than 6,500 feet.
2 MISSION GUARANTEES
2.1 The A319 Aircraft will be capable of carrying a guaranteed payload
of not less than *** lb over a still air stage distance of 2,610
nautical miles (representative of PHL to SFO with a 65 knot
headwind) when operated under the conditions defined below:
2.1.1 The departure airport conditions (representative of PHL 09R) are
as follows:
Pressure altitude : 21 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 10,499 feet
Take-off distance available : 10,499 feet
Accelerate-stop distance available : 10,499 feet
Slope : 0.10% downhill
Wind : Zero
Obstacles (height and distance : 17 feet/1,090 feet
from end of TOR : 57 feet/4,306 feet
: 178 feet/9,500 feet
The destination airport conditions are such as to allow the
required landing weight to be used without restriction. Pressure
altitude is 11 feet.
2.1.2 An allowance of 220 lb of fuel is included for taxi at the
departure airport.
2.1.3 An allowance of 505 lb of fuel is included for take-off and climb
to 1,500 ft above the departure airport at 84(degree)F with
acceleration to climb speed.
2.1.4 Climb from 1,500 ft above the departure airport up to cruise
altitude using maximum climb thrust and cruise at a fixed Mach
number of 0.78 at pressure altitudes of 35,000 ft and 39,000 ft
and descent to 1,500 ft above the destination airport are
conducted in ISA+10(degree)C conditions. Climb and descent speeds
below 10,000 ft will be 250 knots CAS.
2.1.5 An allowance of 190 lb of fuel is included for approach and land at
the destination airport.
2.1.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.1.4 above.
2.1.7 At the end of approach and land 7,110 lb of fuel will remain in
the tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft above the destination airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.2 The A319 Aircraft will be capable of carrying a guaranteed payload
of not less than *** lb over a still air stage distance of 1,545
nautical miles (representative of STT to PHL with a 37 knot
headwind) when operated under the conditions defined below:
2.2.1 The departure airport conditions (representative of STT 10) are as
follows:
Pressure altitude : 24 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 7,000 feet
Take-off distance available : 7,000 feet
Accelerate-stop distance available : 7,000 feet
Slope : 0.20% downhill
Wind : Zero
Obstacle (height and distance : 151 feet/2,083 feet
from end of TOR)
The destination airport conditions are such as to allow the
required landing weight to be used without restriction. Pressure
altitude is 21 feet.
2.2.2 An allowance of 220 lb of fuel is included for taxi at the
departure airport.
2.2.3 An allowance of 380 lb of fuel is included for take-off and climb
to 1,500 ft above the departure airport at 84(degree)F with
acceleration to climb speed.
2.2.4 Climb from 1,500 ft above the departure airport up to cruise
altitude using maximum climb thrust and cruise at a fixed Mach
number of 0.78 at pressure altitudes of 35,000 ft and 39,000 ft
and descent to 1,500 ft above the destination airport are
conducted in ISA+10(degree)C conditions. Climb and descent speeds
below 10,000 ft will be 250 knots CAS.
2.2.5 An allowance of 200 lb of fuel is included for approach and land at
the destination airport.
2.2.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.2.4 above.
2.2.7 At the end of approach and land 6,630 lb of fuel will remain in the
tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft above the destination airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.3 In carrying a fixed payload of 26,760 lb over a still air stage
distance of 2,000 nautical miles when operated under the
conditions defined below the Block Fuel will be not more than a
guaranteed value of *** lb.
2.3.1 The departure airport conditions are such as to allow the required
take-off weight to be used without restriction.
The destination airport conditions are such as to allow the
required landing weight to be used without restriction.
2.3.2 An allowance of 220 lb of fuel is included for taxi at the
departure airport.
2.3.3 An allowance of 430 lb of fuel is included for take-off and climb
to 1,500 ft pressure altitude with acceleration to climb speed at
a temperature of 84(degree)F.
2.3.4 Climb from 1,500 ft pressure altitude up to cruise altitude using
maximum climb thrust and cruise at a fixed Mach number of 0.78 at
pressure altitudes of 35,000 ft and 39,000 ft and descent to 1,500
ft pressure altitude are conducted in ISA+10(degree)C conditions.
Climb and descent speeds below 10,000 ft will be 250 knots CAS.
2.3.5 An allowance of 200 lb of fuel is included for approach and
landing at the destination airport.
2.3.6 An allowance of 70 lb of fuel is included for taxi at the
destination airport.
2.3.7 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.3.4 above.
Block Fuel is defined as the fuel burnt during taxi, take-off,
climb, cruise, descent and approach and landing as described in
Subparagraphs 2.3.2 to 2.3.6 inclusive.
2.3.8 At the end of approach and landing 6,890 lb of fuel will remain in
the tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft pressure altitude above the destination
airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.4 The A319 Aircraft will be capable of carrying a fixed payload of
31,960 lb over a guaranteed still air stage distance of not less
than *** nautical miles when operated under the conditions defined
below:
2.4.1 The departure airport conditions are such as to allow the required
take-off weight to be used without restriction.
The destination airport conditions are such as to allow the
required landing weight to be used without restriction.
2.4.2 An allowance of 220 lb of fuel is included for taxi at the
departure airport.
2.4.3 An allowance of 490 lb of fuel is included for take-off and climb
to 1,500 ft pressure altitude with acceleration to climb speed in
ISA+10(degree)C conditions.
2.4.4 Climb from 1,500 ft pressure altitude up to cruise altitude using
maximum climb thrust and cruise at a fixed Mach number of 0.78 at
pressure altitudes of 35,000 ft and 39,000 ft and descent to 1,500
ft pressure altitude are conducted in ISA+10(degree)C conditions.
Climb and descent speeds below 10,000 ft will be 250 knots CAS.
2.4.5 An allowance of 200 lb of fuel is included for approach and
landing at the destination airport.
2.4.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.4.4 above.
2.4.7 At the end of approach and landing 7,080 lb of fuel will remain in
the tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft pressure altitude above the destination
airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.5 The A319 Aircraft will be capable of carrying a fixed payload of
26,760 lb over a guaranteed still air stage distance of not less
than *** nautical miles when operated under the conditions defined
below:
2.5.1 The departure airport conditions are such as to allow the required
take-off weight to be used without restriction.
The destination airport conditions are such as to allow the
required landing weight to be used without restriction.
2.5.2 An allowance of 220 lb of fuel is included for taxi at the
departure airport.
2.5.3 An allowance of 470 lb of fuel is included for take-off and climb
to 1,500 ft pressure altitude with acceleration to climb speed in
ISA+10(degree)C conditions.
2.5.4 Climb from 1,500 ft pressure altitude up to cruise altitude using
maximum climb thrust and cruise at a fixed Mach number of 0.78 at
pressure altitudes of 35,000 ft and 39,000 ft and descent to 1,500
ft pressure altitude are conducted in ISA+10(degree)C conditions.
Climb and descent speeds below 10,000 ft will be 250 knots CAS.
2.5.5 An allowance of 200 lb of fuel is included for approach and
landing at the destination airport.
2.5.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.5.4 above.
2.5.7 At the end of approach and landing 6,890 lb of fuel will remain in
the tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft pressure altitude above the destination
airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.6 The mission payload guarantee defined in Subparagraph 2.1 and the
mission fuel burn guarantee defined in Subparagraph 2.3 and the
mission ranges defined in Subparagraphs 2.4 and 2.5 are based on
the Buyer's Manufacturer's Weight Empty as defined in Subparagraph
3.3 below plus a fixed allowance of 10,730 lb for Customer Changes
and Operators Items.
The mission payload guarantee defined in Subparagraph 2.2 is based
on the Buyer's Manufacturer's Weight Empty as defined in
Subparagraph 3.3 below plus a fixed allowance of 12,230 lb for
Customer Changes and Operators Items.
3 MANUFACTURER'S WEIGHT EMPTY AND USABLE LOAD
3.1 The Seller guarantees a Buyer's Manufacturer's Weight Empty of ***.
3.2 The Seller guarantees that the difference between the Buyer's
Manufacturer's Weight Empty and the Maximum Zero Fuel Weight will
be not less than ***.
3.3 For the purposes of this Paragraph 3 and of Subparagraph 2.6 above
the Buyer's Manufacturer's Weight Empty is the Manufacturer's
Weight Empty defined in Section 13-10.00.00 of the Specification
amended by the Specification Changes defined in the Preamble to
this Letter Agreement and is subject to adjustment as defined in
Subparagraph 7.2.
For information only an analysis of the Buyer's Manufacturer's
Weight Empty, Customer Changes, Operators Items and Operating
Weight Empty is shown in Appendix A to this Letter Agreement.
4 NOISE
4.1 External
4.1.1 The Seller guarantees that the A319 Aircraft will be certified in
accordance with FAR Part 36 Noise Standards, issue 1988, including
Amendment 36-15, Stage 3. The applicable noise limits are as
defined in paragraphs 36.201 and c36.5 (3).
4.1.2 ***
4.1.3 ***
4.2 Internal
4.2.1 Cockpit noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.78 in
still air under ISA conditions, the guaranteed A-Weighted Sound
Pressure Level (SPL) will not exceed *** and the Speech
Interference Level (SIL) will not exceed ***.
4.2.2 Cabin noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.78 in
still air under ISA conditions, the guaranteed A-Weighted Sound
Pressure Level (SPL) and the Speech Interference Level (SIL) will
be as follows:
- the A-Weighted SPL will not exceed *** over the whole seating
area.
- the SIL will not exceed *** along the front 40% of the
passenger compartment and will not exceed *** along the
remaining 60% of the passenger compartment length.
4.2.3 On the ground and under the conditions defined in Subparagraph 5.9
below the noise levels in the passenger compartment with passenger
doors open or closed the A-weighted Sound Pressure Level ("SPL")
will not exceed *** and the Speech Interference Level ("SIL") will
not exceed ***.
5 GUARANTEE CONDITIONS
5.1 The performance and noise certification requirements for the A319
Aircraft, except where otherwise noted, will be as stated in
Section 02 of the Specification.
5.2 For the determination of FAR take-off and landing performance a
hard level dry runway surface with no runway strength limitations,
no obstacles, zero wind, atmosphere according to ISA, except as
otherwise noted and the use of speedbrakes, flaps, landing gear
and engines in the conditions liable to provide the best results
will be assumed.
When establishing take-off and second segment performance no air
will be bled from the engines for cabin air conditioning or
anti-icing.
5.3 The en-route one engine inoperative climb performance will be
established with the amount of engine air bleed associated with
the maximum cabin altitude as specified in Section 21-30.32 of the
Specification and an average ventilation rate not less than the
amount defined in the Specification but no air will be bled from
the engines for anti- icing.
5.4 Climb, cruise and descent performance associated with the
Guarantees will include allowances for normal electrical load and
for normal engine air bleed and power extraction associated with
maximum cabin differential pressure as defined in Section 21-
30.31 of the Specification. Cabin air conditioning management
during performance demonstration as described in Subparagraph 6.3
below may be such as to optimize the A319 Aircraft performance
while meeting the minimum air conditioning requirements defined
above. Unless otherwise stated no air will be bled from the
engines for anti-icing.
5.5 The engines will be operated using not more than the engine
manufacturer's maximum recommended outputs for take-off, maximum
go-round, maximum continuous, maximum climb and cruise for normal
operation unless otherwise stated.
5.6 Where applicable the Guarantees assume the use of an approved fuel
having a density of 6.7 lb/US gallon and a lower heating value of
18,590 BTU/lb.
5.7 Speech interference level (SIL) is defined as the arithmetic
average of the sound pressure levels in the 1,000, 2,000, and
4,000 Hz octave bands. A-weighted sound level (dBA) is as defined
in the American National Standard Specification ANSI.4-1971. ***
5.8 The sound levels guaranteed in Subparagraph 4.2
i) will be measured at the positions defined in Section 03-83.10 of
the Specification
ii) refer to an A319 Aircraft with standard acoustic insulation and
an interior completely furnished. The effect on noise of Buyer
Furnished Equipment other than passenger seats will be the
responsibility of the Buyer.
5.9 For the purposes of the sound levels guaranteed in Subparagraph
4.2.3 the APU and air conditioning system will be operating. Sound
level measurements may be made at the prevailing ambient
temperature with the air conditioning packs controlled to
approximate air conditioning machinery rotational speed
appropriate to an ambient temperature of 25(degree)C.
6 GUARANTEE COMPLIANCE
6.1 Compliance with the Guarantees will be demonstrated using
operating procedures and limitations in accordance with those
defined by the certifying Airworthiness Authority
and by the Seller unless otherwise stated.
6.2 Compliance with the take-off, second segment, en-route one engine
inoperative, landing and certified noise elements of the
Guarantees will be demonstrated with reference to the approved
Flight Manual.
6.3 Compliance with those parts of the Guarantees defined in
Paragraphs 1 and 2 above not covered by the requirements of the
certifying Airworthiness Authority will be demonstrated by
calculation based on data obtained during flight tests conducted
on one (or more, as agreed between the Buyer and the Seller) A319
aircraft of the same aerodynamic configuration as those A319
Aircraft purchased by the Buyer.
6.4 Compliance with the Manufacturer's Weight Empty and Usable Load
guarantees defined in Paragraph 3 will be demonstrated with
reference to a weight compliance report.
6.5 Compliance with the mission guarantees defined in Paragraph 2 will
be demonstrated with reference to the weight compliance report
described in Subparagraph 6.4.
6.6 Compliance with the guarantees defined in Subparagraphs 4.1.2 and
4.1.3 will be based on data collected for noise certification
purposes. ***
6.7 Compliance with the noise guarantees defined in Subparagraph 4.2
will be demonstrated with reference to noise surveys conducted on
one (or more, at the Seller's discretion) A319 aircraft of an
acoustically similar standard as the A319 Aircraft.
6.8 Data derived from tests and noise surveys will be adjusted as
required using conventional methods of correction, interpolation
or extrapolation in accordance with established aeronautical
practices to show compliance with the Guarantees.
6.9 Compliance with the Guarantees is not contingent on engine
performance defined in the engine manufacturer's specification.
6.10 The Seller undertakes to furnish the Buyer with a report or
reports demonstrating compliance with the Guarantees at, or as
soon as possible after, the delivery of each of the A319 Aircraft.
7 ADJUSTMENT OF GUARANTEES
7.1 In the event of any change to any law, governmental regulation or
requirement or interpretation thereof ("rule change") by any
governmental agency made subsequent to the date of the Agreement
and such rule change affects the A319 Aircraft configuration or
performance or both required to obtain certification the
Guarantees will be appropriately modified to reflect the effect of
any such change.
7.2 The Guarantees apply to the A319 Aircraft as described in the
Preamble to this Letter Agreement and may be adjusted in the event
of :
a) Any further configuration change which is the subject of a SCN
b) Variation in actual weights of items defined in Section 13-10
of the Specification
c) Changes required to obtain certification which cause changes to
the performance or weight of the A319 Aircraft
8 EXCLUSIVE GUARANTEES
The Guarantees are exclusive and are provided in lieu of any and
all other performance and weight guarantees of any nature which
may be stated, referenced or incorporated in the Specification or
any other document.
9 UNDERTAKING; REMEDIES
***
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Letter Agreement in favor of the Buyer in respect of
the Seller's rights against and obligations to the Manufacturer
under the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer and
Seller recognize and agree that, except as otherwise expressly
provided in Paragraph 8 of this Letter Agreement, all the
provisions of Clause 12 of the Agreement, including without
limitation the Exclusivity of Warranties and General Limitations
of Liability and Duplicate Remedies therein contained, will apply
to the foregoing ***.
ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner
without the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
paragraph will be void and of no force or effect. Notwithstanding
the preceding sentence, the terms of Subclauses 19.5 and 19.6 of
the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding, please execute the
original and one (1) copy hereof in the space provided below and return a
copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
---------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
---------------------
Its: Treasurer
Date: November 24, 1998
A319-112 APPENDIX A TO
CFM 56-5B-6 ENGINES EXHIBIT 1
1 Manufacturer's Weight Empty and Operating Weight Empty
At the time of this Agreement the Buyer's Manufacturer's Weight Empty
and the Operating Weight Empty for the purposes of Subparagraphs 2.6
and Paragraph 3 of this Letter Agreement are defined as follows:
Manufacturer's Weight Empty as defined in the
Specification Reference J 000.02000 Issue 3 : 79,642 lb
Specification Change for the fitting of CFM56-5B6
engines : 611 lb
Specification Change for the increase in Design
Weights : 0 lb
-------
----
Buyer's Manufacturer's Weight Empty according to the
Preamble of this Letter Agreement and for the purposes
of Subparagraph 2.6 and Paragraph 3 of this Letter
Agreement : *** lb
Specification changes as defined in Subparagraph 2.1 of
this Appendix A (including USAir livery) : 1,165 lb
Operators Items as defined in Subparagraph 2.2.1 of
this Appendix A : 9,566 lb
-------
----
Operating Weight Empty of the A319 Aircraft for the
purposes of Subparagraphs 2.1 and 2.3 to 2.5
inclusive of this Letter Agreement : 90,984 lb
Operators items as defined in Subparagraph 2.2.2 of
this Appendix A : 11,066 lb
-------
----
Operating Weight Empty of the A319 Aircraft for the
purposes of Subparagraphs 2.2 of this Letter Agreement : 92,484 lb
* Note As of the date hereof the Operating Weight Empty has not been
completely defined. The payloads, fuel burn and ranges guaranteed
in Paragraph 2 are based on the estimated Operating Weight Empty as
shown above.
2 Specification Changes and Operators Items
2.1 Weight of Specification Changes
As of the date of this draft the complete list of USAir Specification
Changes is unknown.
It is estimated that the weight of such Specification
Changes is: : 1,105 lb
USAir livery : 60 lb
2.2 Weights of Operators Items
Oil for engines and APU : 117 lb
Unusable fuel : 143 lb
Water for galleys and toilets : 441 lb
Waste tank pre-charge : 29 lb
A319 Aircraft documents and tool kits : 42 lb
Passenger seats and life jackets : 3,504 lb
Phone equipment : 170 lb
Galley structure and fixed equipment : 1,225 lb
Chillers : 195 lb
Catering and service equipment : 1,938 lb
Cabin supplies : 180 lb
Emergency equipment : 542 lb
Crew and bags : 1,040 lb
-------
2.2.1 Total Operators Items for the purposes of Subparagraphs
and 2.3 to 2.5 inclusive of this Letter Agreement : 9,566 lb
Additional items for over water operation : 1,500 lb
-------
2.2.2 Total Operators Items for the purposes of
Subparagraph 2.2 of this Letter Agreement : 11,066 lb
A320-214 EXHIBIT 2
CFM 56-5B-4 ENGINES
AMENDED LETTER AGREEMENT NO. 8B
As of June 10, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: A320-214 PERFORMANCE GUARANTEES
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A319/A320/A321 Purchase Agreement
dated as of October 31, 1997 (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Amended Letter
Agreement No. 8B (the "Letter Agreement") certain additional terms and
conditions regarding the sale of the Aircraft. Capitalized terms used
herein and not otherwise defined in this Letter Agreement will have the
meanings assigned thereto in the Agreement. The terms "herein," "hereof"
and "hereunder" and words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
The Seller, in its capacity as "Buyer" under its arrangement with the
Manufacturer, has negotiated and obtained the following performance and
weight guarantees (the "Guarantees") from the Manufacturer, in its capacity
as "Seller" with respect to the A320 Aircraft, subject to the terms,
conditions, limitations and restrictions all as hereinafter set out. The
Seller hereby guarantees to the Buyer the performance by the Manufacturer
of the Manufacturer's obligations and assigns to the Buyer and the Buyer
hereby accepts, as to each A320 Aircraft delivered to the Buyer under the
Agreement, all of the rights and obligations of the Seller with respect to
such A320 Aircraft in the Seller's capacity as "Buyer" as aforesaid under
the said Guarantees and the Seller subrogates the Buyer into all such
rights and obligations in respect of such A320 Aircraft. The Seller hereby
warrants to the Buyer that it has all the requisite authority to make the
foregoing assignment and effect the foregoing subrogation to and in favor
of the Buyer and that it will not enter into any amendment of the
provisions so assigned or subrogated without the prior written consent of
the Buyer.
Capitalized terms used in the following quoted provisions and not
otherwise defined herein will have the meanings assigned thereto in the
Agreement except that the term "Seller" refers to the Manufacturer and the
term "Buyer" refers to the Seller (as defined in the Agreement).
QUOTE
PREAMBLE
The guarantees defined below (the "Guarantees") are applicable to
the A320 Aircraft as described in the Technical Specification
D.000.02000 Issue 4 dated 30 March 1995 amended by Specification
Change Notices for:
i) the fitting CFM International CFM 56-5B-4 (with Enhanced
Take-Off rating) propulsion systems
ii) the increase in the Maximum Take-Off Weight to 169,750 lb
(77,000 kg)
without taking into account any further changes thereto as provided
in the Agreement.
Notwithstanding the foregoing the Seller reserves the right to
increase the Design Weights above the weights shown in the
Specification in order to satisfy the Guarantees.
1 GUARANTEED PERFORMANCE
1.1 Take-off
1.1.1 FAR take-off field length at an A320 Aircraft gross weight of
169,750 lb (77,000 kg) at the start of ground run at sea level
pressure altitude at a temperature of 84(degree)F will be not more
than a guaranteed value of 7,420 feet.
1.1.2 When operated under the following conditions (representative of
PHX 08R):
Pressure altitude : 1,133 ft
Ambient temperature : 100(degree)F
Take-off run available ("TOR") : 10,300 feet
Take-off distance available : 10,300 feet
Accelerate-stop distance available : 10,300 feet
Slope : 0.20% uphill
Wind : Zero
Obstacles (height and distance : 15 feet/1,438 feet
from end of TOR) : 418 feet/17,285 feet
the maximum permissible weight at the start of ground run will be
not less than a guaranteed value of 166,850 lb.
1.1.3 When operated under the following conditions (representative of
DEN 09):
Pressure altitude : 5,431 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 12,000 feet
Take-off distance available : 12,000 feet
Accelerate-stop distance available : 12,000 feet
Slope : 0.01% uphill
Wind : Zero
Obstacles : None
the maximum permissible weight at the start of ground run will be
not less than a guaranteed value of 165,900 lb.
1.2 Second Segment
The A320 Aircraft will meet FAR 25 regulations for one engine
inoperative climb after take-off, undercarriage retracted, at a
weight corresponding to the stated weight at the start of ground
run at the altitude and temperature and in the configuration of
flap angle and safety speed required to comply with the
performance guaranteed in Subparagraph 1.1.
1.3 Initial Cruise Altitude
At an A320 Aircraft gross weight of 160,000 lb in ISA+10(degree)C
conditions the pressure altitude for:
1) Level flight at a true Mach number of 0.78 using a thrust not
exceeding maximum cruise thrust
2) A rate of climb of not less than 300 ft/min at a true Mach
number of 0.78 using a thrust not exceeding maximum climb
thrust
3) A buffet maneuver margin of not less than 0.3g at a true Mach
number of 0.78
will be not less than a guaranteed value of 35,000 ft.
1.4 Speed
Level flight speed at an A320 Aircraft gross weight of 160,000 lb
at a pressure altitude of 35,000 at in ISA+10(degree)C conditions
using a thrust not exceeding maximum cruise thrust will be not
less than a guaranteed true Mach number of 0.790.
1.5 Specific Range
1.5.1 The nautical miles per pound of fuel at an A320 Aircraft gross
weight of 155,000 lb at a pressure altitude of 35,000 ft in
ISA+10(degree)C conditions at a true Mach number of 0.78 will be
not less than a guaranteed value of 0.0783 nm/lb.
1.5.2 The nautical miles per pound of fuel at an A320 Aircraft gross
weight of 145,000 lb at a pressure altitude of 37,000 ft in
ISA+10(degree)C conditions at a true Mach number of 0.78 will be
not less than a guaranteed value of 0.0839 nm/lb.
1.6 En-route One Engine Inoperative
The A320 Aircraft will meet FAR regulations minimum en-route climb
one engine inoperative and the other operating at the maximum
continuous thrust with anti-icing off at an A320 Aircraft gross
weight of 155,000 lb in the cruise configuration in
ISA+10(degree)C conditions at a guaranteed pressure altitude of
not less than 14,500 ft.
1.7 Landing Field Length
1.7.1 FAR certified wet landing field length at an A320 Aircraft gross
weight of 142,200 lb (64,500 kg) at sea level pressure altitude
will be not greater than 6,040 feet.
1.7.2 FAR certified wet landing field length at an A320 Aircraft gross
weight of 142,200 lb (64,500 kg) at a pressure altitude of 5,431
ft will be not greater than 6,800 feet.
2 MISSION GUARANTEES
2.1 The A320 Aircraft will be capable of carrying a guaranteed payload
of not less than *** over a still air stage distance of 2,610
nautical miles (representative of PHL to SFO with a 65 knot
headwind) when operated under the conditions defined below:
2.1.1 The departure airport conditions (representative of PHL 09R) are
as follows:
Pressure altitude : 21 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 10,499 feet
Take-off distance available : 10,499 feet
Accelerate-stop distance available : 10,499 feet
Slope : 0.10% downhill
Wind : Zero
Obstacles (height and distance : 17 feet/1,090 feet
from end of TOR) : 57 feet/4,306 feet
: 178 feet/9,500 feet
The destination airport conditions are such as to allow the
required landing weight to be used without restriction. Pressure
altitude is 11 feet.
2.1.2 An allowance of 220 lb of fuel is included for taxi at the
departure airport.
2.1.3 An allowance of 520 lb of fuel is included for take-off and climb
to 1,500 ft above the departure airport at 84(degree)F with
acceleration to climb speed.
2.1.4 Climb from 1,500 ft above the departure airport up to cruise
altitude using maximum climb thrust and cruise at a fixed Mach
number of 0.78 at pressure altitudes of 35,000 ft and 39,000 ft
and descent to 1,500 ft above the destination airport are
conducted in ISA+10(degree)C conditions. Climb and descent speeds
below 10,000 ft will be 250 knots CAS.
2.1.5 An allowance of 180 lb of fuel is included for approach and land at
the destination airport.
2.1.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.1.4 above.
2.1.7 At the end of approach and land 7,210 lb of fuel will remain in the
tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft above the destination airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.2 The A320 Aircraft will be capable of carrying a guaranteed payload
of not less than *** lb over a still air stage distance of 1,545
nautical miles (representative of STT to PHL with a 37 knot
headwind) when operated under the conditions defined below:
2.2.1 The departure airport conditions (representative of STT 10) are as
follows:
Pressure altitude : 24 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 7,000 feet
Take-off distance available : 7,000 feet
Accelerate-stop distance available : 7,000 feet
Slope : 0.20% downhill
Wind : Zero
Obstacle (height and distance : 151 feet/2,083 feet
from end of TOR)
The destination airport conditions are such as to allow the
required landing weight to be used without restriction. Pressure
altitude is 21 feet.
2.2.2 An allowance of 220 lb of fuel is included for taxi at the
departure airport.
2.2.3 An allowance of 410 lb of fuel is included for take-off and climb
to 1,500 ft above the departure airport at 84(degree)F with
acceleration to climb speed.
2.2.4 Climb from 1,500 ft above the departure airport up to cruise
altitude using maximum climb thrust and cruise at a fixed Mach
number of 0.78 at a pressure altitude of 35,000 ft and descent to
1,500 ft above the destination airport are conducted in
ISA+10(degree)C conditions. Climb and descent speeds below 10,000
ft will be 250 knots CAS.
2.2.5 An allowance of 190 lb of fuel is included for approach and land at
the destination airport.
2.2.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.2.4 above.
2.2.7 At the end of approach and land 6,930 lb of fuel will remain in the
tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft above the destination airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.3 In carrying a fixed payload of 31,665 lb over a still air stage
distance of 2,000 nautical miles when operated under the
conditions defined below the Block Fuel will be not more than a
guaranteed value of ***.
2.3.1 The departure airport conditions are such as to allow the required
take-off weight to be used without restriction.
The destination airport conditions are such as to allow the
required landing weight to be used without restriction.
2.3.2 An allowance of 220 lb of fuel is included for taxi at the
departure airport.
2.3.3 An allowance of 470 lb of fuel is included for take-off and climb
to 1,500 ft pressure altitude with acceleration to climb speed at
a temperature of 84(degree)F.
2.3.4 Climb from 1,500 ft pressure altitude up to cruise altitude using
maximum climb thrust and cruise at a fixed Mach number of 0.78 at
a pressure altitude of 35,000 ft and descent to 1,500 ft pressure
altitude are conducted in ISA+10(degree)C conditions. Climb and
descent speeds below 10,000 ft will be 250 knots CAS.
2.3.5 An allowance of 190 lb of fuel is included for approach and
landing at the destination airport.
2.3.6 An allowance of 70 lb of fuel is included for taxi at the
destination airport.
2.3.7 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.3.4 above.
Block Fuel is defined as the fuel burnt during taxi, take-off,
climb, cruise, descent and approach and landing as described in
Subparagraphs 2.3.2 to 2.3.6 inclusive.
2.3.8 At the end of approach and landing 7,190 lb of fuel will remain in
the tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft pressure altitude.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.4 The A320 Aircraft will be capable of carrying a fixed payload of
38,700 lb over a guaranteed still air stage distance of not less
than *** when operated under the conditions defined below:
2.4.1 The departure airport conditions are such as to allow the required
take-off weight to be used without restriction.
The destination airport conditions are such as to allow the
required landing weight to be used without restriction.
2.4.2 An allowance of 220 lb of fuel is included for taxi at the
departure airport.
2.4.3 An allowance of 510 lb of fuel is included for take-off and climb
to 1,500 ft pressure altitude with acceleration to climb speed in
ISA+10(degree)C conditions.
2.4.4 Climb from 1,500 ft pressure altitude up to cruise altitude using
maximum climb thrust and cruise at a fixed Mach number of 0.78 at
a pressure altitudes of 35,000 ft and descent to 1,500 ft pressure
altitude are conducted in ISA+10(degree)C conditions. Climb and
descent speeds below 10,000 ft will be 250 knots CAS.
2.4.5 An allowance of 190 lb of fuel is included for approach and
landing at the destination airport.
2.4.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.4.4 above.
2.4.7 At the end of approach and landing 7,490 lb of fuel will remain in
the tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft pressure altitude above the destination
airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.5 The A320 Aircraft will be capable of carrying a fixed payload of
31,665 lb over a guaranteed still air stage distance of not less
than *** when operated under the conditions defined below:
2.5.1 The departure airport conditions are such as to allow the required
take-off weight to be used without restriction.
The destination airport conditions are such as to allow the
required landing weight to be used without restriction.
2.5.2 An allowance of 220 lb of fuel is included for taxi at the
departure airport.
2.5.3 An allowance of 500 lb of fuel is included for take-off and climb
to 1,500 ft pressure altitude with acceleration to climb speed in
ISA+10(degree)C conditions.
2.5.4 Climb from 1,500 ft pressure altitude up to cruise altitude using
maximum climb thrust and cruise at a fixed Mach number of 0.78 at
a pressure altitude of 35,000 ft and descent to 1,500 ft pressure
altitude are conducted in ISA+10(degree)C conditions. Climb and
descent speeds below 10,000 ft will be 250 knots CAS.
2.5.5 An allowance of 190 lb of fuel is included for approach and
landing at the destination airport.
2.5.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.5.4 above.
2.5.7 At the end of approach and landing 7,190 lb of fuel will remain in
the tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft pressure altitude above the destination
airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.6 The mission payload guarantee defined in Subparagraph 2.1 and the
mission fuel burn guarantee defined in Subparagraph 2.3 and the
mission range guarantees defined in Subparagraphs 2.4 and 2.5 are
based on the Buyer's Manufacturer's Weight Empty as defined in
Subparagraph 3.3 below plus a fixed allowance of 11,970 lb for
Customer Changes and Operators Items.
The mission payload guarantee defined in Subparagraph 2.2 is based
on the Buyer's Manufacturer's Weight Empty as defined in
Subparagraph 3.3 below plus a fixed allowance of 13,470 lb for
Customer Changes and Operators Items.
3 MANUFACTURER'S WEIGHT EMPTY AND USABLE LOAD
3.1 The Seller guarantees a Buyer's Manufacturer's Weight Empty of ***.
3.2 The Seller guarantees that the difference between the Buyer's
Manufacturer's Weight Empty and the Maximum Zero Fuel Weight will
be not less than ***.
3.3 For the purposes of this Paragraph 3 and of Subparagraph 2.6 above
the Buyer's Manufacturer's Weight Empty is the Manufacturer's
Weight Empty defined in Section 13-10.00.00 of the Specification
amended by the Specification Changes defined in the Preamble to
this Letter Agreement and is subject to adjustment as defined in
Subparagraph 7.2.
For information only an analysis of the Buyer's Manufacturer's
Weight Empty, Customer Changes, Operators Items and Operating
Weight Empty is shown in Appendix A to this
Letter Agreement.
4 NOISE
4.1 External
4.1.1 The Seller guarantees that the A320 Aircraft will be certified in
accordance with FAR Part 36 Noise Standards, issue 1978, including
Amendment 36-15, Stage 3. The applicable noise limits are as
defined in paragraphs 36.201 and c36.5 (3).
4.1.2 ***
4.1.3 ***
4.2 Internal
4.2.1 Cockpit noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.78 in
still air under ISA conditions, the guaranteed A-Weighted Sound
Pressure Level (SPL) will not exceed *** and the Speech
Interference Level (SIL) will not exceed ***.
4.2.2 Cabin noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.78 in
still air under ISA conditions, the guaranteed A-Weighted Sound
Pressure Level (SPL) and the Speech Interference Level (SIL) will
be as follows:
- the A-Weighted SPL will not exceed *** over the whole seating
area.
- the SIL will not exceed *** along the front 40% of the
passenger compartment and will not exceed *** along the
remaining 60% of the passenger compartment length.
4.2.3 On the ground and under the conditions defined in Subparagraph 5.9
below the noise levels in the passenger compartment with passenger
doors open or closed the A-weighted Sound Pressure Level ("SPL")
will not exceed *** and the Speech Interference Level ("SIL") will
not exceed ***.
5 GUARANTEE CONDITIONS
5.1 The performance and noise certification requirements for the A320
Aircraft, except where otherwise noted, will be as stated in
Section 02 of the Specification.
5.2 For the determination of FAR take-off and landing performance a
hard level dry runway surface with no runway strength limitations,
no obstacles, zero wind, atmosphere according to ISA, except as
otherwise noted and the use of speedbrakes, flaps, landing gear
and engines in the conditions liable to provide the best results
will be assumed.
5.2.1 When establishing take-off and second segment performance no air
will be bled from the engines for cabin air conditioning or
anti-icing.
5.3 The en-route one engine inoperative climb performance will be
established with the amount of engine air bleed associated with
the maximum cabin altitude as specified in Section 21-30.32 of the
Specification and an average ventilation rate not less than the
amount defined in the Specification but no air will be bled from
the engines for anti- icing.
5.4 Climb, cruise and descent performance associated with the
Guarantees will include allowances for normal electrical load and
for normal engine air bleed and power extraction associated with
maximum cabin differential pressure as defined in Section 21-
30.31 of the Specification. Cabin air conditioning management
during performance demonstration as described in Subparagraph 6.3
below may be such as to optimize the A320 Aircraft performance
while meeting the minimum air conditioning requirements defined
above. Unless otherwise stated no air will be bled from the
engines for anti-icing.
5.5 The engines will be operated using not more than the engine
manufacturer's maximum recommended outputs for take-off, maximum
go-round, maximum continuous, maximum climb and cruise for normal
operation unless otherwise stated.
5.6 Where applicable the Guarantees assume the use of an approved fuel
having a density of 6.7 lb/US gallon and a lower heating value of
18,590 BTU/lb.
5.7 Speech interference level (SIL) is defined as the arithmetic
average of the sound pressure levels in the 1,000, 2,000, and
4,000 Hz octave bands. A-weighted sound level (dBA) is as defined
in the American National Standard Specification ANSI.4-1971.***
5.8 The sound levels guaranteed in Subparagraph 4.2:
i) will be measured at the positions defined in Section 03-83.10 of
the Specification
ii) refer to an A320 Aircraft with standard acoustic insulation and
an interior completely furnished. The effect on noise of Buyer
Furnished Equipment other than passenger seats will be the
responsibility of the Buyer.
5.9 For the purposes of the sound levels guaranteed in Subparagraph
4.2.3 the APU and air conditioning system will be operating. Sound
level measurements may be made at the prevailing ambient
temperature with the air conditioning packs controlled to
approximate air conditioning machinery rotational speed
appropriate to an ambient temperature of 25(degree)C.
6 GUARANTEE COMPLIANCE
6.1 Compliance with the Guarantees will be demonstrated using
operating procedures and limitations in accordance with those
defined by the certifying Airworthiness Authority
and by the Seller unless otherwise stated.
6.2 Compliance with the take-off, second segment, en-route one engine
inoperative, landing and certified noise elements of the
Guarantees will be demonstrated with reference to the approved
Flight Manual.
6.3 Compliance with those parts of the Guarantees defined in
Paragraphs 1 and 2 above not covered by the requirements of the
certifying Airworthiness Authority will be demonstrated by
calculation based on data obtained during flight tests conducted
on one (or more, as agreed between the buyer and the Seller) A320
aircraft of the same aerodynamic configuration as those A320
Aircraft purchased by the Buyer.
6.4 Compliance with the Manufacturer's Weight Empty and Usable Load
guarantees defined in Paragraph 3 will be demonstrated with
reference to a weight compliance report.
6.5 Compliance with the mission guarantees defined in Paragraph 2 will
be demonstrated with reference to the weight compliance report
described in Subparagraph 6.4.
6.6 Compliance with the guarantees defined in Subparagraphs 4.1.2 and
4.1.3 will be based on data collected for noise certification
purposes. ***
6.7 Compliance with the noise guarantees defined in Subparagraph 4.2
will be demonstrated with reference to noise surveys conducted on
one (or more, at the Seller's discretion) A320 aircraft of an
acoustically similar standard as the A320 Aircraft.
6.8 Data derived from tests and noise surveys will be adjusted as
required using conventional methods of correction, interpolation
or extrapolation in accordance with established aeronautical
practices to show compliance with the Guarantees.
6.9 Compliance with the Guarantees is not contingent on engine
performance defined in the engine manufacturer's specification.
6.10 The Seller undertakes to furnish the Buyer with a report or
reports demonstrating compliance with the Guarantees at, or as
soon as possible after, the delivery of each of the A320 Aircraft.
7 ADJUSTMENT OF GUARANTEES
7.1 In the event of any change to any law, governmental regulation or
requirement or interpretation thereof ("rule change") by any
governmental agency made subsequent to the date of the Agreement
and such rule change affects the A320 Aircraft configuration or
performance or both required to obtain certification the
Guarantees will be appropriately modified to reflect the effect of
any such change.
7.2 The Guarantees apply to the A320 Aircraft as described in the
Preamble to this Letter Agreement and may be adjusted in the event
of :
a) Any further configuration change which is the subject of a SCN
b) Variation in actual weights of items defined in Section 13-10
of the Specification
c) Changes required to obtain certification which cause changes to
the performance or weight of the A320 Aircraft
8 EXCLUSIVE GUARANTEES
The Guarantees are exclusive and are provided in lieu of any and
all other performance and weight guarantees of any nature which
may be stated, referenced or incorporated in the Specification or
any other document.
9 UNDERTAKING; REMEDIES
***
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Letter Agreement in favor of the Buyer in respect of
the Seller's rights against and obligations to the Manufacturer
under the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer and
Seller recognize and agree that, except as otherwise expressly
provided in Paragraph 8 of this Letter Agreement, all the
provisions of Clause 12 of the Agreement, including without
limitation the Exclusivity of Warranties and General Limitations
of Liability and Duplicate Remedies therein contained, will apply
to the foregoing ***.
ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner
without the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
paragraph will be void and of no force or effect. Notwithstanding
the preceding sentence, the terms of Subclauses 19.5 and 19.6 of
the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding, please execute the
original and one (1) copy hereof in the space provided below and return a
copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
---------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
--------------------
Its: Treasurer
Date: November 24, 1998
A320-214
CFM 56-5B-4 ENGINES APPENDIX A TO EXHIBIT 2
-----------------------
1 Manufacturer's Weight Empty and Operating Weight Empty
At the time of this Agreement the Buyer's Manufacturer's Weight
Empty and the Operating Weight Empty for the purposes of
Subparagraph 2.6 and Paragraph 3 of this Letter Agreement are
defined as follows:
Manufacturer's Weight Empty as defined in the
Specification Reference D 000.02000 Issue 4 : 81,966 lb
Specification Change for the fitting of CFM56-5B4
engines : 582 lb
Specification Change for the increase in Design
Weights : 220 lb
--------
Buyer's Manufacturer's Weight Empty according to the
Preamble of this Letter Agreement and for the purposes
of Subparagraph 2.6 and Paragraph 3 of this Letter
Agreement : ***
Specification changes as defined in Subparagraph
2.1 of this Appendix A (including USAir livery) : 1,197 lb
Operators Items as defined in Subparagraph 2.2.1
of this Appendix A : 10,776 lb
--------
Operating Weight Empty of the A320 Aircraft for the
purposes of Subparagraphs 2.1 and 2.3 to 2.5 inclusive
of this Letter Agreement : 94,741 lb
Operators items as defined in Subparagraph 2.2.2 of
this Appendix A : 11,276 lb
--------
Operating Weight Empty of the A320 Aircraft for the
purposes of Subparagraphs 2.2 of this Letter Agreement : 96,241 lb
* Note As of the date hereof the Operating Weight Empty has not been
completely defined. The payloads, fuel burn and ranges guaranteed
in Paragraph 2 are based on the estimated Operating Weight Empty
as shown above.
2 Specification Changes and Operators Items
2.1 Weight of Specification Changes
As of the date of this draft the complete list of USAir
Specification Changes is unknown.
It is estimated that the weight of such Specification
Changes is: : 1,137 lb
USAir livery : 60 lb
2.2 Weights of Operators Items
Oil for engines and APU : 117 lb
Unusable fuel : 143 lb
Water for galleys and toilets : 441 lb
Waste tank pre-charge : 29 lb
A320 Aircraft documents and tool kits : 42 lb
Passenger seats and life jackets : 4,216 lb
Phone equipment : 170 lb
Galley structure and fixed equipment : 1,265 lb
Chillers : 195 lb
Catering and service equipment : 2,354 lb
Cabin supplies : 213 lb
Emergency equipment : 551 lb
Crew and bags : 1,040 lb
-------
2.2.1 Total Operators Items for the purposes of Subparagraphs
2.1 and 2.3 to 2.5 inclusive of this Letter Agreement : 10,776 lb
Additional items for over water operation : 1,500 lb
-------
2.2.2 Total Operators Items for the purposes of
Subparagraph 2.2 of this Letter Agreement : 12,276 lb
A321-211
CFM 56-5B-3 ENGINES
EXHIBIT 3
AMENDED LETTER AGREEMENT NO. 8C
As of June 10, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: A321-211 PERFORMANCE GUARANTEES
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A319/A320/A321 Purchase Agreement
dated as of October 31, 1997 (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Amended Letter
Agreement No. 8C (the "Letter Agreement") certain additional terms and
conditions regarding the sale of the Aircraft. Capitalized terms used
herein and not otherwise defined in this Letter Agreement will have the
meanings assigned thereto in the Agreement. The terms "herein," "hereof"
and "hereunder" and words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
The Seller, in its capacity as "Buyer" under its arrangement with
the Manufacturer, has negotiated and obtained the following performance and
weight guarantees (the "Guarantees") from the Manufacturer, in its capacity
as "Seller" with respect to the A321 Aircraft, subject to the terms,
conditions, limitations and restrictions all as hereinafter set out. The
Seller hereby guarantees to the Buyer the performance by the Manufacturer
of the Manufacturer's obligations and assigns to the Buyer and the Buyer
hereby accepts, as to each A321 Aircraft delivered to the Buyer under the
Agreement, all of the rights and obligations of the Seller with respect to
such A321 Aircraft in the Seller's capacity as "Buyer" as aforesaid under
the said Guarantees and the Seller subrogates the Buyer into all such
rights and obligations in respect of such A321 Aircraft. The Seller hereby
warrants to the Buyer that it has all the requisite authority to make the
foregoing assignment and effect the foregoing subrogation to and in favor
of the Buyer and that it will not enter into any amendment of the
provisions so assigned or subrogated without the prior written consent of
the Buyer.
Capitalized terms used in the following quoted provisions and not
otherwise defined herein will have the meanings assigned thereto in the
Agreement except that the term "Seller" refers to the Manufacturer and the
term "Buyer" refers to the Seller (as defined in the Agreement).
QUOTE
PREAMBLE
The guarantees defined below (the "Guarantees") are applicable to the
A321 Aircraft as described in the Technical Specification E.000.02000
Issue 1 dated 30 June 1995 and fitted with CFM International CFM
56-5B-3 propulsion systems without taking into account any further
changes thereto as provided in the Agreement.
Notwithstanding the foregoing the Seller reserves the right to
increase the Design Weights above the weights shown in the
Specification in order to satisfy the Guarantees.
1 GUARANTEED PERFORMANCE
1.1 Take-off
1.1.1 FAR take-off field length at an A321 Aircraft gross weight of 196,210
lb (89,000 kg) at the start of ground run at sea level pressure
altitude at a temperature of 84(degree)F will be not more than a
guaranteed value of 8,090 feet.
1.1.2 When operated under the following conditions (representative of PHX
08R):
Pressure altitude : 1,133 ft
Ambient temperature : 100(degree)F
Take-off run available ("TOR") : 10,300 feet
Take-off distance available : 10,300 feet
Accelerate-stop distance available : 10,300 feet
Slope : 0.20% uphill
Wind : Zero
Obstacles (height and distance : 15 feet/1,438 feet
from end of TOR) : 418 feet/17,285 feet
the maximum permissible weight at the start of ground run will be not
less than a guaranteed value of 180,300 lb.
1.1.3 When operated under the following conditions (representative of DEN
09):
Pressure altitude : 5,431 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 12,000 feet
Take-off distance available : 12,000 feet
Accelerate-stop distance available : 12,000 feet
Slope : 0.01% uphill
Wind : Zero
Obstacles : None
the maximum permissible weight at the start of ground run will be not
less than a guaranteed value of 176,400 lb.
1.2 Second Segment
The A321 Aircraft will meet FAR 25 regulations for one engine
inoperative climb after takeoff, undercarriage retracted, at a weight
corresponding to the stated weight at the start of ground run at the
altitude and temperature and in the configuration of flap angle and
safety speed required to comply with the performance guaranteed in
Subparagraph 1.1.
1.3 Initial Cruise Altitude
At an A321 Aircraft gross weight of 185,000 lb in ISA+10(degree)C
conditions the pressure altitude for :
1) Level flight at a true Mach number of 0.78 using a thrust not
exceeding maximum cruise thrust
2) A rate of climb of not less than 300 ft/min at a true Mach number
of 0.78 using a thrust not exceeding maximum climb thrust
3) A buffet maneuver margin of not less than 0.3g at a true Mach
number of 0.78
will be not less than a guaranteed value of 33,000 ft.
1.4 Speed
Level flight speed at an A321 Aircraft gross weight of 185,000 lb at
a pressure altitude of 33,000 ft in ISA+10(degree)C conditions using
a thrust not exceeding maximum cruise thrust will be not less than a
guaranteed true Mach number of 0.790.
1.5 Specific Range
1.5.1 The nautical miles per pound of fuel at an A321 Aircraft gross weight
of 170,000 lb at a pressure altitude of 35,000 ft in ISA+10(degree)C
conditions at a true Mach number of 0.78 will be not less than a
guaranteed value of 0.0702 nm/lb.
1.5.2 The nautical miles per pound of fuel at an A321 Aircraft gross weight
of 160,000 lb at a pressure altitude of 37,000 ft in ISA+10(degree)C
conditions at a true Mach number of 0.78 will be not less than a
guaranteed value of 0.0741 nm/lb.
1.6 En-route One Engine Inoperative
The A321 Aircraft will meet FAR regulations minimum en-route climb
one engine inoperative and the other operating at the maximum
continuous thrust with anti-icing off at an A321 Aircraft gross
weight of 170,000 lb in the cruise configuration in ISA+10(degree)C
conditions at a guaranteed pressure altitude of not less than 15,000
ft.
1.7 Landing Field Length
1.7.1 FAR certified wet landing field length at an A321 Aircraft gross
weight of 166,450 lb (75,500 kg) at sea level pressure altitude will
be not greater than 6,270 feet.
1.7.2 FAR certified wet landing field length at an A321 Aircraft gross
weight of 166,450 lb (75,500 kg) at a pressure altitude of 5,431 ft
will be not greater than 7,100 feet.
2 MISSION GUARANTEES
2.1 The A321 Aircraft will be capable of carrying a guaranteed payload of
not less than *** over a still air stage distance of *** nautical
miles (representative of PHL to SFO with a 65 knot headwind) when
operated under the conditions defined below:
2.1.1 The departure airport conditions (representative of PHL 09R) are as
follows:
Pressure altitude : 21 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 10,499 feet
Take-off distance available : 10,499 feet
Accelerate-stop distance available : 10,499 feet
Slope : 0.10% downhill
Wind : Zero
Obstacles (height and distance : 17 feet/1,090 feet
from end of TOR) : 57 feet/4,306 feet
: 178 feet/9,500 feet
The destination airport conditions are such as to allow the required
landing weight to be used without restriction. Pressure altitude is
11 feet.
2.1.2 An allowance of 220 lb of fuel is included for taxi at the departure
airport.
2.1.3 An allowance of 530 lb of fuel is included for take-off and climb to
1,500 ft above the departure airport at 84(degree)F with acceleration
to climb speed.
2.1.4 Climb from 1,500 ft above the departure airport up to cruise altitude
using maximum climb thrust and cruise at a fixed Mach number of 0.78
at pressure altitudes of 35,000 ft and 39,000 ft and descent to 1,500
ft above the destination airport are conducted in ISA+10(degree)C
conditions. Climb and descent speeds below 10,000 ft will be 250
knots CAS.
2.1.5 An allowance of 230 lb of fuel is included for approach and land at
the destination airport.
2.1.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.1.4 above.
2.1.7 At the end of approach and land 7,370 lb of fuel will remain in the
tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft above the destination airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.2 The A321 Aircraft will be capable of carrying a guaranteed payload of
not less than *** over a still air stage distance of *** nautical
miles (representative of STT to PHL with a 37 knot headwind) when
operated under the conditions defined below:
2.2.1 The departure airport conditions (representative of STT 10) are as
follows:
Pressure altitude : 24 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 7,000 feet
Take-off distance available : 7,000 feet
Accelerate-stop distance available : 7,000 feet
Slope : 0.20% downhill
Wind : Zero
Obstacle (height and distance : 151 feet/2,083 feet
from end of TOR)
The destination airport conditions are such as to allow the required
landing weight to be used without restriction. Pressure altitude is
21 feet.
2.2.2 An allowance of 220 lb of fuel is included for taxi at the departure
airport.
2.2.3 An allowance of 570 lb of fuel is included for take-off and climb to
1,500 ft above the departure airport at 84(degree)F with acceleration
to climb speed.
2.2.4 Climb from 1,500 ft above the departure airport up to cruise altitude
using maximum climb thrust and cruise at a fixed Mach number of 0.78
at pressure altitudes of 31,000 ft and 35,000 ft and descent to 1,500
ft above the destination airport are conducted in ISA+10(degree)C
conditions. Climb and descent speeds below 10,000 ft will be 250
knots CAS.
2.2.5 An allowance of 270 lb of fuel is included for approach and land at
the destination airport.
2.2.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.2.4 above.
2.2.7 At the end of approach and land 7,940 lb of fuel will remain in the
tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft above the destination airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.3 In carrying a fixed payload of 37,690 lb over a still air stage
distance of 2,000 nautical miles when operated under the conditions
defined below the Block Fuel will be not more than a guaranteed value
of ***.
2.3.1 The departure airport conditions are such as to allow the required
take-off weight to be used without restriction.
The destination airport conditions are such as to allow the required
landing weight to be used without restriction.
2.3.2 An allowance of 220 lb of fuel is included for taxi at the departure
airport.
2.3.3 An allowance of 630 lb of fuel is included for take-off and climb to
1,500 ft pressure altitude with acceleration to climb speed at a
temperature of 84(degree)F.
2.3.4 Climb from 1,500 ft pressure altitude up to cruise altitude using
maximum climb thrust and cruise at a fixed Mach number of 0.78 at a
pressure altitude of 35,000 ft and descent to 1,500 ft pressure
altitude are conducted in ISA+10(degree)C conditions. Climb and
descent speeds below 10,000 ft will be 250 knots CAS.
2.3.5 An allowance of 260 lb of fuel is included for approach and landing
at the destination airport.
2.3.6 An allowance of 70 lb of fuel is included for taxi at the destination
airport.
2.3.7 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.3.4 above.
Block Fuel is defined as the fuel burnt during taxi, take-off, climb,
cruise, descent and approach and landing as described in
Subparagraphs 2.3.2 to 2.3.6 inclusive.
2.3.8 At the end of approach and landing 8,300 lb of fuel will remain in the
tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft pressure altitude.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.4 The A321 Aircraft will be capable of carrying a fixed payload of ***
over a guaranteed still air stage distance of not less than ***
nautical miles when operated under the conditions defined below:
2.4.1 The departure airport conditions are such as to allow the required
take-off weight to be used without restriction.
The destination airport conditions are such as to allow the required
landing weight to be used without restriction.
2.4.2 An allowance of 220 lb of fuel is included for taxi at the departure
airport.
2.4.3 An allowance of 680 lb of fuel is included for take-off and climb to
1,500 ft pressure altitude with acceleration to climb speed in
ISA+10(degree)C conditions.
2.4.4 Climb from 1,500 ft pressure altitude up to cruise altitude using
maximum climb thrust and cruise at a fixed Mach number of 0.78 at
pressure altitudes of 31,000 ft and 35,000 ft and descent to 1,500 ft
pressure altitude are conducted in ISA+10(degree)C conditions. Climb
and descent speeds below 10,000 ft will be 250 knots CAS.
2.4.5 An allowance of 260 lb of fuel is included for approach and landing
at the destination airport.
2.4.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.4.4 above.
2.4.7 At the end of approach and landing 8,790 lb of fuel will remain in the
tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft pressure altitude above the destination
airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.5 The A321 Aircraft will be capable of carrying a fixed payload of ***
over a guaranteed still air stage distance of not less than *** when
operated under the conditions defined below:
2.5.1 The departure airport conditions are such as to allow the required
take-off weight to be used without restriction.
The destination airport conditions are such as to allow the required
landing weight to be used without restriction.
2.5.2 An allowance of 220 lb of fuel is included for taxi at the departure
airport.
2.5.3 An allowance of 640 lb of fuel is included for take-off and climb to
1,500 ft pressure altitude with acceleration to climb speed in
ISA+10(degree)C conditions.
2.5.4 Climb from 1,500 ft pressure altitude up to cruise altitude using
maximum climb thrust and cruise at a fixed Mach number of 0.78 at a
pressure altitude of 35,000 ft and descent to 1,500 ft pressure
altitude are conducted in ISA+10(degree)C conditions. Climb and
descent speeds below 10,000 ft will be 250 knots CAS.
2.5.5 An allowance of 260 lb of fuel is included for approach and landing
at the destination airport.
2.5.6 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 2.5.4 above.
2.5.7 At the end of approach and landing 8,300 lb of fuel will remain in the
tanks. This represents the estimated fuel required for:
1) Missed approach
2) Diversion consisting of climb and cruise in ISA+10(degree)C
conditions over a still air distance of 150 nautical miles
starting at 1,500 ft pressure altitude above the destination
airport.
3) Holding for 45 minutes at 20,000 ft pressure altitude in
ISA+10(degree)C conditions.
2.6 The mission payload guarantee defined in Subparagraph 2.1 and the
mission fuel burn guarantee defined in Subparagraph 2.3 and the
mission range guarantees defined in Subparagraphs 2.3 and 2.4 are
based on the Buyer's Manufacturer's Weight Empty as defined in
Subparagraph 3.3 below plus a fixed allowance of 14,370 lb for
Customer Changes and Operators Items.
The mission payload guarantee defined in Subparagraph 2.2 is based on
the Buyer's Manufacturer's Weight Empty as defined in Subparagraph
3.3 below plus a fixed allowance of 15,870 lb for Customer Changes
and Operators Items.
3 MANUFACTURER'S WEIGHT EMPTY AND USABLE LOAD
3.1 The Seller guarantees a Buyer's Manufacturer's Weight Empty of ***.
3.2 The Seller guarantees that the difference between the Buyer's
Manufacturer's Weight Empty and the Maximum Zero Fuel Weight will be
not less than ***.
3.3 For the purposes of this Paragraph 3 and of Subparagraph 2.6 above
the Buyer's Manufacturer's Weight Empty is the Manufacturer's Weight
Empty defined in Section 13- 10.00.00 of the Specification and is
subject to adjustment as defined in Subparagraph 7.2.
For information only an analysis of the Buyer's Manufacturer's Weight
Empty, Customer Changes, Operators Items and Operating Weight Empty
is shown in Appendix A to this Letter Agreement.
4 NOISE
4.1 External
4.1.1 The Seller guarantees that the A321 Aircraft will be certified in
accordance with FAR Part 36 Noise Standards, issue 1978, including
Amendment 36-15 Stage 3. The applicable noise limits are as defined
in paragraphs 36.201 and c36.5 (3).
4.1.2 ***
4.1.3 ***
4.2 Internal
4.2.1 Cockpit noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.78 in
still air under ISA conditions, the guaranteed A-Weighted Sound
Pressure Level (SPL) will not exceed *** and the Speech Interference
Level (SIL) will not exceed ***.
4.2.2 Cabin noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.78 in
still air under ISA conditions, the guaranteed A-Weighted Sound
Pressure Level (SPL) and the Speech
Interference Level (SIL) will be as follows:
- the A-Weighted SPL will not exceed *** over the whole seating area.
- the SIL will not exceed *** along the front 40% of the passenger
compartment and will not exceed *** along the remaining 60% of the
passenger compartment length.
4.2.3 On the ground and under the conditions defined in Subparagraph 5.9
below the noise levels in the passenger compartment with passenger
doors open or closed the A-weighted Sound Pressure Level ("SPL") will
not exceed *** and the Speech Interference Level ("SIL") will not
exceed ***.
5 GUARANTEE CONDITIONS
5.1 The performance and noise certification requirements for the A321
Aircraft, except where otherwise noted, will be as stated in Section
02 of the Specification.
5.2 For the determination of FAR take-off and landing performance a hard
level dry runway surface with no runway strength limitations, no
obstacles, zero wind, atmosphere according to ISA, except as
otherwise noted and the use of speedbrakes, flaps, landing gear and
engines in the conditions liable to provide the best results will be
assumed. When establishing take-off and second segment performance no
air will be bled from the engines for cabin air conditioning or
anti-icing.
5.3 The en-route one engine inoperative climb performance will be
established with the amount of engine air bleed associated with the
maximum cabin altitude as specified in Section 21- 30.32 of the
Specification and an average ventilation rate not less than the
amount defined in the Specification but no air will be bled from the
engines for anti-icing.
5.4 Climb, cruise and descent performance associated with the Guarantees
will include allowances for normal electrical load and for normal
engine air bleed and power extraction associated with maximum cabin
differential pressure as defined in Section 21-30.31 of the
Specification. Cabin air conditioning management during performance
demonstration as described in Subparagraph 6.3 below may be such as
to optimize the A321 Aircraft performance while meeting the minimum
air conditioning requirements defined above. Unless otherwise stated
no air will be bled from the engines for anti-icing.
5.5 The engines will be operated using not more than the engine
manufacturer's maximum recommended outputs for take-off, maximum
go-round, maximum continuous, maximum climb and cruise for normal
operation unless otherwise stated.
5.6 Where applicable the Guarantees assume the use of an approved fuel
having a density of 6.7 lb/US gallon and a lower heating value of
18,590 BTU/lb.
5.7 Speech interference level (SIL) is defined as the arithmetic average
of the sound pressure levels in the 1,000, 2,000, and 4,000 Hz octave
bands. A-weighted sound level (dBA) is as defined in the American
National Standard Specification ANSI.4-1971. ***
5.8 The sound levels guaranteed in Subparagraph 4.2:
i) will be measured at the positions defined in Section 03-83.10 of the
Specification
ii) refer to an A321 Aircraft with standard acoustic insulation and an
interior completely furnished. The effect on noise of Buyer
Furnished Equipment other than passenger seats will be the
responsibility of the Buyer.
5.9 For the purposes of the sound levels guaranteed in Subparagraph 4.2.3
the APU and air conditioning system will be operating. Sound level
measurements may be made at the prevailing ambient temperature with
the air conditioning packs controlled to approximate air conditioning
machinery rotational speed appropriate to an ambient temperature of
25(degree)C.
6 GUARANTEE COMPLIANCE
6.1 Compliance with the Guarantees will be demonstrated using operating
procedures and limitations in accordance with those defined by the
certifying Airworthiness Authority and
by the Seller unless otherwise stated.
6.2 Compliance with the take-off, second segment, en-route one engine
inoperative, landing and certified noise elements of the Guarantees
will be demonstrated with reference to the approved Flight Manual.
6.3 Compliance with those parts of the Guarantees defined in Paragraphs 1
and 2 above not covered by the requirements of the certifying
Airworthiness Authority will be demonstrated by calculation based on
data obtained during flight tests conducted on one (or more, as
agreed between the Buyer and the Seller) A321 aircraft of the same
aerodynamic configuration as those A321 Aircraft purchased by the
Buyer.
6.4 Compliance with the Manufacturer's Weight Empty and Usable Load
guarantees defined in Paragraph 3 will be demonstrated with reference
to a weight compliance report.
6.5 Compliance with the mission guarantees defined in Paragraph 2 will be
demonstrated with reference to the weight compliance report described
in Subparagraph 6.4.
6.6 Compliance with the guarantees defined in Subparagraphs 4.1.2 and
4.1.3 will be based on data collected for noise certification
purposes. Compliance with the guarantees defined in the said
paragraphs will not be construed as authorizing operation at the
defined airports (DCA and SNA) under the defined conditions.
6.7 Compliance with the noise guarantees defined in Subparagraph 4.2 will
be demonstrated with reference to noise surveys conducted on one (or
more, at the Seller's discretion) A321 aircraft of an acoustically
similar standard as the A321 Aircraft.
6.8 Data derived from tests and noise surveys will be adjusted as
required using conventional methods of correction, interpolation or
extrapolation in accordance with established aeronautical practices
to show compliance with the Guarantees.
6.9 Compliance with the Guarantees is not contingent on engine
performance defined in the engine manufacturer's specification.
6.10 The Seller undertakes to furnish the Buyer with a report or reports
demonstrating compliance with the Guarantees at, or as soon as
possible after, the delivery of each of the A321 Aircraft.
7 ADJUSTMENT OF GUARANTEES
7.1 In the event of any change to any law, governmental regulation or
requirement or interpretation thereof ("rule change") by any
governmental agency made subsequent to the date of the Agreement and
such rule change affects the A321 Aircraft configuration or
performance or both required to obtain certification the Guarantees
will be appropriately modified to reflect the effect of any such
change.
7.2 The Guarantees apply to the A321 Aircraft as described in the
Preamble to this Letter Agreement and may be adjusted in the event of:
a) Any further configuration change which is the subject of a SCN
b) Variation in actual weights of items defined in Section 13-10 of
the Specification
c) Changes required to obtain certification which cause changes to
the performance or weight of the A321 Aircraft
8 EXCLUSIVE GUARANTEES
The Guarantees are exclusive and are provided in lieu of any and all
other performance and weight guarantees of any nature which may be
stated, referenced or incorporated in the Specification or any other
document.
9 UNDERTAKING; REMEDIES
***
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Letter Agreement in favor of the Buyer in respect of the
Seller's rights against and obligations to the Manufacturer under the
provisions quoted above, the Buyer hereby accepts such assignment and
subrogation and agrees to be bound by all of the terms, conditions
and limitations therein contained. The Buyer and Seller recognize and
agree that, except as otherwise expressly provided in Paragraph 8 of
this Letter Agreement, all the provisions of Clause 12 of the
Agreement, including without limitation the Exclusivity of Warranties
and General Limitations of Liability and Duplicate Remedies therein
contained, will apply to the foregoing ***.
ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner without
the prior written consent of the Seller, and any attempted assignment
or transfer in contravention of the provisions of this paragraph will
be void and of no force or effect. Notwithstanding the preceding
sentence, the terms of Subclauses 19.5 and 19.6 of the Agreement will
apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding, please execute the
original and one (1) copy hereof in the space provided below and return a
copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
---------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
--------------------
Its: Treasurer
Date: November 24, 1998
APPENDIX A TO
EXHIBIT 3
1 Manufacturer's Weight Empty and Operating Weight Empty
At the time of this Agreement the Buyer's Manufacturer's Weight Empty
and the Operating Weight Empty for the purposes of Subparagraph 2.6
and Paragraph 3 of this Letter Agreement are defined as follows:
Manufacturer's Weight Empty as defined in the
Specification Reference E 000.02000 Issue 1 : 93,110 lb
--------
Buyer's Manufacturer's Weight Empty according to the
Preamble of this Letter Agreement and for the purposes
of Subparagraph 2.6 and Paragraph 3 of this Letter
Agreement : ***
Specification changes as defined in Subparagraph 2.1 of
this Appendix A (including US Airways livery) : 1,543 lb
Operators Items as defined in Subparagraph 2.2.1 of
this Appendix A : 12,829 lb
--------
Operating Weight Empty of the A321 Aircraft for
the purposes of Subparagraphs 2.1 and 2.3 to 2.5
inclusive of this Letter Agreement : 107,482 lb
Operators items as defined in Subparagraph 2.2.2 of
this Appendix A : 14,329 lb
---------
Operating Weight Empty of the A321 Aircraft for the
purposes of Subparagraphs 2.2 of this Letter Agreement : 108,982 lb
* Note As of the date hereof the Operating Weight Empty has not been
completely defined. The payloads, fuel burn and ranges guaranteed in
Paragraph 2 are based on the estimated Operating Weight Empty as
shown above.
2 Specification Changes and Operators Items
2.1 Weight of Specification Changes
As of the date of this draft the complete list of USAir Specification
Changes is unknown. It is estimated that the weight of such
Specification Changes is :
: 1,483 lb
USAir livery : 60 lb
2.2 Weights of Operators Items
Oil for engines and APU : 117 lb
Unusable fuel : 154 lb
Water for galleys and toilets : 441 lb
Waste tank pre-charge : 29 lb
A321 Aircraft documents and tool kits : 42 lb
Passenger seats and life jackets : 5,184 lb
Phone equipment : 170 lb
Galley structure and fixed equipment : 1,512 lb
Chillers : 195 lb
Catering and service equipment : 2,829 lb
Cabin supplies : 252 lb
Emergency equipment : 704 lb
Crew and bags : 1,200 lb
--------
2.2.1 Total Operators Items for the purposes of
Subparagraphs 2.1 and 2.3 to 2.5 inclusive of
this Letter Agreement : 12,829 lb
Additional items for over water operation : 1,500 lb
-------
2.2.2 Total Operators Items for the purposes of
Subparagraph 2.2 of this Letter Agreement : 14,329 lb
LETTER AGREEMENT NO. 1 TO AMENDMENT NO. 1
As of June 10, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: MISCELLANEOUS
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into Amendment No. 1, dated as of even date
herewith (the "Amendment"), to the Airbus A319/A320/A321 Purchase Agreement
dated as of October 31, 1997, which covers, among other things, the sale by
the Seller and the purchase by the Buyer of certain Aircraft, under the
terms and conditions set forth in said Agreement. The Buyer and the Seller
have agreed to set forth in this Letter Agreement No. 1 to the Amendment
(the "Letter Agreement") certain additional terms and conditions regarding
the sale of the Aircraft. Capitalized terms used herein and not otherwise
defined in this Letter Agreement will have the meanings assigned thereto in
the Agreement. The terms "herein," "hereof" and "hereunder" and words of
similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Amendment, that the provisions of said
Amendment are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Amendment, except that
if the Amendment and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
1. LETTER AGREEMENT NO. 5
1.1 The Buyer and the Seller hereby agree that ***. Therefore,
Subparagraph 1.3 of Letter Agreement No. 5 to the Agreement is hereby
superseded and replaced by the following quoted text.
QUOTE
***
UNQUOTE
1.2 The Buyer and the Seller hereby agree that the reference to *** in
Subparagraph 2.1.1(ii)(b) of Letter Agreement No. 5 to the Agreement
is hereby superseded and replaced by ***. Therefore, Subparagraph
2.1.1(ii) of Letter Agreement No. 5 to the Agreement is hereby
superseded and replaced by the following quoted text.
QUOTE
***
UNQUOTE
2. LETTER AGREEMENT NO. 7
The Buyer and the Seller hereby agree to amend Subparagraph 9.1 of
Letter Agreement No. 7 to the Agreement by replacing such
subparagraph with the following quoted text.
QUOTE
9.1 ***
UNQUOTE
2. LETTER AGREEMENT NO. 13
The Buyer and the Seller hereby agree to amend Paragraph 8 of Letter
Agreement No. 13 to the Agreement by replacing such paragraph with
the following quoted text.
QUOTE
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Letter Agreement in favor of the Buyer in respect of
the Seller's rights against and obligations to the Manufacturer
under the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer and
Seller recognize and agree that, except as otherwise expressly
provided in Paragraph 7 of this Letter Agreement, all the
provisions of Clause 12 of the Agreement, including without
limitation the Exclusivity of Warranties and General Limitations
of Liability and Duplicate Remedies therein contained, will apply
to the foregoing Technical Dispatch Reliability Guarantee.
ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner
without the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
paragraph will be void and of no force or effect. Notwithstanding
the preceding sentence, the terms of Subclauses 19.5 and 19.6 of
the Agreement will apply to this Letter Agreement.
UNQUOTE
4. ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner without
the prior written consent of the Seller, and any attempted assignment
or transfer in contravention of the provisions of this Paragraph 4
will be void and of no force or effect. Notwithstanding the preceding
sentence, the terms of Subclauses 19.5 and 19.6 of the Agreement will
apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding, please
execute the original and one (1) copy hereof in the space provided below
and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
---------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
--------------------
Its: Treasurer
Date: November 24, 1998
Exhibit 10.3
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted text has been marked with a triple
asterisk ("***") and has been filed separately with the Securities and
Exchange Commissions.
Amendment No. 2
TO THE A319/A320/A321 PURCHASE AGREEMENT
dated as of October 31, 1997
between
AVSA, S.A.R.L.,
and
US AIRWAYS GROUP, INC.
This Amendment No. 2 (hereinafter referred to as the "Amendment") entered
into as of January 19, 1999, by and between AVSA, S.A.R.L., a societe
limitee organized and existing under the laws of the Republic of France,
having its registered office located at 2, Rond Point Maurice Bellonte,
31700 Blagnac, FRANCE (hereinafter referred to as the "Seller"), and US
Airways Group, Inc., a corporation organized and existing under the laws of
the State of Delaware, United States of America, having its executive
offices located at 2345 Crystal Drive, Arlington, VA 22227, U.S.A.
(hereinafter referred to as the "Buyer");
WITNESSETH:
WHEREAS, the Buyer and the Seller entered into an Airbus
A319/A320/A321 Purchase Agreement, dated as of October 31, 1997, relating
to the sale by the Seller and the purchase by the Buyer of certain Airbus
Industrie A319, A320 and A321 model aircraft (the "Aircraft"), which
agreement, together with all Exhibits, Appendices and Letter Agreements
attached thereto and as amended by Amendment No. 1 dated as of June 10,
1998 is hereinafter called the "Agreement".
WHEREAS, the Buyer and the Seller agree to amend the deliver schedule
for the Aircraft.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. DEFINITIONS
Capitalized terms used herein and not otherwise defined in this
Amendment will have the meanings assigned to them in the Agreement.
The terms "herein," "hereof," and hereunder and words of similar
import refer to this Amendment.
2. DELIVERY SCHEDULE
2.1 In line with the terms of Subparagraph 3.3 of Amendment No. 1, the
Seller has offered the Buyer, and the Buyer has accepted, (i) delivery
positions for some Additional Aircraft and (ii) to *** certain
A319 and A320 delivery positions. Consequently, the Buyer and the
Seller hereby agree:
(i) as per the terms of the Seller's letter dated June 4, 1998, ***;
(ii) as per the terms of the Seller's letters dated June 24, 1998 and
June 26, 1998, ***.
2.2 Therefore,
(i) the delivery schedule set forth in Subclauses 9.1.1. and 9.1.2 of
the Agreement is hereby superseded and replaced by the schedule set
forth in Appendix 1 hereto;
(ii) the number of Firm Aircraft is increased by *** units, such that
the number of Firm Aircraft is now *** units (*** A319 Firm Aircraft
and *** A320 Firm Aircraft), ***.
(iii) the number of Reconfirmable Aircraft is ***, such that the
number of Reconfirmable Aircraft granted by the Seller to the Buyer is
now ***.
2.3 On signature of this Amendment, the Buyer will make all Predelivery
Payments due as a result of the rescheduling of the Aircraft as set
forth above, minus amounts already received by the Seller as of the
date hereof.
If the foregoing correctly sets forth our understanding, please
execute this Amendment in the space provided below, whereupon, as of the
date first above written, this Amendment will constitute part of this
Agreement.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
----------------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
-------------------------
Its: Treasurer
Date: November 24, 1998
Exhibit 10.4
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted text has been has been marked with a
triple asterisk ("***") and has been filed separately with the Securities
and Exchange Commission.
AIRBUS A330/A340 PURCHASE AGREEMENT
Dated as of November 24, 1998
between
AVSA, S.A.R.L.,
Seller
and
US Airways Group, Inc.,
Buyer
C O N T E N T S
CLAUSES TITLE
0 PURCHASE AGREEMENT
1 DEFINITIONS
2 SALE AND PURCHASE
3 CHANGES
4 PRICE
5 PRICE REVISION
6 PAYMENT TERMS
7 PLANT REPRESENTATIVES - INSPECTION
8 BUYER'S ACCEPTANCE
9 DELIVERY
10 EXCUSABLE DELAY
11 INEXCUSABLE DELAY
12 WARRANTIES AND SERVICE LIFE POLICY
13 PATENT INDEMNITY
14 TECHNICAL PUBLICATIONS
15 CUSTOMER ASSISTANCE
16 TRAINING AND TRAINING AIDS
17 VENDORS' PRODUCT SUPPORT
18 BUYER FURNISHED EQUIPMENT AND DATA
19 ASSIGNMENT
20 DATA RETRIEVAL
21 TERMINATION FOR CERTAIN EVENTS
22 MISCELLANEOUS PROVISIONS
EXHIBITS TITLE
EXHIBIT "A-1" A330-200 AIRCRAFT SPECIFICATION
EXHIBIT "A-2" A330-300 AIRCRAFT SPECIFICATION
EXHIBIT "A-3" A340-200 AIRCRAFT SPECIFICATION
EXHIBIT "A-4" A340-300 AIRCRAFT SPECIFICATION
EXHIBIT "B" [INTENTIONALLY LEFT BLANK]
EXHIBIT "C" SCN FORM
EXHIBIT "D" SELLER SERVICE LIFE POLICY
EXHIBIT "E" CERTIFICATE OF ACCEPTANCE
EXHIBIT "F" TECHNICAL PUBLICATIONS
EXHIBIT "G" AIRFRAME PRICE REVISION FORMULA
EXHIBIT "H-1" PRATT & WHITNEY PRICE REVISION FORMULA FOR
A330-200 AND A330-300 AIRCRAFT
EXHIBIT "H-2" CFM INTERNATIONAL PRICE REVISION FORMULA FOR
A340-200 AND A340-300 AIRCRAFT
P U R C H A S E A G R E E M E N T
This agreement is made this 24 day of November 1998
between
AVSA, a societe a responsabilite limitee organized and
existing under the laws of the Republic of France, having
its registered office located at
2, rond-point Maurice Bellonte
31700 BLAGNAC
FRANCE
(hereinafter referred to as the "Seller")
and
US Airways Group, Inc. a corporation organized and
existing under the laws of the State of Delaware, United
States of America, having its executive offices located
at
2345 Crystal Drive
Arlington, VA 22227
(hereinafter referred to as the "Buyer")
WHEREAS,
a) the Buyer wishes to purchase and the Seller is willing to sell up
to thirty (30) Airbus Industrie aircraft, upon the terms and
conditions herein provided; and
b) the Seller is a sales subsidiary of Airbus Industrie, G.I.E., and
will purchase the A330 and A340 model aircraft from Airbus
Industrie, G.I.E., for resale to the Buyer.
NOW THEREFORE IT IS AGREED AS FOLLOWS:
1 - DEFINITIONS
For all purposes of this agreement, except as otherwise
expressly provided or unless the context otherwise
requires, the following terms will have the following
meanings:
A319/A320/A321 Agreement - the A319/A320/A321 Purchase
Agreement originally executed as of October 31, 1997,
including all exhibits, appendices and letter agreements
attached or otherwise incorporated therein and all SCNs,
as the same has been and may in the future be amended or
modified (whether by formal amendment, letter,
correspondence or otherwise in writing) from time to
time, and in effect from time to time.
A330 Aircraft - any or all A330-200 Aircraft and A330-300
Aircraft.
A330-200 Aircraft - any or all of the Firm A330-200
Aircraft, Reconfirmable A330-200 Aircraft and Additional
Aircraft that the Buyer selects as A330-200 aircraft and
Aircraft that the Buyer converts into A330-200 aircraft
to be purchased by the Seller and sold to the Buyer
pursuant to this Agreement, together with all components,
equipment, parts and accessories installed in or on such
aircraft and the Propulsion Systems installed thereon
upon delivery.
A330-300 Aircraft - any or all of the Firm A330-300
Aircraft, Reconfirmable A330-300 Aircraft and Additional
Aircraft that the Buyer selects as A330-300 aircraft and
Aircraft that the Buyer converts into A330-300 aircraft
to be purchased by the Seller and sold to the Buyer
pursuant to this Agreement, together with all components,
equipment, parts and accessories installed in or on such
aircraft and the Propulsion Systems installed thereon
upon delivery.
A340 Aircraft - any or all A340-200 Aircraft and A340-300
Aircraft.
A340-200 Aircraft - any or all of the Firm A340-200
Aircraft, Reconfirmable A340-200 Aircraft and Additional
Aircraft that the Buyer selects as A340-200 aircraft and
Aircraft that the Buyer converts into A340-200 aircraft
to be purchased by the Seller and sold to the Buyer
pursuant to this Agreement, together with all components,
equipment, parts and accessories installed in or on such
aircraft and the Propulsion Systems installed thereon
upon delivery.
A340-300 Aircraft - any or all of the Firm A340-300
Aircraft, Reconfirmable A340-300 Aircraft and Additional
Aircraft that the Buyer selects as A340-300 aircraft and
Aircraft that the Buyer converts into A340-300 aircraft
to be purchased by the Seller and sold to the Buyer
pursuant to this Agreement, together with all components,
equipment, parts and accessories installed in or on such
aircraft and the Propulsion Systems installed thereon
upon delivery.
A330-200 Airframe - any A330-200 Aircraft, excluding the
Propulsion Systems therefor.
A330-300 Airframe - any A330-300 Aircraft, excluding the
Propulsion Systems therefor.
A340-200 Airframe - any A340-200 Aircraft, excluding the
Propulsion Systems therefor.
A340-300 Airframe - any A340-300 Aircraft, excluding the
Propulsion Systems therefor.
Additional Aircraft - up to sixteen (16) A330-300,
A330-200, A340-300 and/or A340-200 model aircraft other
than Firm Aircraft and Reconfirmable Aircraft that may be
purchased by the Seller and sold to the Buyer pursuant to
this Agreement, together with all components, equipment,
parts and accessories installed in or on such aircraft
and the Propulsion Systems installed thereon upon
delivery.
Affiliate - with respect to any person or entity, any
other person or entity directly or indirectly
controlling, controlled by or under common control with
such person or entity, not including any of the
Associated Contractors.
Agreement - this Airbus A330/A340 Purchase Agreement,
including all exhibits, appendices and letter agreements
attached or otherwise incorporated herein and all SCNs,
as the same may be amended or modified (whether by formal
amendment, letter, correspondence or otherwise in
writing) from time to time, and in effect from time to
time.
Aircraft - any or all of the A330 Aircraft and A340
Aircraft to be purchased by the Seller and sold to the
Buyer pursuant to this Agreement, together with all
components, equipment, parts and accessories installed in
or on such aircraft and the Propulsion Systems installed
thereon upon delivery.
Airframe - any Aircraft, excluding the Propulsion Systems
therefor.
Airframe Price Revision Formula - the formula set forth
in Exhibit "G" of this Agreement.
ASC - Airbus Service Company, Inc., a corporation
organized and existing under the laws of the State of
Delaware, having its registered office located at 198 Van
Buren Street, Suite 300, Herndon, VA 20170, or any
successor thereto.
Associated Contractors - collectively, the members and,
for certain purposes, subcontractors of the Manufacturer
from time to time, which members presently are:
(1) AEROSPATIALE, SOCIETE NATIONALE INDUSTRIELLE
("Aerospatiale"), whose principal office is at
37, Boulevard de Montmorency
75016 Paris
France
(2) BRITISH AEROSPACE (OPERATIONS) LTD, whose
principal office is at
Warwick House
PO Box 87
Farnborough Aerospace Centre
Farnborough
Hants GU14 6YU
England
(3) CONSTRUCCIONES AERONAUTICAS, S.A., whose principal
office is at
404 Avenida de Aragon
28022 Madrid
Spain
(4) DAIMLER-BENZ AEROSPACE AIRBUS, GmbH, whose principal
office is at
Kreetslag 10
Postfach 95 01 09
21111 Hamburg
Germany
ATA Specification 100 - the specification issued by the
Air Transport Association of America relating to
manufacturers' technical data.
ATA Specification 101 - the specification issued by the
Air Transport Association of America relating to ground
equipment technical data.
ATA Specification 102 - the specification issued by the
Air Transport Association of America relating to software
programs.
ATA Specification 200 - the specification issued by the
Air Transport Association of America relating to
integrated data processing.
ATA Specification 300 - the specification issued by the
Air Transport Association of America relating to the
packaging of spare parts shipments.
ATA Specification 2000 - the specification issued by the
Air Transport Association of America relating to an
industry-wide communication system linking suppliers and
users for the purposes of spares provisioning,
purchasing, order administration, invoicing and
information or data exchange.
ATA Specification 2100 - the specification issued by the
Air Transport Association of America relating to the
standards for the presentation of technical information
prepared as digital media (magnetic tape or CD ROM).
Base Price - for any Aircraft, Airframe or Propulsion
Systems, as defined in Subclause 4.1 of this Agreement.
Buyer Furnished Equipment - for any Aircraft, all the
items of equipment that will be furnished by the Buyer
and installed in the Aircraft by the Seller, as defined
in the Specification.
Commercial Constraints - means delivery positions that
are not available solely because they are under offer to
another customer or because they would require
unreasonably expensive modifications to meet the
Specification.
Courseware - computer-based-training programs developed
and owned or licensed by the Seller in conjunction with
the Buyer's training programs.
Customer Originated Changes - as defined in Subclause
14.5.3 of this Agreement.
Deposit - as defined in Subclause 6.2.4 of this
Agreement.
Development Changes - as defined in Subclause 3.2 of this
Agreement.
DGAC - the Direction Generale de l'Aviation Civile of
France, or any successor agency thereto.
Excusable Delay - as defined in Subclause 10.1 of this
Agreement.
FAA - the U.S. Federal Aviation Administration, or any
successor agency thereto.
Failure - as defined in Subclause 12.2 of this Agreement.
Final Contract Price - as defined in Subclause 4.2 of
this Agreement.
Firm A330-200 Aircraft - any or all of the Firm A330-300
Aircraft that the Buyer converts into A330-200 aircraft
to be purchased by the Seller and sold to the Buyer
pursuant to this Agreement, together with all components,
equipment, parts and accessories installed in or on such
aircraft and the Propulsion Systems installed thereon
upon delivery.
Firm A330-300 Aircraft - any or all of the seven (7) firm
A330-300 aircraft for which the delivery schedule is set
forth in Subclause 9.1.1 hereof to be purchased by the
Seller and sold to the Buyer pursuant to this Agreement,
together with all components, equipment, parts and
accessories installed in or on such aircraft and the
Propulsion Systems installed thereon upon delivery.
Firm A340-200 Aircraft - any or all of the Firm A330-300
Aircraft that the Buyer converts into A340-200 aircraft
to be purchased by the Seller and sold to the Buyer
pursuant to this Agreement, together with all components,
equipment, parts and accessories installed in or on such
aircraft and the Propulsion Systems installed thereon
upon delivery.
Firm A340-300 Aircraft - any or all of the Firm A330-300
Aircraft that the Buyer converts into A340-300 aircraft
to be purchased by the Seller and sold to the Buyer
pursuant to this Agreement, together with all components,
equipment, parts and accessories installed in or on such
aircraft and the Propulsion Systems installed thereon
upon delivery.
Firm Aircraft - any or all of the Firm A330-200 Aircraft,
Firm A330-300 Aircraft, Firm A340-200 and Firm A340-300
Aircraft to be purchased by the Seller and sold to the
Buyer pursuant to this Agreement, together with all
components, equipment, parts and accessories installed in
or on such aircraft and the Propulsion Systems installed
thereon upon delivery.
Industrial Constraints - means delivery positions that
are not physically available, because production capacity
limits have been reached.
Inexcusable Delay - as defined in Subclause 11.1 of this
Agreement.
In-house Warranty - as referred to in Subclause 12.1.7 of
this Agreement.
In-house Warranty Labor Rate - as defined in Subclause
12.1.7(v) of this Agreement.
Interface Problem - as defined in Subclause 12.4.1 of
this Agreement.
Item - as defined in Subclause 12.2 of this Agreement.
LIBOR - for each stated interest period, the rate for
deposits in US dollars being quoted to prime banks in the
London Interbank Market for such an interest period, at
11:00 a.m., London time, on the day that is two (2) days
(other than a Saturday, Sunday or a day that is a legal
holiday or a day on which banking institutions are
authorized to close in the City of New York, New York,
London, England, or Paris, France) before the first day
of an interest period. Such rate may be displayed on the
Reuters Screen LIBO Page, the Bloomberg LIBOR screen, or
in the Wall Street Journal or The Financial Times. The
Buyer and Seller will consult these sources and agree on
the rate. In the event that agreement cannot be reached,
if at least two (2) such offered rates appear on the
Reuters Screen LIBO Page, the rate for that interest
period will be the arithmetic mean of such offered rates
rounded to the nearest basis point (0.5 rounds to 1),
otherwise the rate for that interest period will be
"LIBOR" as quoted by National Westminster Bank, plc.
"Reuters Screen LIBO Page" means the display designated
as page "LIBO" on the Reuters Monitor Money Rates Service
(or any successor to such page or service).
Manufacturer - Airbus Industrie, a "Groupement d'Interet
Economique" established under "Ordonnance" No. 67-821
dated September 23, 1967, of the Republic of France.
Material - "Material" will comprise: (a) Seller Parts, it
being expressly understood that Seller Parts will not
include parts manufactured pursuant to a Parts
Manufacturing Authority, (b) Vendor Parts classified as
rotable line replacement units, (c) Vendor Parts
classified as expendable line maintenance parts, (d)
ground support equipment (GSE) and special-to-type tools,
(e) hardware and standard material, and (f) consumables
and raw material.
Material Breach - as defined in Subclause 21.1 of this
Agreement.
Predelivery Payment - any payment made against the Final
Contract Price of an Aircraft, the expected schedule for
which is set forth in Subclause 6.2.2 of this Agreement.
Predelivery Payment Reference Price - as defined in
Subclause 6.2.3 of this Agreement.
Product Support Agreements - as referred to in Subclause
17.1.1 of this Agreement.
Propulsion Systems - the (i) two (2) powerplants
manufactured by Pratt & Whitney, to be installed on an
A330 Aircraft at delivery, or (ii) four (4) powerplants
manufactured by CFM International, to be installed on an
A340 Aircraft at delivery, each composed of (x) the
powerplant (as such term is defined in Chapters 70-80 of
ATA Specification 100 (Revision 21), but limited to the
equipment, components, parts and accessories included in
the powerplant, as so defined) and (y) thrust reversers
and nacelles that have been sold to the Manufacturer by
Pratt & Whitney or CFM International, as applicable.
Qualifying Affiliate - as defined in Subclause 19.5 of
this Agreement.
Reconfirmable A330-200 Aircraft - any or all of the
Reconfirmable A330-300 Aircraft that the Buyer converts
into A330-200 aircraft to be purchased by the Seller and
sold to the Buyer pursuant to this Agreement, together
with all components, equipment, parts and accessories
installed in or on such aircraft and the Propulsion
Systems installed thereon upon delivery.
Reconfirmable A330-300 Aircraft - any or all of the seven
(7) reconfirmable A330-300 aircraft for which the
delivery schedule is set forth in Subclause 9.1.1 hereof
to be purchased by the Seller and sold to the Buyer
pursuant to this Agreement, together with all components,
equipment, parts and accessories installed in or on such
aircraft and the Propulsion Systems installed thereon
upon delivery.
Reconfirmable A340-200 Aircraft - any or all of the
Reconfirmable A330-300 Aircraft that the Buyer converts
into A340-200 aircraft to be purchased by the Seller and
sold to the Buyer pursuant to this Agreement, together
with all components, equipment, parts and accessories
installed in or on such aircraft and the Propulsion
Systems installed thereon upon delivery.
Reconfirmable A340-300 Aircraft - any or all of the
Reconfirmable A330-300 Aircraft that the Buyer converts
into A340-300 aircraft to be purchased by the Seller and
sold to the Buyer pursuant to this Agreement, together
with all components, equipment, parts and accessories
installed in or on such aircraft and the Propulsion
Systems installed thereon upon delivery.
Reconfirmable Aircraft - any or all of the Reconfirmable
A330-200 Aircraft, Reconfirmable A330-300 Aircraft,
Reconfirmable A340-200 Aircraft and Reconfirmable
A340-300 Aircraft that may be purchased by the Seller and
sold to the Buyer pursuant to this Agreement, together
with all components, equipment, parts and accessories
installed in or on such aircraft and the Propulsion
Systems installed thereon upon delivery.
RFC - as defined in Subclause 3.3 of this Agreement.
SCN - as defined in Subclause 3.1 of this Agreement.
Seller Parts - industrial proprietary components,
equipment, accessories or parts of the Manufacturer
manufactured to the detailed design of the Manufacturer
or a subcontractor of it and bearing official part
numbers of the Manufacturer or material for which the
Seller has exclusive sales rights in the United States of
America.
Service Life Policy - as referred to in Subclause 12.2 of
this Agreement.
Specifications - as defined in Subclause 2.2 of this
Agreement.
Standard Specifications - as defined in Subclause 2.2 of
this Agreement.
Technical Publications - as defined in Subclause 14.1 of
this Agreement.
Training - as defined in Subclause 16.1 of this
Agreement.
Training Conference - as defined in Subclause 16.2.1 of
this Agreement.
Vendor - each manufacturer of Vendor Parts.
Vendor Component - as defined in Subclause 12.4.3 of this
Agreement.
Vendor Parts - any equipment, component, accessory, or
part installed in or intended to be installed in an
Aircraft, other than Warranted Parts, Propulsion Systems
and Buyer Furnished Equipment.
Warranted Part - as defined in Subclause 12.1.1 of this
Agreement.
Warranty Claim - as defined in Subclause 12.1.6(iv) of
this Agreement.
Working Day - with respect to any action to be taken
hereunder, a day other than a Saturday, Sunday or other
day designated as a legal holiday in the jurisdiction in
which such action is required to be taken, provided that
for purposes of determining when any notice or election,
any payment or any delivery of any Aircraft is required
to be made, "Working Days" will mean any day other than a
Saturday, Sunday or other day designated as a legal
holiday or on which banks are permitted to be closed in
(a) Toulouse, France, (b) New York, New York or (c) any
other location where applicable United States federal
offices (such as those of the FAA) are located.
The terms "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement, and not
a particular Clause thereof.
The term "including" as used in this Agreement means
"including, without limitation," unless otherwise
specified or unless the context otherwise requires.
Technical and trade items not otherwise defined herein
will have the meanings assigned to them as generally
accepted in the aircraft manufacturing industry.
2 - SALE AND PURCHASE
2.1 General
The Seller will cause to be manufactured and will sell
and deliver, and the Buyer will buy and take delivery of,
the Aircraft subject to the terms and conditions
contained in this Agreement.
2.2 Specification Documents
Each Aircraft will be manufactured, and when delivered
will be in accordance with the Specification for such
Aircraft:
(i) in respect of the A330-200 Aircraft, Standard
Specification Document No. G.000.02000, Issue 3,
dated October 15, 1996, with an MTOW of 230
tonnes (the "A330-200 Standard Specification"),
(ii) in respect of A330-300 Aircraft, Standard
Specification Document No. G.000.03000, Issue 6,
dated October 15, 1996, with an MTOW of 230
tonnes (the "A330-300 Standard Specification"),
(iii) in respect of A340-200 Aircraft, Standard
Specification Document No. F.000.02000, Issue 6,
dated January 15, 1997, with an MTOW of 275
tonnes (the "A340-200 Standard Specification"),
(iv) in respect of A340-300 Aircraft, Standard
Specification, Document No. F.000.03000 Issue 6,
dated January 15, 1997, with an MTOW of 275
tonnes (the "A340-300 Standard Specification").
Copies of the A330-200 Standard Specification, A330-300
Standard Specification, A340-200 Standard Specification
and A340-300 Standard Specification are annexed hereto
as, respectively, Exhibit "A-1," Exhibit "A-2," Exhibit
"A-3" and Exhibit "A-4" to this Agreement (collectively,
the "Standard Specifications"). The Standard
Specifications, as amended by the change orders set forth
in Exhibit "B" hereto are hereinafter referred to as the
"Specifications." The Specifications may be further
modified from time to time pursuant to the provisions of
Clause 3 below.
2.3 Certification
Each Aircraft will be delivered to the Buyer with the
Certificate of Airworthiness for Export issued by the
DGAC for the Aircraft, and in a condition enabling the
Buyer (or an eligible person under then applicable law)
to immediately obtain at the time of delivery a US
Standard Airworthiness Certificate issued pursuant to
Part 21 of the US Federal Aviation Regulations, and ***.
After transfer of title to the Aircraft will have
occurred, and once the registration process with the FAA
will have taken place, the Buyer will present to the
DGAC, as the representative of the FAA, (i) the
Certificate of Airworthiness for Export and (ii) the
temporary registration certificate issued by the FAA,
with respect to the Aircraft. The DGAC representative
acting on behalf of the FAA will then immediately issue
to the Buyer the US Standard Airworthiness Certificate
for the Aircraft.
In addition, the Seller will assist the Buyer in
obtaining at time of delivery of the first A330 Aircraft
and first A340 Aircraft ***.
The Buyer will be responsible for the United States
registration of the Aircraft. The Seller will have no
obligation, whether before, at or after delivery of any
Aircraft, to make any alterations to such Aircraft to
enable such Aircraft to meet FAA requirements for
specific operation on routes unique to the Buyer ***.
Except as set forth in this Subclause 2.3, the Seller
will not be required to obtain any other certificate or
approval with respect to the Aircraft.
3 - CHANGES
3.1 Specification Change Notices
The Specifications may be amended from time to time by a
Specification Change Notice, a written agreement between
the parties (each such Specification Change Notice being
herein called an "SCN" and being substantially in the
form of Exhibit "C" hereto). Each SCN will set forth in
detail the particular changes to be made in the
Specifications, and the effect, if any, of such changes
on design, performance, weight, balance, time of
delivery, Buyer Furnished Equipment and price (in base
year dollars and, for information purposes only, in then
current year dollars) of each Aircraft affected thereby
and interchangeability or replaceability of parts. SCNs
will not be binding on either party until signed by
persons duly authorized in writing by the Buyer and the
Seller, but upon being so signed will constitute
amendments to this Agreement. All SCNs will be signed on
behalf of the Buyer by an officer in its finance
department and an officer in flight operations or
maintenance, or alternatively may be signed by the
Buyer's chief executive officer or president.
3.2 Development Changes
*** the Specifications may also be revised by the Seller
without an SCN or the Buyer's consent solely to
incorporate Manufacturer-decided changes that are deemed
necessary or useful to correct defects, improve the
Aircraft or its process of manufacture, prevent delay, or
ensure compliance with this Agreement and that do not
increase the price or adversely affect the delivery,
overall dimensions, weight, operational or maintenance
requirements or performance of the Aircraft or adversely
(i) change the interchangeability or replaceability
requirements of the Specifications with respect to parts
or (ii) *** (hereinafter called "Development Changes").***
3.3 Requests and Approvals
In the event that the Buyer files a Request for Change
("RFC") with the Seller and the RFC does not subsequently
become an SCN for any reason, such RFC will be cancelled
without charge to the Buyer. Upon receipt of any request
for a proposed change, the Seller will consider such
request in good faith and will respond within ten (10)
Working Days with (i) if possible, all appropriate
information, including, a written estimated range of the
cost thereof, the impact on the delivery dates of the
applicable Aircraft and any certification requirements,
or (ii) if (i) is not possible, with a date when the
Seller will provide the Buyer with the information in
(i). In the event that the Buyer requests the Seller in
writing to incorporate a proposed change (excluding
Development Changes) in an Aircraft and the Seller agrees
to such request and incorporates such change, but the
change is not subsequently made the subject of an SCN for
any reason (other than the Seller's unreasonable refusal
to sign the SCN or otherwise acting in bad faith), the
Buyer will pay to the Seller the actual direct cost of
design and other work resulting from such request and
incurred by the Seller ***. In the event that the Buyer
requests the Seller in writing to proceed with a proposed
change before any requisite approval of DGAC and FAA has
been obtained and subsequently such DGAC or FAA approval
is not obtained, any SCN which will have been executed in
connection with such proposed change will be deemed
canceled. ***
3.4 Specification Changes Before Delivery
If, pursuant to the promulgation, adoption, issuance,
change or interpretation of any applicable law or
regulation, any change in the Specifications has to be
made before delivery of any Aircraft to enable ***. For
each such change, the parties will sign an SCN specifying
the effect, if any, of such change on design,
performance, weight, balance, time of delivery, Buyer
Furnished Equipment and price of each Aircraft affected
thereby and interchangeability or replaceability of
parts. If the Seller anticipates that the scheduled
delivery of any Aircraft will be postponed by reason of
such change, the delivery date of such Aircraft as
provided in Subclause 9.1 will be extended to the extent
required by reason of such change, ***.
The Seller will use all reasonable efforts to ensure that
each Aircraft that is the subject of such postponement is
"ready for delivery" without discrimination against
the Aircraft.
***
The cost of the changes applicable to Propulsion Systems,
will be borne by the Buyer or the manufacturer thereof in
accordance with such arrangements as may be made
separately between the Buyer and the manufacturer of the
Propulsion Systems.
3.5 Specification Changes After Delivery
Subclause 3.4 will not require the Seller to make any
changes or modifications to or to make any payments or
take any other action with respect to any Aircraft
delivered to the Buyer before any law or regulation
referred to in Subclause 3.4 is to be complied with. Any
such changes or modifications made to an Aircraft after
its delivery to the Buyer will be at the Buyer's expense,
except as otherwise agreed between the Buyer and the
Seller.
3.6 Specification Evolution
The Seller will keep the Buyer advised of any evolution
in the design of the A330/A340 family of aircraft and of
any new relevant option that becomes available
with respect to the Aircraft.
4 - PRICE
4.1 Base Price of the Aircraft
The "Base Price" of each Aircraft is the sum of:
(i) the Base Price of the Airframe, and
(ii) the Base Price of the Propulsion Systems.
4.1.1 Base Price of the Airframe
4.1.1.1 A330-200 Airframe
The Base Price of the A330-200 Airframe will be the sum
of the Base Prices set forth below in (i) and (ii):
(i) the Base Price of the Standard A330-200
Airframe, as defined in the A330-200 Standard
Specification set forth in Exhibit "A-1" hereto
(excluding Buyer Furnished Equipment, Propulsion
Systems and SCNs), at delivery conditions
prevailing in January 1999, which is:
US $***
(US dollars-***), and
(ii) a budgetary Base Price for SCNs to be mutually
agreed upon, at delivery conditions prevailing
in January 1999, which is:
US $***
(US dollars-***).
4.1.1.2 A330-300 Airframe
The Base Price of the A330-300 Airframe will be the sum
of the Base Prices set forth below in (i) and (ii):
(i) the Base Price of the Standard A330-300
Airframe, as defined in the A330-300 Standard
Specification set forth in Exhibit "A-2" hereto
(excluding Buyer Furnished Equipment, Propulsion
Systems and SCNs), at delivery conditions
prevailing in January 1999, which is:
US $***
(US dollars-***), and
(ii) a budgetary Base Price for SCNs to be mutually
agreed upon, at delivery conditions prevailing
in January 1999, which is:
US $***
(US dollars-***).
4.1.1.3 A340-200 Airframe
The Base Price of the A340-200 Airframe will be the sum
of the Base Prices set forth below in (i) and (ii):
(i) the Base Price of the Standard A340-200
Airframe, as defined in the A340-200 Standard
Specification set forth in Exhibit "A-3" hereto
(excluding Buyer Furnished Equipment, Propulsion
Systems and SCNs), at delivery conditions
prevailing in January 1999, which is:
US $***
(US dollars-***), and
(ii) a budgetary Base Price for SCNs to be mutually
agreed upon, at delivery conditions prevailing
in January 1999, which is:
US $***
(US dollars-***).
4.1.1.4 A340-300 Airframe
The Base Price of the A340-300 Airframe will be the sum
of the Base Prices set forth below in (i) and (ii):
(i) the Base Price of the Standard A340-300
Airframe, as defined in the A340-300 Standard
Specification set forth in Exhibit "A-4" hereto
(excluding Buyer Furnished Equipment, Propulsion
Systems and SCNs), at delivery conditions
prevailing in January 1999, which is:
US $***
(US dollars-***), and
(ii) a budgetary Base Price for SCNs to be mutually
agreed upon, at delivery conditions prevailing
in January 1999, which is:
US $***
(US dollars-***).
4.1.1.5 The Base Price of the Airframe of each Aircraft will be
revised to the actual delivery date of such Aircraft in
accordance with the Airframe Price Revision Formula.
4.1.2 Base Price of the Propulsion Systems
4.1.2.1 A330 Aircraft: Pratt & Whitney PW 4168A Propulsion Systems
The Base Price of a set of two (2) PW 4168A Propulsion
Systems together with the related aft pylon fairing, at
delivery conditions prevailing in January 1999, is:
US $***
(US dollars-***).
Said Base Price has been calculated with reference to the
Reference Price indicated by Pratt & Whitney of US $***
and in accordance with economic conditions
prevailing in ***.
Said Reference Price is subject to adjustment to the date
of delivery of the A330 Aircraft in accordance with the
Pratt & Whitney Price Revision Formula set forth in
Exhibit "H-1" of this Agreement.
4.1.2.2 A340 Aircraft: CFM International CFM 56-5C4 Propulsion
Systems
The Base Price of a set of four (4) CFM 56-5C4 Propulsion
Systems and additional standard equipment, at delivery
conditions prevailing in January 1999, is:
US $ ***
(US dollars--***).
Said Base Price has been calculated with reference to the
Reference Price indicated by CFM International of US $
*** as defined by the Reference Composite Price Index of
*** and in accordance with economic conditions prevailing
in ***.
Said Reference Price is subject to adjustment to the date
of delivery of the A340 Aircraft in accordance with the
CFM International Price Revision Formula set forth
in Exhibit "H-2" of this Agreement.
4.2 Final Contract Price
The Final Contract Price of an Aircraft will be the sum
of:
(i) the Base Price of the Airframe constituting
a part of such Aircraft, as adjusted to the
date of delivery of such Aircraft in
accordance with Subclause 5.1 of this
Agreement;
(ii) the price (as of delivery conditions
prevailing in January 1999) of any SCNs
constituting a part of such Aircraft that
are entered into pursuant to Clause 3 after
the date of execution of this Agreement, as
adjusted to the date of delivery of such
Aircraft in accordance with Subclause 5.1
of this Agreement;
(iii) the Reference Price of the installed
Propulsion Systems constituting a part of
such Aircraft, as adjusted to the date of
delivery of such Aircraft in accordance
with Subclause 5.2 of this Agreement; and
(iv) any other adjustment resulting from any
other provisions of this Agreement and/or
any other written agreement between the
Buyer and the Seller relating to the
Aircraft and specifically stating that such
adjustment is to be included in or taken
into account in the Final Contract Price of
an Aircraft, such as the Seller's purchase
of Buyer Furnished Equipment from the
Buyer.
4.3 Validity of Propulsion Systems Prices
It is understood that the prices cited above and the
price revision formulas referred to in Subclause 5.2
concerning the Propulsion Systems and related equipment
are based on information received from the relevant
Propulsion Systems manufacturer and remain subject to any
modifications that might be jointly communicated by such
Propulsion Systems manufacturer and the Buyer to the
Seller and the Manufacturer.
4.4 Taxes, Duties and Imposts
4.4.1 The Seller will bear and pay the amount of any and all
taxes, duties, imposts or similar charges of any nature
whatsoever that are (i) imposed upon the Buyer, or any
assignee pursuant to an assignment as set forth in Clause
19, (ii) imposed upon the Seller with an obligation on
the Buyer to withhold or collect the amount thereof from
the Seller or (iii) imposed upon the Buyer with an
obligation on the Seller to withhold or collect such
amount from the Buyer, and that are levied, assessed,
charged or collected for or in connection with the
fabrication, manufacture, modification, assembly, sale,
delivery, use of or payment under this Agreement for any
Aircraft, component, accessory, service, equipment or
part delivered or furnished hereunder, provided such
taxes, duties, imposts or similar charges have been
levied, assessed, charged or collected in the Republic of
France under laws promulgated and enforceable in the
Republic of France.
4.4.2 The Buyer will bear and pay the amount of any and all
taxes, duties, imposts or similar charges of any nature
whatsoever imposed upon the Seller (except for taxes
based on or measured by the Seller's income), imposed
upon the Buyer with an obligation on the Seller to
collect the amount thereof for the Buyer, or imposed upon
the Seller with an obligation for the Buyer to withhold
such amount from the Seller (except for income taxes
collected by withholding), which are levied, assessed,
charged or collected for or in connection with the sale,
delivery or use of (except any use prior to delivery to
the Buyer), or payment under this Agreement for any
Aircraft, component, accessory, equipment or part
delivered or furnished hereunder, provided such taxes,
duties, imposts or similar charges have been promulgated
and are enforceable under any laws ***.
4.4.3 If a claim is made against one party (the "Indemnitee")
for any taxes, duties, imposts or similar charges for
which the other party (the "Indemnitor") has agreed to be
liable pursuant to the provisions of this Agreement, the
Indemnitee will promptly notify the Indemnitor. In lieu
of any direction or request by the Indemnitor received
within five (5) Working Days of the due date specified in
said claim, the Indemnitee may pay the amount of said
tax, duty, impost or charge and claim against the
Indemnitor for reimbursement consistent with Subclause
4.4. However, if requested by the Indemnitor in writing,
the Indemnitee will, at the Indemnitor's expense, take
such action as the Indemnitor may reasonably direct with
respect to such asserted liability and will not pay such
taxes, duties, imposts or similar charges except under
protest, if protest is necessary. If payment is made, the
Indemnitee will, at the Indemnitor's expense, take such
action as the Indemnitor may reasonably direct to recover
payment and will, if requested, permit the Indemnitor in
the Indemnitee's name to file a claim or commence an
action to recover such payment. If the Indemnitee will
receive a refund or credit for all or any part of such
taxes, duties, imposts or similar charges, then the
Indemnitee will promptly repay the Indemnitor the amount
of any such refund or credits which are attributable to
the amount paid by the Indemnitor, including any interest
received thereon, but less any expenses incurred by the
Indemnitee in pursuing such refund or credit.
5 - PRICE REVISION
5.1 Airframe Price Revision Formula
The Base Price of the Airframe of each Aircraft will be
revised to the actual delivery date of such Aircraft in
accordance with the Airframe Price Revision Formula,
unless otherwise provided in this Agreement.
5.2 Propulsion Systems Price Revision Formula
The Reference Price of the Propulsion Systems will be
revised to the actual delivery date of the Aircraft on
which such Propulsion Systems are installed in accordance
with the revision formula set forth in, as applicable,
Exhibit "H-1" or Exhibit "H-2" hereto, unless otherwise
provided in this Agreement.
6 - PAYMENT TERMS
6.1 Method and Place of Payment
6.1.1 The Buyer will pay all sums due hereunder in immediately
available funds in United States dollars by credit to the
Seller's account at Credit Lyonnais, New York Branch, or
to such other account located in the United States of
America as the Seller will designate by notice to the
Buyer.
6.1.2 The Seller will pay all sums due hereunder to the Buyer
in immediately available funds in United States dollars
by credit to the Buyer's account, account no. 2147591, at
PNC Bank in Pittsburgh, Pennsylvania, or to such other
account located in the United States of America as the
Buyer designates by notice to the Seller.
6.2 Predelivery Payments
6.2.1 ***
6.2.2 Predelivery Payments will be paid according to the
following schedules.
6.2.2.1 ***
6.2.2.2 ***
6.2.3 The Predelivery Payment Reference Price is defined as:
A = Pb (1 + ***)
where
A = the Predelivery Payment Reference Price for
Aircraft to be delivered in calendar year T.
Pb = the Base Price of the Aircraft as defined in
Subclause 4.1 above.
N = (T -1999)
T = the year of delivery of the relevant Aircraft.
6.2.4 The Seller acknowledges that it has already received from
the Buyer the sum of US$*** (US dollars-***), which
represents a deposit of US$ *** (US dollars-***) for each
of the Firm A330-300 Aircraft and a deposit of US$ ***
for each of the Reconfirmable A330-300 Aircraft (each a
"Deposit"). Each Deposit paid with respect to each
particular Firm A330-300 Aircraft and Reconfirmable
A330-300 Aircraft will be credited without interest
against the first Predelivery Payment for the applicable
Firm A330-300 Aircraft and Reconfirmable A330-300
Aircraft due in accordance with the schedules above in
Subclause 6.2.2.
6.3 Payment of Final Contract Price
Concurrently with the transfer of title to each Aircraft,
the Buyer will pay to the Seller the Final Contract Price
thereof, less the total amount of the Predelivery
Payments theretofore received by the Seller for such
Aircraft under Subclause 6.2 above,***. The Seller's
receipt of the full amount of all Predelivery Payments
and of the Final Contract Price *** will be a condition
precedent to the Seller's obligation to deliver such
Aircraft.
6.4 Payment of Other Amounts
Unless otherwise expressly provided for herein, any
payments due hereunder or in respect of an Aircraft in
addition to those referred to in Subclauses 6.2.2 and 6.3
above will be paid by the Buyer concurrently with the
delivery of the corresponding Aircraft or, if invoiced
after delivery of such Aircraft, within one (1) month
after the invoice date.
6.5 Overdue Payments
If any payment due under this Agreement is not received
on the date or dates as agreed upon between the Buyer and
the Seller, the person entitled to receive payments (the
"Recipient") will have the right to claim from the person
owing such payment (the "Payor") and the Payor will
promptly pay to the Recipient *** interest at a rate per
annum equal to *** on the amount of such overdue payment,
to be calculated from and including the due date of such
payment to (but excluding) the date such payment is
received by the Recipient. For purposes of the foregoing
sentence, any period of less than one month will be
prorated to include the period during which the payment
is overdue. The Recipient's right to receive such
interest will be in addition to any other rights of the
Recipient hereunder or at law. ***
6.6 Refund of Predelivery Payments
The Buyer will have no right to any refund of any deposit
or Predelivery Payment received by the Seller, except as
otherwise provided in this Agreement.
6.7 Proprietary Interest
The Buyer will not, by virtue of anything contained in
this Agreement (including, without limitation, any
Predelivery Payments hereunder, or any designation or
identification by the Seller of a particular Aircraft as
an Aircraft to which any of the provisions of this
Agreement refers), and notwithstanding any provision of
law to the contrary, acquire any proprietary, insurable
or other interest whatsoever in any Aircraft prior to
delivery of and payment for such Aircraft as provided in
this Agreement.
6.8 Tender of Delivery
In addition to any other rights and remedies available to
the Seller, the Seller will not be obligated to tender
delivery of any Aircraft to the Buyer, if, *** the Buyer
is still in default of its obligation to make any
Predelivery Payment due with respect to such Aircraft.
6.9 Payment in Full
The Buyer's obligation to make payments to the Seller
hereunder will not be affected by and will be determined
without regard to any setoff, counterclaim, recoupment,
defense or other right that the Buyer may have against
the Seller or any other person and all such payments will
be made without deduction or withholding of any kind.
7 - PLANT REPRESENTATIVES - INSPECTION
7.1 Inspection Procedures
7.1.1 All work to be carried out on the Aircraft and all
materials and parts thereof will at all reasonable times
during business hours be open to inspection by duly
authorized representatives of the Buyer or its designee
at the respective works of the Associated Contractors
and, if possible, at the works of their respective
subcontractors, and such representatives will, to carry
out the aforesaid inspection, have access to such
relevant technical data as is reasonably necessary for
this purpose (except that, if access to any part of the
respective works where construction is in progress or
materials or parts are stored is restricted for security
reasons, the Associated Contractors will be allowed a
reasonable time to make the items available for
inspection elsewhere). The actual detailed inspection of
the Aircraft, materials and parts thereof will take place
only in the presence of the respective inspection
department personnel of the Associated Contractors or
their subcontractors. The procedures for such inspections
will be agreed upon with the Buyer prior to any
inspection, based on modifications to the Manufacturer's
Quality Instruction document.
7.1.2 For the purposes of Subclause 7.1.1 above and commencing
with the date of this Agreement until the delivery of the
last Aircraft, the Seller will furnish free-of-charge
adequate secretarial assistance and suitable, private and
secure (with access limited and controlled by the Buyer
in its sole discretion) space, office equipment,
telecommunications (including telephone and facsimile
lines and equipment for professional use only) and
facilities in or conveniently located with respect to
Aerospatiale's works in Toulouse, France, for the use of
not more than six (6) (or more if reasonably necessary)
representatives of the Buyer during the aforementioned
period.
7.1.3 All inspections, examinations and discussions with the
Seller's, the Associated Contractors' or their respective
subcontractors' engineering or other personnel by the
Buyer and its said representatives will be performed in
such manner as not to unreasonably delay or hinder the
work to be carried out on the Aircraft or the proper
performance of this Agreement. In no event will the Buyer
or its representatives be permitted to inspect any
aircraft other than the Aircraft. The Seller will not
permit, and will cause the Manufacturer not to permit,
any representatives, employees, agents or personnel of
any other airline or customer to inspect, or to have
access to, the Aircraft or any designs or specifications
relating thereto.
7.2 INDEMNITY
7.2.1 SCOPE
IN CONNECTION WITH THE PROVISION OF SERVICES UNDER THIS
CLAUSE 7, THE SELLER AND THE BUYER PROVIDE THE
INDEMNITIES SET FORTH IN SUBCLAUSES 7.2.2 AND 7.2.3.
7.2.2 SELLER'S INDEMNITY
THE SELLER WILL INDEMNIFY AND HOLD HARMLESS THE BUYER,
ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND
AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND
EXPENSES
(I) FOR ALL INJURIES TO AND DEATHS OF PERSONS
(EXCEPTING INJURIES TO OR DEATH OF THE
BUYER'S REPRESENTATIVES PARTICIPATING IN
ANY TESTS, CHECKOUTS OR INSPECTIONS OR
CONTROLS UNDER THIS CLAUSE 7) CAUSED BY THE
BUYER OR ITS REPRESENTATIVES, AND
(II) FOR ANY LOSS OF OR DAMAGE TO PROPERTY
(EXCEPTING LOSS OF OR DAMAGE TO PROPERTY OF
THE BUYER'S SAID REPRESENTATIVES) CAUSED BY
THE BUYER OR ITS REPRESENTATIVES,
ARISING OUT OF OR IN CONNECTION WITH ANY SUCH TESTS,
CHECKOUTS, INSPECTIONS OR CONTROLS UNDER THIS CLAUSE 7.
THIS INDEMNITY OF THE SELLER WILL NOT APPLY FOR ANY SUCH
LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISING
OUT OF OR CAUSED BY THE WILLFUL MISCONDUCT OR GROSS
NEGLIGENCE OF THE BUYER'S SAID REPRESENTATIVES.
7.2.3 BUYER'S INDEMNITY
THE BUYER WILL INDEMNIFY AND HOLD HARMLESS THE SELLER,
THE MANUFACTURER, EACH OF THE ASSOCIATED CONTRACTORS AND
THEIR RESPECTIVE SUBCONTRACTORS AND THEIR RESPECTIVE
OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL
LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES
(I) FOR INJURIES TO OR DEATHS OF THE BUYER'S SAID
REPRESENTATIVES PARTICIPATING IN ANY TESTS,
CHECKOUTS, INSPECTIONS OR CONTROLS UNDER THIS
CLAUSE 7,
(II) FOR LOSS OF OR DAMAGE TO PROPERTY OF THE
BUYER'S SAID REPRESENTATIVES, AND
(III) ARISING OUT OF OR CAUSED BY THE WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE OF THE
BUYER'S SAID REPRESENTATIVES.
WITH RESPECT TO SUBCLAUSES (I) AND (II) OF THE PRECEDING
SENTENCE, THE BUYER WILL NOT BE OBLIGATED TO INDEMNIFY OR
HOLD HARMLESS THE SELLER WHERE THE LIABILITIES, DAMAGES,
LOSSES, COSTS OR EXPENSES ARISE FROM THE SELLER'S, THE
MANUFACTURER'S OR ANY OF THE ASSOCIATED CONTRACTORS' OR
THEIR RESPECTIVE SUBCONTRACTORS' OR THEIR RESPECTIVE
OFFICERS', AGENTS' OR EMPLOYEES' WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE.
7.2.4 CLAIMS
IN THE EVENT ANY CLAIM IS MADE OR LAWSUIT IS BROUGHT
AGAINST EITHER PARTY (OR ITS RESPECTIVE DIRECTORS,
OFFICERS, AGENTS OR EMPLOYEES) FOR DAMAGES FOR DEATH OR
INJURY, OR FOR PROPERTY DAMAGE, THE LIABILITY FOR WHICH
HAS BEEN ASSUMED BY THE OTHER PARTY PURSUANT TO THIS
SUBCLAUSE 7.2, THE FORMER (INDEMNITEE) WILL PROMPTLY GIVE
NOTICE TO THE OTHER PARTY (INDEMNITOR), AND THE
INDEMNITOR WILL HAVE THE RIGHT TO INVESTIGATE, AND THE
RIGHT IN ITS SOLE DISCRETION TO ASSUME AND CONDUCT THE
DEFENSE OF OR SETTLE OR COMPROMISE, SUCH CLAIM, ACTION,
PROCEEDING OR LAWSUIT. HOWEVER, IF IN THE REASONABLE
OPINION OF THE INDEMNITEE, SUCH DEFENSE, SETTLEMENT OR
COMPROMISE INVOLVES THE POTENTIAL IMPOSITION OF CRIMINAL
LIABILITY ON THE INDEMNITEE OR A CONFLICT OF INTEREST
BETWEEN THE INDEMNITOR AND THE INDEMNITEE, THE INDEMNITOR
WILL NOT BE ENTITLED TO ASSUME AND CONDUCT THE DEFENSE OF
ANY SUCH CLAIM, ACTION, PROCEEDING OR LAWSUIT. THE
INDEMNITEES WILL BE ENTITLED, AT THEIR OWN EXPENSE,
ACTING THROUGH ONE (1) COUNSEL, TO PARTICIPATE IN ANY
CLAIM, ACTION, PROCEEDING OR LAWSUIT THE DEFENSE OF WHICH
HAS BEEN ASSUMED BY THE INDEMNITOR PURSUANT TO THE
PRECEDING PROVISIONS, PROVIDED, THAT SUCH PARTICIPATION
DOES NOT, IN THE REASONABLE OPINION OF INDEPENDENT
COUNSEL OF THE INDEMNITOR, INTERFERE WITH THE CONDUCT OF
SUCH DEFENSE. NOTWITHSTANDING ANYTHING TO THE CONTRARY,
NO SETTLEMENT OR COMPROMISE WILL BE ENTERED INTO WITHOUT
THE PRIOR WRITTEN CONSENT OF THE INDEMNITEE, WHICH
CONSENT WILL NOT BE UNREASONABLY WITHHELD OR DELAYED.
EACH INDEMNITEE WILL COOPERATE WITH THE INDEMNITOR IN THE
INVESTIGATION AND CONDUCT OF THE DEFENSE OF ANY CLAIM,
ACTION, PROCEEDING OR LAWSUIT INDEMNIFIED HEREUNDER.
IN THE EVENT THAT THE INDEMNITOR DOES NOT ASSUME AND
CONDUCT THE DEFENSE OF THE CLAIM OR LAWSUIT, THEN THE
INDEMNITEE WILL HAVE THE RIGHT TO PROCEED WITH DEFENSE OF
THE CLAIM OR LAWSUIT AS IT DEEMS APPROPRIATE AND WILL
HAVE AN ACTION AGAINST THE INDEMNITOR FOR ANY JUDGMENTS,
SETTLEMENTS, COSTS OR EXPENSES INCURRED IN CONDUCTING
SAID DEFENSE. FOR THE PURPOSE OF THIS SUBCLAUSE 7.2, A
CLAIM OR LAWSUIT AGAINST THE MANUFACTURER OR ANY OF THE
ASSOCIATED CONTRACTORS OR ANY OF THEIR RESPECTIVE
SUBCONTRACTORS OR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, AGENTS OR EMPLOYEES WILL BE DEEMED TO BE A
LAWSUIT AGAINST THE SELLER.
8 - BUYER'S ACCEPTANCE
8.1 Acceptance Procedures
8.1.1 The Seller or any Affiliate thereof acting as the
Seller's designee will give to the Buyer not less than
thirty (30) days' notice of the proposed date and time
when the Buyer's acceptance tests will be conducted, and,
in the event that the Buyer elects to attend the said
tests, the Buyer will cooperate in complying with the
reasonable requirements of the Seller with the intention
of completing all tests within five (5) Working Days
after commencement. The tests will take place at
Aerospatiale's works near Toulouse, France, and will be
carried out by the personnel of the Manufacturer
(accompanied, if the Buyer so wishes, by representatives
of the Buyer up to a total of six (6) (or more if
reasonably requested by the Buyer) acting as observers,
of whom not more than two (2) will have access to the
cockpit at any one time and of whom one (1) may act as
copilot, subject to such person's appropriate
certification). During flight tests, these
representatives will comply with the instructions of the
Manufacturer's representatives. The Manufacturer will not
normally be required in the course of such acceptance
tests to fly any of the Aircraft for more than an
aggregate of three (3) hours, unless more time is
necessary to complete the acceptance tests.
8.1.2 The Seller will cause ASC, at no cost to the Buyer, to
brief, and provide one (1) free-of-charge four (4) hour
simulator session for each new set of acceptance pilots.
This briefing will provide specific information related
to acceptance flights.
8.1.3 The acceptance tests will be designed to demonstrate the
satisfactory functioning of the Aircraft and all systems
relating thereto, and compliance with the terms,
requirements and conditions of this Agreement, including
conformity to the Specifications and ***. The successful
completion of such acceptance tests will also be deemed
to demonstrate compliance with the Specifications. The
acceptance tests will be conducted in accordance with the
Manufacturer's aircraft acceptance procedure, as amended
to incorporate the Buyer's reasonable requests. At the
time of delivery, the Aircraft will comply with all
relevant limits and tolerances specified in the Aircraft
Maintenance Manual. In the event that the Buyer does not
attend the tests or fails to so cooperate, the Seller may
complete them in the absence of the Buyer, provided that
the Seller has given the Buyer reasonable prior written
notice of not less than seven (7) days of its intention
to complete such tests and the Buyer remains absent or
uncooperative. The Buyer will be deemed to have accepted
the tests, if such tests are reasonably deemed
satisfactory by the Seller, and the Seller will furnish
such data with respect to such tests as the Buyer may
reasonably request. Notwithstanding the above, said
acceptance by the Buyer will not impair the rights of the
Buyer that derive from the warranties relating to the
Aircraft.
8.1.4 If the acceptance tests for an Aircraft are not
successfully completed or there is a defect, the Buyer,
within two (2) days after such tests, will give notice to
the Seller specifying such unsuccessful completion or
defect. Thereafter the Seller will, without unreasonable
hindrance from the Buyer, carry out any necessary changes
and, as soon as practicable thereafter, resubmit the
Aircraft for new acceptance tests, including flight tests
if necessary, demonstrate the elimination of the defect,
such tests to be held and carried out in accordance with
this Subclause 8.1. In order to avoid a delay in the
delivery of any Aircraft found to have one or more
defects, the Buyer may elect with the consent of the
Seller (such consent not to be unreasonably withheld) to
take delivery of such Aircraft prior to the correction of
such defects and without prejudice to any rights the
Buyer may have under this Agreement against the Seller by
reason of such defects.
In the event the Buyer elects to take delivery of an
Aircraft with defects pursuant to the preceding
paragraph, delivery of such Aircraft will be made as
originally scheduled, and such defects will be corrected,
at the Seller's expense, by the Buyer or the Seller at
such subsequent time as is mutually acceptable to the
Buyer and the Seller, and as will be set forth in a
written agreement that will state the settlement agreed
by the Buyer and the Seller with respect to such defects.
8.1.5 Within three (3) months of execution of the Agreement,
the Buyer and the Seller will review the technical
documentation provided by the Seller at delivery of each
Aircraft, and, if practicable, will agree on any
reasonable changes to such documentation deemed necessary
by the Buyer.
8.2 Seller's Use of Aircraft
The Seller will be entitled to use, without compensation
to the Buyer, each Aircraft prior to its delivery as may
be necessary to obtain the certificates required under
Clause 2 hereof. Such use will not *** affect the Buyer's
obligation to accept delivery of any Aircraft hereunder.
***
8.3 Certificate of Acceptance
When the Aircraft is "ready for delivery" as defined
below in Subclause 9.2, the Buyer will forthwith give to
the Seller a signed Certificate of Acceptance in the form
attached as Exhibit "E" in respect of the relevant
Aircraft. Should the Buyer fail to so deliver the said
Certificate, then the Buyer will be deemed to be in
default as though it had without warrant rejected
delivery of such Aircraft when duly tendered to it
hereunder and will thereafter bear all costs and expenses
resulting from such delay in delivery. The execution and
delivery of a Certificate of Acceptance by the Buyer in
respect of an Aircraft will not constitute waiver by the
Buyer of any rights and remedies it may have in respect
of any Aircraft under Clauses 12 and 13 of this
Agreement.
8.4 Finality of Acceptance
The Buyer's acceptance of delivery of each Aircraft will
constitute waiver by the Buyer of any right it may have
under the Uniform Commercial Code or otherwise to revoke
such acceptance for any reason, whether known or unknown
to the Buyer at the time of acceptance.
8.5 INDEMNITY
8.5.1 SCOPE
IN CONNECTION WITH THE PROVISION OF SERVICES UNDER THIS
CLAUSE 8, THE SELLER AND THE BUYER PROVIDE THE
INDEMNITIES SET FORTH IN SUBCLAUSES 8.5.2 AND 8.5.3.
8.5.2 SELLER'S INDEMNITY
THE SELLER WILL INDEMNIFY AND HOLD HARMLESS THE BUYER,
ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND
AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND
EXPENSES
(I) FOR ALL INJURIES TO AND DEATHS OF PERSONS
(EXCEPTING INJURIES TO AND DEATHS OF THE
BUYER'S REPRESENTATIVES PARTICIPATING IN
ANY GROUND OR FLIGHT TESTS UNDER THIS
CLAUSE 8) CAUSED BY THE BUYER OR ITS
REPRESENTATIVES, AND
(II) FOR ANY LOSS OF OR DAMAGE TO PROPERTY
(EXCEPTING LOSS OF OR DAMAGE TO PROPERTY OF
THE BUYER'S SAID REPRESENTATIVES), CAUSED
BY THE BUYER OR ITS REPRESENTATIVES,
ARISING OUT OF OR IN CONNECTION WITH THE OPERATION OF THE
AIRCRAFT DURING ANY GROUND OR FLIGHT TESTS UNDER THIS
CLAUSE 8.
THIS INDEMNITY OF THE SELLER WILL NOT APPLY FOR ANY SUCH
LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISING
OUT OF OR CAUSED BY THE WILLFUL MISCONDUCT OR GROSS
NEGLIGENCE OF THE BUYER'S SAID REPRESENTATIVES.
8.5.3 BUYER'S INDEMNITY
THE BUYER WILL INDEMNIFY AND HOLD HARMLESS THE SELLER,
THE MANUFACTURER, EACH OF THE ASSOCIATED CONTRACTORS AND
THEIR RESPECTIVE SUBCONTRACTORS AND EACH OF THEIR
RESPECTIVE DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM
AND AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND
EXPENSES
(I) FOR INJURIES TO OR DEATHS OF THE BUYER'S
SAID REPRESENTATIVES PARTICIPATING IN ANY
GROUND OR FLIGHT TESTS UNDER THIS CLAUSE 8,
(II) FOR LOSS OF OR DAMAGE TO PROPERTY OF THE
BUYER'S SAID REPRESENTATIVES, AND
(III) ARISING OUT OF OR CAUSED BY THE WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE OF THE
BUYER'S SAID REPRESENTATIVES.
WITH RESPECT TO SUBCLAUSES (I) AND (II) OF THE PRECEDING
SENTENCE, THE BUYER WILL NOT BE OBLIGATED TO INDEMNIFY OR
HOLD HARMLESS THE SELLER WHERE THE LIABILITIES, DAMAGES,
LOSSES, COSTS OR EXPENSES ARISE FROM THE SELLER'S, THE
MANUFACTURER'S OR ANY OF THE ASSOCIATED CONTRACTORS' OR
THEIR RESPECTIVE SUBCONTRACTORS' OR THEIR RESPECTIVE
OFFICERS', AGENTS' OR EMPLOYEES' WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE.
8.5.4 CLAIMS
IN THE EVENT ANY CLAIM IS MADE OR LAWSUIT IS BROUGHT
AGAINST EITHER PARTY (OR ITS RESPECTIVE DIRECTORS,
OFFICERS, AGENTS OR EMPLOYEES) FOR DAMAGES FOR DEATH OR
INJURY OR FOR PROPERTY DAMAGE, THE LIABILITY FOR WHICH
HAS BEEN ASSUMED BY THE OTHER PARTY PURSUANT TO THIS
SUBCLAUSE 8.5, THE FORMER (INDEMNITEE) WILL PROMPTLY GIVE
NOTICE TO THE OTHER PARTY (INDEMNITOR), AND THE
INDEMNITOR WILL HAVE THE RIGHT TO INVESTIGATE, AND THE
RIGHT IN ITS SOLE DISCRETION TO ASSUME AND CONDUCT THE
DEFENSE OF OR SETTLE OR COMPROMISE, SUCH CLAIM, ACTION,
PROCEEDING OR LAWSUIT.
HOWEVER, IF IN THE REASONABLE OPINION OF THE INDEMNITEE,
SUCH DEFENSE, SETTLEMENT OR COMPROMISE INVOLVES THE
POTENTIAL IMPOSITION OF CRIMINAL LIABILITY ON THE
INDEMNITEE OR A CONFLICT OF INTEREST BETWEEN THE
INDEMNITOR AND THE INDEMNITEE, THE INDEMNITOR WILL NOT BE
ENTITLED TO ASSUME AND CONDUCT THE DEFENSE OF ANY SUCH
CLAIM, ACTION, PROCEEDING OR LAWSUIT. THE INDEMNITEES
WILL BE ENTITLED, AT THEIR OWN EXPENSE, ACTING THROUGH
ONE (1) COUNSEL, TO PARTICIPATE IN ANY CLAIM, ACTION,
PROCEEDING OR LAWSUIT THE DEFENSE OF WHICH HAS BEEN
ASSUMED BY THE INDEMNITOR PURSUANT TO THE PRECEDING
PROVISIONS, PROVIDED, THAT SUCH PARTICIPATION DOES NOT,
IN THE REASONABLE OPINION OF INDEPENDENT COUNSEL OF THE
INDEMNITOR, INTERFERE WITH THE CONDUCT OF SUCH DEFENSE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, NO SETTLEMENT
OR COMPROMISE WILL BE ENTERED INTO WITHOUT THE PRIOR
WRITTEN CONSENT OF THE INDEMNITEE, WHICH CONSENT WILL NOT
BE UNREASONABLY WITHHELD OR DELAYED. EACH INDEMNITEE WILL
COOPERATE WITH THE INDEMNITOR IN THE INVESTIGATION AND
CONDUCT OF THE DEFENSE OF ANY CLAIM, ACTION, PROCEEDING
OR LAWSUIT INDEMNIFIED HEREUNDER.
IN THE EVENT THAT THE INDEMNITOR DOES NOT ASSUME AND
CONDUCT THE DEFENSE OF THE CLAIM OR LAWSUIT, THEN THE
INDEMNITEE WILL HAVE THE RIGHT TO PROCEED WITH DEFENSE OF
THE CLAIM OR LAWSUIT AS IT DEEMS APPROPRIATE AND WILL
HAVE AN ACTION AGAINST THE INDEMNITOR FOR ANY JUDGMENTS,
SETTLEMENTS, COSTS OR EXPENSES INCURRED IN CONDUCTING
SAID DEFENSE. FOR THE PURPOSE OF THIS SUBCLAUSE 8.5, A
CLAIM OR LAWSUIT AGAINST THE MANUFACTURER OR ANY OF THE
ASSOCIATED CONTRACTORS OR ANY OF THEIR RESPECTIVE
SUBCONTRACTORS OR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, AGENTS OR EMPLOYEES WILL BE DEEMED TO BE A
LAWSUIT AGAINST THE SELLER.
9 - DELIVERY
9.1 Delivery Locations, Schedule and Notice of Delivery Date
Subject to the provisions of this Agreement, the Seller
will have the Aircraft ready for delivery at
Aerospatiale's works near Toulouse, France.
9.1.1 The Buyer will accept the Aircraft, during the months and
years set forth below in this Subparagraph 9.1.1.
(i) Firm A330-300 Aircraft
***
(ii) Reconfirmable A330-300 Aircraft
***
The delivery dates for Firm A330-300 Aircraft ***.
In addition, the delivery dates set forth in Subclause
9.1.1(i) are ***.
9.1.2 [INTENTIONALLY LEFT BLANK]
9.1.3 [INTENTIONALLY LEFT BLANK]
9.1.4 ***
9.2 Certificate of Airworthiness
Each Aircraft will for the purpose of this Agreement be
deemed to be "ready for delivery" upon (a) the
satisfactory completion of its acceptance tests, (b) the
issuance of Certificate of Airworthiness for Export in
the "Transport Category" with respect thereto by the
DGAC, and (c) the Seller's compliance with the other
obligations to be performed by it under Subclauses 2.3
and 9.3 hereof.
9.3 Title
Title to and risk of loss of and damage to the Aircraft
will pass to the Buyer upon delivery following execution
of the Certificate of Acceptance and upon payment of the
Final Contract Price for such Aircraft. The Seller will
provide the Buyer with (a) an invoice(s) in form and
substance satisfactory to the Buyer, (b) a bill of sale
duly conveying to the Buyer good title to such Aircraft
free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever, (c) an FAA-approved
form bill of sale executed by the Seller in favor of the
Buyer, and (d) such other appropriate documents of title
or other documents as the Buyer may reasonably request.
9.4 Buyer Delays
In the event that:
(i) the delivery of and payment of the Final
Contract Price for the Aircraft is delayed more
than five (5) days after the firm delivery date
established pursuant to Subclause 9.1 due to any
breach of the Buyer under this Agreement, or
(ii) within two (2) days after delivery of and
transfer of title to the Aircraft the Buyer has
failed to remove such Aircraft for whatever
reason (except for reasons attributable to the
Seller or the Manufacturer),
then the Buyer will on demand reimburse the Seller for
all reasonable out-of-pocket costs and expenses sustained
by the Seller and resulting from any such delay or
failure. Such reimbursement will be in addition to any
other rights that the Seller may have under this
Agreement as a result of any such delay or failure.
9.5 Flyaway Expenses
***
10 - EXCUSABLE DELAY
10.1 Scope
Neither the Seller nor the Manufacturer will be
responsible for or be deemed to be in default on account
of delays in delivery or failure to deliver or otherwise
in the performance of this Agreement or any part hereof
due to causes reasonably beyond the Seller's, the
Manufacturer's or any Associated Contractor's control or
not occasioned by the Seller's, the Manufacturer's or any
Associated Contractor's fault, misconduct or negligence
("Excusable Delay").
It is expressly understood and agreed that each of (i)
any delay caused directly or indirectly by the Buyer's
failure to comply with its obligations hereunder, and
(ii) any delay in delivery or otherwise in the
performance of this Agreement by the Seller due in whole
or in part to any delay in or failure of the delivery of,
or any other event or circumstance relating to, the
Propulsion Systems or Buyer Furnished Equipment, will, to
the extent attributable to such delay, constitute
Excusable Delay for the Seller, unless such delay or
failure of delivery or other event or circumstance is
attributable to any default by the Seller of its
obligations hereunder or any failure of the Seller to
notify the Buyer and the manufacturer of the Propulsion
Systems in a timely manner of the Seller's need therefor.
The Seller will promptly after becoming aware of any
delay falling within the provisions of this Subclause
10.1 (i) notify the Buyer of such delay and of the
probable extent thereof, including, without limitation, a
description of the cause thereof and, if possible, a
possible date of rescheduled delivery in accordance with
the terms of this Agreement, and after such prompt
initial notice, apprise the Buyer of the status of such
delay and possible date of such rescheduled delivery, and
(ii) subject to the following provisions, as soon as
practicable after the removal of the cause or causes for
delay, resume the performance of those obligations
affected under this Agreement. The Seller and the
Manufacturer will endeavor to limit the extent of any
such delay. The Seller will schedule the delivery of the
Aircraft that is the subject of such delay to a date
compatible with the Aircraft delivery schedule of the
Buyer.
10.2 Unanticipated Delay
In the event that the delivery of any Aircraft will be
delayed by reason of an Excusable Delay for a period of
more than twelve (12) months after the end of the
calendar month in which delivery is otherwise required
hereunder, the Buyer will be entitled to terminate this
Agreement with respect only to the Aircraft so affected
upon written notice given to the Seller within thirty
(30) days after the expiration of such twelve (12) month
period. In the event such delay will continue for an
additional six (6) month period after the expiration of
such twelve (12) month period, either party will have the
option to terminate this Agreement with respect to the
Aircraft so affected upon written notice given to the
other within thirty (30) days after the end of such
additional six (6) month period. Any termination of this
Agreement in respect of an Aircraft pursuant to this
Subclause 10.2 will discharge all obligations and
liabilities of the parties hereunder with respect to such
affected Aircraft, ***.
10.3 Anticipated Delay
In respect of any Aircraft, the Seller may conclude that
Excusable Delays will (i) cause delay in delivery of such
Aircraft for a period of more than twelve (12) months
after the end of the calendar month in which delivery is
otherwise required or (ii) prevent delivery of such
Aircraft. In such event, in good faith and in accordance
with its normal scheduling procedures, the Seller will
give written notice to the Buyer of either (i) such delay
and its related rescheduling reflecting such delay(s) or
(ii) such nondelivery. Within thirty (30) days after the
Buyer's receipt of such notice, the Buyer may terminate
this Agreement as to such rescheduled or nondeliverable
Aircraft by giving written notice to the Seller. Such
termination will discharge all obligations and
liabilities of the parties hereunder with respect to such
affected Aircraft, ***.
10.4 Delivery Date
If, following notice of an anticipated delay under
Subclause 10.3, this Agreement is not terminated in
accordance with the provisions of Subclause 10.3 (with
respect to the affected Aircraft), then the date of
delivery otherwise required hereunder will be extended by
a period equal to the delay specified in such notice,
with a view towards having each Aircraft subject to such
Excusable Delay ready for delivery as promptly as
practicable. ***
10.5 Lost, Destroyed or Damaged Aircraft
10.5.1 If any Aircraft suffers a total loss, is destroyed, or is
damaged beyond economic repair prior to delivery thereof,
then this Agreement will be terminated with respect to
such Aircraft and the obligations and liabilities of the
parties hereunder with respect to such Aircraft will be
discharged. The Seller will repay to the Buyer an amount
equal to the entire amount of any Predelivery Payments
received from the Buyer hereunder with respect to any
such Aircraft that is lost, destroyed or damaged beyond
economic repair, ***.
10.5.2 ***
10.6 ***
10.7 ***
10.8 REMEDIES
THIS CLAUSE 10 SETS FORTH THE SOLE AND EXCLUSIVE REMEDY
OF THE BUYER FOR DELAYS IN DELIVERY OR FAILURE TO
DELIVER, OTHER THAN SUCH DELAYS AS ARE COVERED BY CLAUSE
11, AND THE BUYER HEREBY WAIVES ALL RIGHTS, INCLUDING
WITHOUT LIMITATION ANY RIGHTS TO INCIDENTAL AND
CONSEQUENTIAL DAMAGES OR SPECIFIC PERFORMANCE, TO WHICH
IT WOULD OTHERWISE BE ENTITLED IN RESPECT THEREOF. THE
BUYER WILL NOT BE ENTITLED TO CLAIM THE REMEDIES AND
RECEIVE THE BENEFITS PROVIDED IN THIS CLAUSE 10 TO THE
EXTENT THE DELAY REFERRED TO IN THIS CLAUSE 10 IS CAUSED
BY THE NEGLIGENCE OR FAULT OF THE BUYER OR ITS
REPRESENTATIVES.
11 - INEXCUSABLE DELAY
11.1 Should an Aircraft not be ready for delivery to the Buyer
within thirty (30) days after the date specified in this
Agreement (as such date may otherwise be changed pursuant
to this Agreement) for reasons other than as are covered
by Clause 10 or for circumstances specified in Subclause
11.6 ("Inexcusable Delay"), the Buyer will, in respect of
any subsequent delay in delivery of such Aircraft, have
the right to claim and the Seller will in respect of any
subsequent delay, at the Buyer's option, pay or credit to
the Buyer as liquidated damages for such subsequent delay
in delivery of such Aircraft US $*** (US dollars-***) for
each day of subsequent delay in the delivery, until the
date of actual delivery or the effective date of the
written notice of termination referred to in Subclause
11.4 plus any amount referred to in Subclause 11.4.
The Seller will immediately after becoming aware of any
Inexcusable Delay or any potential Inexcusable Delay (i)
notify the Buyer of such delay and the probable extent
thereof, including, when possible, a detailed description
of the cause thereof and, if possible, a possible date of
rescheduled delivery in accordance with the terms of this
Agreement and after such immediate initial notice,
apprise the Buyer of the status of such delay and
possible date of such rescheduled delivery on a regular
basis, and (ii) subject to the following provisions, as
soon as practicable after the removal of the cause or
causes for delay, resume the performance of those
obligations affected under this Agreement with a view
towards having each Aircraft subject to such Inexcusable
Delay ready for delivery as promptly as practicable.
11.2 Total Liability
Notwithstanding Subclause 11.1, the total liability of
the Seller under this Clause 11 and this Agreement with
respect to any Aircraft will in no event exceed the total
sum of US $ *** (US dollars-***) plus any amount referred
to in Subclause 11.3 or 11.4.
11.3 ***
11.4 Six-Month Delay
In the event that an Inexcusable Delay exceeds six (6)
months, the Buyer will have the right, exercisable by
written notice to the Seller given no less than one (1)
month and no more than two (2) months after such six (6)
month period, to terminate this Agreement in respect only
of the Aircraft that is subject to such Inexcusable
Delay, whereupon the Seller will pay the Buyer, within
one (1) month after such notice, an amount equal to all
Predelivery Payments made by the Buyer to the Seller in
relation to such Aircraft, ***.
11.5 ***
11.6 ***
11.6.1 ***
11.6.2 ***
11.6.3 ***
11.6.4 ***
11.6.5 ***
11.7 ***
11.8 REMEDIES
THIS CLAUSE 11 SETS FORTH THE SOLE AND EXCLUSIVE REMEDY
OF THE BUYER FOR DELAYS IN DELIVERY OR FAILURE TO
DELIVER, OTHER THAN SUCH DELAYS AS ARE COVERED BY CLAUSE
10, AND THE BUYER HEREBY WAIVES ALL RIGHTS, INCLUDING
WITHOUT LIMITATION ANY RIGHTS TO INCIDENTAL AND
CONSEQUENTIAL DAMAGES OR SPECIFIC PERFORMANCE, TO WHICH
IT WOULD OTHERWISE BE ENTITLED IN RESPECT THEREOF.
12 - WARRANTIES AND SERVICE LIFE POLICY
12.1 STANDARD WARRANTY
12.1.1 Nature of Warranty
12.1.2 Exceptions
12.1.3 Warranty Periods
12.1.4 Buyer's Remedy and Seller's Obligation
12.1.5 Warranty Claim Requirements
12.1.6 Warranty Administration
12.1.7 In-house Warranty
12.1.8 Standard Warranty Transferability
12.1.9 Warranty for Corrected, Replacement or Repaired Warranted
Parts
12.1.10 Good Airline Operation - Normal Wear and Tear
12.2 SELLER SERVICE LIFE POLICY
12.2.1 Definitions
12.2.2 Periods and Seller's Undertakings
12.2.3 Seller's Participation in the Cost
12.2.4 General Conditions and Limitations
12.2.5 Transferability
12.3 VENDOR WARRANTIES
12.3.1 Seller's Support
12.3.2 Vendor's Default
12.4 INTERFACE COMMITMENT
12.4.1 Interface Problem
12.4.2 Seller's Responsibility
12.4.3 Vendor's Responsibility
12.4.4 Joint Responsibility
12.4.5 General
12.5 Performance Standard
12.6 EXCLUSIVITY OF WARRANTIES AND GENERAL LIMITATIONS
OF LIABILITY
12.7 DUPLICATE REMEDIES
12.8 SURVIVABILITY
12 - WARRANTIES AND SERVICE LIFE POLICY
The Seller, in its capacity as "Buyer" under its
arrangements with the Manufacturer, has negotiated and
obtained the following Standard Warranty, Service Life
Policy, Vendor Warranties and Interface Commitment from
the Manufacturer with respect to the Aircraft, subject to
the terms, conditions, limitations and restrictions
(including, but not limited to, the Exclusivity of
Warranties and General Limitations of Liability and
Duplicate Remedies provisions) all as hereinafter set
out. The Seller hereby guarantees to the Buyer the
performance by the Manufacturer of the Manufacturer's
obligations and assigns to the Buyer, and the Buyer
hereby accepts, all of the rights and obligations of the
Seller in the Seller's capacity as "Buyer" as aforesaid
under the said Standard Warranty, Service Life Policy,
Vendor Warranties and Interface Commitment and the Seller
subrogates the Buyer into all such rights and obligations
in respect of the Aircraft. The Seller hereby warrants to
the Buyer that the Seller has all requisite authority to
make the foregoing assignment and effect the foregoing
subrogation to and in favor of the Buyer and that the
Seller will not enter into any amendment of the
provisions so assigned without the prior written consent
of the Buyer. Capitalized terms utilized in the following
provisions have the meanings assigned thereto in this
Agreement, except that the term "Seller" refers to the
Manufacturer and the term "Buyer" refers to the Seller
and cross-references herein refer to Clauses and Exhibits
in this Agreement or to Paragraphs in any Letter
Agreement hereto.
QUOTE
12.1 STANDARD WARRANTY
12.1.1 Nature of Warranty
Subject to the limitations and conditions as hereinafter
provided, and except as provided in Subclause 12.1.2, the
Seller warrants to the Buyer that each Aircraft and each
Warranted Part will at the time of delivery to the Buyer:
(i) be free from defects in material,
(ii) be free from defects in workmanship, including,
without limitation, processes of manufacture,
(iii) be free from defects in design (including,
without limitation, selection of materials,
parts and components) having regard to the state
of the art at the date of such design,
(iv) be free from defects arising from failure to
conform to the Specifications,
(v) permit complete interchangeability among
Aircraft and parts of like part-numbered parts,
and
(vi) be free and clear of all liens and other
encumbrances.
For the purposes of this Agreement, the term "Warranted
Part" will mean any Seller proprietary component,
equipment, accessory or part that at the time of delivery
of an Aircraft (a) is installed on or incorporated in
such Aircraft, (b) is manufactured to the detail design
of the Seller or a subcontractor of it and (c) bears a
part number of the Seller.
12.1.2 Exceptions
The warranties set forth in Subclause 12.1.1 will not
apply to Buyer Furnished Equipment, nor to engines, nor
to any component, accessory, equipment or part purchased
by the Buyer that is not a Warranted Part, provided,
however, that:
(i) any defect in the Seller's workmanship in
respect of the installation of such items in or
on the Aircraft, including any failure by the
Seller to conform to the installation
instructions of the manufacturers of such items
that invalidates any applicable warranty from
such manufacturers, will constitute a defect in
workmanship for the purpose of this Subclause
12.1 and be covered by the warranty set forth in
Subclause 12.1.1(ii), and
(ii) any defect inherent in the Seller's design of
the installation, in view of the state of the
art at the date of such design, that impairs the
use or function of such items will constitute a
defect in design for the purposes of this
Subclause 12.1 and be covered by the warranty
set forth in Subclause 12.1.1(iii).
12.1.3 Warranty Periods
The warranties described in Subclauses 12.1.1 and 12.1.2
herein above will be limited to those defects that become
apparent within thirty-six (36) months after delivery of
the affected Aircraft.
12.1.4 Buyer's Remedy and Seller's Obligation
12.1.4.1 The Buyer's remedy and the Seller's obligation and
liability under Subclauses 12.1.1 and 12.1.2 herein above
are limited to, at the Seller's expense, the repair,
replacement or correction of, or the supply of
modifications kits rectifying the defect for, any
defective Warranted Part, as mutually agreed between and
satisfactory to the Buyer and the Seller. *** Nothing
herein contained will obligate the Seller to correct any
failure to conform to the Specifications with respect to
components, equipment, accessories or parts that the
parties agree in writing at the time of delivery of the
affected Aircraft are acceptable deviations or have no
material adverse effect on the use, operation or
performance of an Aircraft.
***
12.1.4.2 In the event a defect covered by Subclause 12.1.1 becomes
apparent within the period set forth in Subclause 12.1.3
and the Seller is obligated to correct such defect, the
Seller will also, if so requested by the Buyer in writing
and if reasonably practicable, make such correction in
any affected Aircraft that has not already been delivered
to the Buyer. Rather than accept a delay in delivery of
any such Aircraft, the Buyer and the Seller may agree to
deliver such Aircraft with subsequent correction of the
defect by the Buyer at the Seller's expense, or the Buyer
may elect to accept delivery and thereafter file a
Warranty Claim as though the defect had become apparent
immediately after delivery of such Aircraft.
12.1.4.3 ***
12.1.5 Warranty Claim Requirements
The Buyer's remedy and the Seller's obligation and
liability under this Subclause 12.1, with respect to each
claimed defect, are subject to the following conditions
precedent:
(i) the existence of a defect covered by the
provisions of this Subclause 12.1,
(ii) the defect's having become apparent within the
applicable warranty period, as set forth in
Subclause 12.1.3,
(iii) the Buyer's having returned as soon as
reasonably practicable the Warranted Part
claimed to be defective to such repair
facilities as may be designated by the Seller
*** except where the Buyer elects to repair a
defective Warranted Part in accordance with the
provisions of Subclause 12.1.7, and
(iv) the Seller's having received a Warranty Claim
fulfilling the conditions of and in accordance
with the provisions of Subclause 12.1.6 below.
12.1.6 Warranty Administration
The warranties set forth in Subclause 12.1 will be
administered as hereinafter provided:
(i) Transportation Costs
Transportation costs associated with the sending
of a defective Warranted Part to the facilities
designated by the Seller and for the return
therefrom of a repaired or replacement Warranted
Part will be borne by the Buyer ***.
(ii) Return of an Aircraft
In the event that the Buyer desires to return an
Aircraft to the Seller for consideration of a
Warranty Claim, the Buyer will notify the Seller
of its intention to do so and the Seller will,
prior to such return, have the right to inspect
such Aircraft and thereafter, without prejudice
to its rights hereunder, to repair such
Aircraft, at its sole option, either at the
Buyer's facilities, provided that space is
available, or at another mutually acceptable
location. Return of any Aircraft by the Buyer to
the Seller and return of such Aircraft to the
Buyer's facilities will be ***.
(iii) On-Aircraft Work by the Seller
In the event that a defect subject to this
Subclause 12.1 may justify the dispatch by the
Seller of a working team to repair or correct
such defect at the Buyer's facilities, or in the
event of the Seller's accepting the return of an
Aircraft to perform or have performed such
repair or correction *** as determined in
accordance with in Subclause 12.1.7(v)(a).
If the Seller is requested to perform the work,
the Seller and the Buyer will agree on a
schedule and place for the work to be performed.
(iv) Warranty Claim Substantiation
For each claim under this Subclause 12.1, the
Buyer will give written notice to the Seller
that contains at least the following data, to
the extent reasonably ascertainable, available
and relevant, with respect to a part or
Aircraft, as applicable ("Warranty Claim"). The
absence of data from any Warranty Claim will not
prejudice validity of such Warranty Claim. ***
(a) description of defect and action taken,
if any,
(b) date of incident and/or of removal,
(c) description of the defective part,
(d) part number,
(e) serial number (if applicable),
(f) position on Aircraft, according to
Catalog Sequence Number (CSN) of the
Illustrated Parts Catalog, Component
Maintenance Manual or Structural Repair
Manual (as such documents are defined
in Clause 14 and Exhibit "F" hereto) as
applicable,
(g) total flying hours or calendar times,
as applicable, at the date of
appearance of a defect,
(h) time since last shop visit at the date
of defect appearance,
(i) Manufacturer's serial number of the
Aircraft and/or its registration
number,
(j) Aircraft total flying hours and/or
number of landings at the date of
defect appearance,
(k) claim number,
(l) date of claim, and
(m) date of delivery of an Aircraft or part
to the Buyer.
Claims are to be addressed as follows:
AIRBUS INDUSTRIE
CUSTOMER SERVICE DIVISION - SG-C
WARRANTY ADMINISTRATION
ROND-POINT MAURICE BELLONTE
F-31707 BLAGNAC
FRANCE
or to the office of the Resident Customer
Support Representatives assigned to the Buyer
under Subclause 15.1.2 of this Agreement.
(v) Acceptance and Rejection
*** The Seller will provide reasonable written
substantiation in case of rejection of a
Warranty Claim. Transportation, insurance, and
any other costs associated with the sending of
any Warranted Part or any other item, equipment,
component or part for which the Buyer's Warranty
Claim is rejected by the Seller will be borne by
the Buyer. The Buyer may at any time appeal the
rejection with the Customer Support Director
referred to in Subclause 15.3 of this Agreement.
(vi) Replacements
Replacements made pursuant to this Subclause
12.1 will be made within the lead time defined
in the Seller's Spare Parts Price List. The
Seller will use all reasonable efforts to
achieve expedited handling of replacements.
Replaced components, equipment, accessories or
parts will become the Seller's property.
Title to and risk of loss of any Aircraft,
component, accessory, equipment or part returned
by the Buyer to the Seller will at all times
remain with the Buyer, except that (i) when the
Seller has possession of a returned Aircraft,
component, accessory, equipment or part to which
the Buyer has title, the Seller will have such
responsibility therefor as is chargeable by law
to a bailee for hire, but the Seller will not be
liable for loss of use, and (ii) title to and
risk of loss of a returned component, accessory,
equipment or part will pass to the Seller upon
receipt by the Buyer of any item furnished by
the Seller to the Buyer as a replacement
therefor. Upon the Buyer's receipt of any
replacement component, accessory, equipment or
part provided by the Seller pursuant to this
Subclause 12.1, title to and risk of loss of
such component, accessory, equipment or part
will pass to the Buyer.
(vii) Inspection
The Seller will have the right to inspect the
affected Aircraft and documents and other
records relating thereto in the event of any
claim under this Subclause 12.1, on reasonable
prior written notice to the Buyer. Each such
inspection will be made during reasonable times
during the Buyer's normal business day and will
not unreasonably interfere with the Buyer's
operation or personnel.
12.1.7 In-house Warranty
(i) Authorization
The Buyer is hereby authorized to perform the
repair of Warranted Parts, subject to the terms
of this Subclause 12.1.7 ("In-house Warranty").
The Buyer will use reasonable efforts to notify
the Seller's representative of its decision to
perform any In-house repairs before such repairs
are commenced, unless it is not practical to do
so, in which case the Buyer will notify the
Seller of the In-house repair as soon as
reasonably practicable.
(ii) Conditions of Authorization
The Buyer will be entitled to the benefits under
this Subclause 12.1.7 for repair of Warranted
Parts:
(a) ***
(b) if the following conditions are satisfied:
(i) only if adequate facilities and
qualified personnel are available
to the Buyer,
(ii) in accordance with the Seller's
written instructions set forth in
documents such as the Aircraft
Maintenance Manual, Component
Maintenance Manual
(Manufacturer), Component
Maintenance Manual (Vendor) and
Structural Repair Manual, and
(iii) only to the extent reasonably
necessary to correct the
defect.
(iii) Seller's Rights
The Seller will have the right to have any
Warranted Part, or any part removed therefrom,
which is claimed to be defective, returned to
the Seller, as set forth in Subclause 12.1.6(i),
if, in the judgment of the Seller, the nature of
the defect requires technical investigation.
Subject to applicable safety rules and the
Buyer's contractual obligations with labor
unions, the Seller will further have the right
to have a representative present as an observer
during the disassembly, inspection and testing
of any Warranted Part claimed to be defective.
Such representatives will not unreasonably
interfere with the Buyer's operation and
personnel.
(iv) In-house Warranty Claim Substantiation
Claims for In-house Warranty credit will be
filed within the time period set forth in and
will contain the same information required in
Warranty Claims under Subclause 12.1.6(iv) and
in addition, to the extent ascertainable, will
include:
(a) a report of technical findings with
respect to the defect,
(b) for parts required to remedy the defect:
- part numbers,
- serial numbers (if applicable),
- description of the parts,
- quantity of parts,
- unit price of parts,
- total price of parts,
- related Seller's or third party's
invoices (if applicable),
(c) detailed number of labor hours,
(d) agreed In-house Warranty Labor Rate
(defined below in Subclause
12.1.7(v)(a)), and
(e) total claim value.
(v) Credit
The Buyer's sole remedy, and the Seller's sole
obligation and liability, in respect of In-house
Warranty claims, will be a credit to the Buyer's
account. The credit to the Buyer's account will
be equal to the direct labor cost expended in
performing a repair and to the direct cost of
materials associated with the repair. Such costs
will be determined as set forth below.
(a) To determine direct labor costs, only
man-hours spent on disassembly,
inspection, repair, reassembly, and
final inspection and test (including
flight tests if flight tests prove
necessary to complete a repair under
the In-house Warranty) of the Warranted
Part will be counted. Man-hours
required for maintenance work
concurrently being carried out on the
Aircraft or Warranted Part will not be
included ***.
The man-hours counted as set forth
above will be multiplied by an agreed
labor rate representing the Buyer's
composite average hourly labor rate
(***, including all ***, social
security charges, business taxes and
similar items, but excluding fringe
benefits) paid to the Buyer's employees
whose jobs are directly related to the
performance of the repair (the
"In-house Warranty Labor Rate"). It is
agreed that for the purpose hereof the
In-house Labor Rate is ***.
(b) Direct material costs are determined by
the prices at which the Buyer acquired
such replacement material, excluding
any parts and materials used for
overhaul furnished free of charge by
the Seller.
(vi) Limitation on Credit
The Buyer will in no event be credited for
repair costs (including labor and material) for
any Warranted Part exceeding sixty-five percent
(65%) of the Seller's current catalog price for
a replacement of such defective Warranted Part
or exceeding those costs which would have
resulted if repairs had been carried out at the
Seller's facilities.
Such cost will be substantiated in writing by
the Seller upon reasonable request by the Buyer.
(vii) Scrapped Material
The Buyer will retain any Warranted Part
defective beyond economic repair and any
defective part removed from a Warranted Part
during repair for a period of either one hundred
and twenty (120) days after the date of
completion of repair or ninety (90) days after
submission of a claim for In-house Warranty
credit relating thereto, whichever is longer.
Such parts will be returned to the Seller within
thirty (30) days of receipt of the Seller's
request to that effect, at the Seller's cost.
Notwithstanding the foregoing, the Buyer may,
with the agreement of the Seller's Field
Representative, scrap any such defective parts
that are beyond economic repair and not required
for technical evaluation.
(viii) LIMITATIONS ON LIABILITY OF SELLER
THE SELLER WILL NOT BE LIABLE FOR ANY RIGHT, CLAIM
OR REMEDY, AND THE BUYER WILL INDEMNIFY THE SELLER
AGAINST THE CLAIMS OF ANY THIRD PARTIES FOR ANY
DEFECT, NONCONFORMANCE OR PROBLEM OF ANY KIND,
ARISING OUT OF OR IN CONNECTION WITH ANY REPAIR OF
WARRANTED PARTS OR ANY OTHER ACTIONS UNDERTAKEN BY
THE BUYER UNDER THIS SUBCLAUSE 12.1.7, INCLUDING
BUT NOT LIMITED TO: (I) LIABILITY IN CONTRACT OR
TORT, (II) LIABILITY ARISING FROM THE BUYER'S
ACTUAL OR IMPUTED NEGLIGENCE, INTENTIONAL TORTS
AND/OR STRICT LIABILITY, AND/OR (III) LIABILITY TO
ANY THIRD PARTIES.
12.1.8 Standard Warranty Transferability
The warranties provided for in this Subclause 12.1 for
any Warranted Part will accrue to the benefit of any
owner, lessor, lessee or operator other than the Buyer,
if the Warranted Part enters into the possession of any
such owner, lessor, lessee or operator as a result of a
sale, transfer, lease or other conveyance or as a result
of a pooling or leasing agreement between such owner,
lessor, lessee or operator and the Buyer (and its
successors and assigns), in accordance with the terms and
subject to the limitations and exclusions of the
foregoing warranties, and to applicable laws or
regulations.
12.1.9 Warranty for Corrected, Replacement or Repaired Warranted
Parts
Whenever any Warranted Part that contains a defect for
which the Seller is liable under Subclause 12.1 has been
corrected, repaired or replaced pursuant to the terms of
this Clause 12, the period of the Seller's warranty with
respect to such corrected, repaired or replacement
Warranted Part, whichever may be the case, will be ***.
In the event that a defect is attributable to a defective
repair or replacement by the Buyer, a Warranty Claim with
respect to such defect will not be allowable,
notwithstanding any subsequent correction or repairs.
12.1.10 Good Airline Operation - Normal Wear and Tear
The Buyer's rights under this Subclause 12.1 are subject
to the Aircraft and each component, equipment, accessory
and part thereof being maintained, overhauled, repaired
and operated in accordance with ***.
The Seller's liability under this Subclause 12.1 will not
extend to normal wear and tear nor, to the extent caused
by any of the following, to:
(i) any Aircraft or component, equipment, accessory
or part thereof that has been repaired, altered
or modified after delivery by a party other than
the Seller or ***;
(ii) any Aircraft or component, equipment, accessory
or part thereof that has been willfully operated
in a damaged state (other than in the case of
operational necessity); or
(iii) any component, equipment, accessory or part from
which the trademark, trade name, part or serial
number or other identification marks have been
removed.
This limitation of the Seller's liability will apply in
the cases of Subclause 12.1.10(i) and Subclause
12.1.10(ii) above only to the extent the Seller submits
sufficient evidence proving that the defect arose from or
was contributed to by either of said cases.
12.2 SELLER SERVICE LIFE POLICY
In addition to the warranties set forth in Subclause 12.1
above, the Seller further agrees that should a Failure
occur in any Item, then, subject to the general conditions
and limitations set forth in Subclause 12.2.4 below, the
provisions of this Subclause 12.2 will apply.
12.2.1 Definitions
For the purposes of this Subclause 12.2, the following
definitions will apply:
12.2.1.1 "Item" means any of the Seller components, equipment,
accessories or parts listed in Exhibit "D" hereto which
are installed on an Aircraft at any time during the
period of effectiveness of the Service Life Policy as
defined below in Subclause 12.2.
12.2.1.2 "Failure" means any breakage of, defect in or premature
failure of, an Item that has occurred, or that can
reasonably be expected to occur, based on the Seller's
findings or the experience or expertise of the Buyer or any
other owner or operator of the Seller's aircraft, and that
materially impairs the utility or safety of the Item,
provided that any such breakage of, or defect in, any Item
did not result from any breakage or defect in any other
Aircraft part or component or from any other extrinsic
force, normally covered under hull insurance policy.
12.2.2 Periods and Seller's Undertaking
Subject to the general conditions and limitations set
forth in Subclause 12.2.4 below, the Seller agrees that
if a Failure occurs in an Item within twelve (12) years
after the delivery of said Aircraft to the Buyer, the
Seller will, at its own discretion, as promptly as
practicable and for a price that reflects the Seller's
financial participation as hereinafter provided, either:
12.2.2.1 design and furnish to the Buyer a terminating correction
for such Item subject to a Failure and provide any parts
required for such correction (including Seller designed
standard parts but excluding industry standard parts),
or,
12.2.2.2 replace such Item.
12.2.3 Seller's Participation in the Cost
Any part or Item that the Seller is required to furnish to
the Buyer under this Service Life Policy in connection with
the correction or replacement of an Item will be furnished
to the Buyer at the Seller's current sales price therefor,
less the Seller's financial participation, which will be
determined in accordance with the following formula:
C (N - T)
-------------
P = N
where
P: financial participation of the Seller,
C: the Seller's then current sales price for the
required Item or required Seller designed parts,
T: total time in months since delivery of the
particular Aircraft in which the Item subject to a
Failure was originally installed, and
N: one hundred and forty-four (144) months.
12.2.4 General Conditions and Limitations
12.2.4.1 Notwithstanding Subclause 12.2.3, the undertakings given in
this Subclause 12.2 will not be valid during the period
applicable to an Item under Subclause 12.1.
12.2.4.2 The Buyer's remedy and the Seller's obligation and
liability under this Service Life Policy are subject to
compliance by the Buyer with the following conditions
precedent:
(i) *** the Buyer will maintain log books and other
historical records with respect to each Item
adequate to enable determination as to whether
the alleged Failure is covered by this Service
Life Policy and, if so, to define the portion of
the cost to be borne by the Seller in accordance
with Subclause 12.2.3 above.
(ii) *** the Buyer will keep the Seller informed of
any significant incidents relating to an
Aircraft, howsoever occurring or recorded.
(iii) The conditions of Subclause 12.1.10 will have been
complied with.
(iv) The Buyer will carry out specific structural
inspection programs for monitoring purposes as
may be established from time to time by the
Seller and the Buyer. Such programs will be
compatible with the Buyer's operational
requirements and will be carried out at ***.
(v) In the case of any breakage or defect, *** after
any breakage or defect in an Item becomes
apparent, whether or not said breakage or defect
can reasonably be expected to occur in any other
Aircraft, and the Buyer will inform the Seller in
sufficient detail about the breakage or defect to
enable the Seller to determine whether said
breakage or defect is subject to this Service Life
Policy, to the extent the Buyer has such
information available.
12.2.4.3 Except as otherwise provided in this Subclause 12.2, any
claim under this Service Life Policy will be administered
as provided in, and will be subject to the terms and
conditions of, Subclause 12.1.6.
12.2.4.4 In the event that the Seller will have issued a
modification applicable to an Aircraft, the purpose of
which is to avoid a Failure, the Seller will offer the
necessary modification kit free of charge or under a
prorata formula established by the Seller. If such a kit
is so offered to the Buyer, then, in respect of such
Failure and any Failures that could ensue therefrom, the
validity of the Seller's commitment under this Subclause
12.2 will be subject to the Buyer's incorporating such
modification in the relevant Aircraft, within a
reasonable time, as promulgated by the Seller and in
accordance with the Seller's instructions.
***
12.2.4.5 THIS SERVICE LIFE POLICY IS NEITHER A WARRANTY,
PERFORMANCE GUARANTEE, NOR AN AGREEMENT TO MODIFY ANY
AIRCRAFT OR AIRFRAME COMPONENTS TO CONFORM TO NEW
DEVELOPMENTS OCCURRING IN THE STATE OF AIRFRAME DESIGN
AND MANUFACTURING ART. THE SELLER'S OBLIGATION UNDER THIS
SUBCLAUSE 12.2 IS TO MAKE ONLY THOSE CORRECTIONS TO THE
ITEMS OR FURNISH REPLACEMENTS THEREFOR AS PROVIDED IN
THIS SUBCLAUSE 12.2. THE BUYER'S SOLE REMEDY AND RELIEF
FOR THE NONPERFORMANCE OF ANY OBLIGATION OR LIABILITY OF
THE SELLER ARISING UNDER OR BY VIRTUE OF THIS SERVICE
LIFE POLICY WILL BE IN MONETARY DAMAGES, LIMITED TO THE
AMOUNT THE BUYER REASONABLY EXPENDS IN PROCURING A
CORRECTION OR REPLACEMENT FOR ANY ITEM THAT IS THE
SUBJECT OF A FAILURE COVERED BY THIS SERVICE LIFE POLICY
AND TO WHICH SUCH NONPERFORMANCE IS RELATED, LESS THE
AMOUNT THAT THE BUYER OTHERWISE WOULD HAVE BEEN REQUIRED
TO PAY UNDER THIS SUBCLAUSE 12.2 IN RESPECT OF SUCH
CORRECTED OR REPLACEMENT ITEM. WITHOUT LIMITING THE
EXCLUSIVITY OF WARRANTIES AND GENERAL LIMITATIONS OF
LIABILITY PROVISIONS SET FORTH IN SUBCLAUSE 12.5, THE
BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL CLAIMS TO
ANY FURTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
INCLUDING LOSS OF PROFITS AND ALL OTHER RIGHTS, CLAIMS
AND REMEDIES, ARISING UNDER OR BY VIRTUE OF THIS SERVICE
LIFE POLICY.
12.3 VENDOR WARRANTIES
12.3.1 Seller's Support
Prior to delivery of the first Aircraft, the Seller will
obtain from all Vendors listed in the Supplier Product
Support Agreements manual enforceable and transferable
warranties, service life policies, and indemnities
against patent infringements for Vendor Parts. The Seller
will also obtain enforceable and transferable Vendor
service life policies from landing gear Vendors for
selected structural landing gear elements. The Seller
undertakes to supply to the Buyer such Vendor warranties,
Vendor service life policies and indemnities against
patent infringements substantially in the form summarized
in the Supplier Product Support Agreements manual.
12.3.2 Vendor's Default
12.3.2.1 In the event that any Vendor under any standard warranty
or indemnity against patent infringements obtained by the
Seller pursuant to Subclause 12.3.1 or Clause 13 hereof
defaults in the performance of any material obligation
under such warranty or indemnity against patent
infringements with respect to a Vendor Part, and the
Buyer submits within a reasonable time to the Seller
reasonable evidence that such default has occurred, then
Subclause 12.1 or Clause 13 of this Agreement will apply
to the extent the same would have been applicable had
such Vendor Part been a Warranted Part except that, for
obligations covered under Subclause 12.1, the shorter of
(i) the Vendor's warranty period as indicated in the
Supplier Product Support Agreements manual and (ii) the
Seller's warranty period as indicated in Subclause 12.1.3
of this Agreement will apply.
12.3.2.2 In the event that any Vendor under any Vendor service
life policy obtained by the Seller pursuant to Subclause
12.3.1 hereof defaults in the performance of any material
obligation with respect thereto, and the Buyer submits
within reasonable time to the Seller reasonable evidence
that such default has occurred, then Subclause 12.2 of
this Agreement will apply to the extent the same would
have been applicable had such component, equipment,
accessory or part been listed in Exhibit "D" hereto.
12.3.2.3 At the Seller's request, the Buyer will assign to the
Seller, and the Seller will be subrogated to, all of the
Buyer's rights against the relevant Vendor, with respect
to and arising by reason of such default and the Buyer
will provide reasonable assistance to enable the Seller
to enforce the rights so assigned.
12.4 INTERFACE COMMITMENT
12.4.1 Interface Problem
If the Buyer experiences any technical problem in the
operation of an Aircraft or its systems due to a
malfunction, the cause of which, after due and reasonable
investigation, is not readily identifiable by the Buyer,
but which the Buyer reasonably believes to be
attributable to the design characteristics of one or more
components of the Aircraft (an "Interface Problem"), the
Seller will, if requested by the Buyer, and without
additional charge to the Buyer, promptly conduct or have
conducted an investigation and analysis of such problem
to determine, if possible, the cause or causes of the
problem and to recommend such corrective action as may be
feasible. The Buyer will furnish to the Seller all data
and information in the Buyer's possession relevant to the
Interface Problem and will reasonably cooperate with the
Seller in the conduct of the Seller's investigations and
such tests as may be required.
At the conclusion of such investigation the Seller will
promptly advise the Buyer in writing of the Seller's
opinion as to the cause or causes of the Interface
Problem and the Seller's recommendations as to corrective
action.
12.4.2 Seller's Responsibility
If the Interface Problem is attributable to the design of
a Warranted Part, the Seller will, if requested by the
Buyer, take prompt action to correct the design of such
Warranted Part, pursuant to the terms and conditions of
Subclause 12.1 or 12.2, as applicable.
12.4.3 Vendor's Responsibility
If the Interface Problem is attributable to the design of
a component, equipment, accessory or part other than a
Warranted Part ("Vendor Component"), the Seller will, if
requested by the Buyer, promptly assist and cooperate
with the Buyer in processing and enforcing any warranty
claim the Buyer may have against the manufacturer of such
Vendor Component. Further, ***.
12.4.4 Joint Responsibility
If the Interface Problem is attributable partially to the
design of a Warranted Part and partially to the design of
any Vendor Component, the Seller will, if requested by
the Buyer, seek a solution to the Interface Problem
through cooperative efforts of the Seller and any Vendor
involved. The Seller will promptly advise the Buyer of
such corrective action as may be proposed by the Seller
and any such Vendor. Such proposal will be consistent
with any then existing obligations of the Seller
hereunder and of any such Vendor to the Buyer. When the
Seller or any Vendor has performed such corrective action
to the reasonable satisfaction of the Buyer, such
correction will constitute full satisfaction of any claim
the Buyer may have against either the Seller or any such
Vendor with respect to such Interface Problem.
12.4.5 All requests under this Subclause 12.4 will be directed
to the Seller.
12.5 Performance Standard
***
12.6 EXCLUSIVITY OF WARRANTIES AND
GENERAL LIMITATIONS OF LIABILITY
THIS CLAUSE 12 (INCLUDING ITS SUBPROVISIONS AND RELATED
LETTER AGREEMENTS) SETS FORTH THE EXCLUSIVE WARRANTIES,
EXCLUSIVE LIABILITIES AND EXCLUSIVE OBLIGATIONS OF THE
SELLER, AND THE EXCLUSIVE REMEDIES AVAILABLE TO THE
BUYER, WHETHER UNDER THIS AGREEMENT OR OTHERWISE, ARISING
FROM ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY KIND
IN ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY, PART OR
SERVICE DELIVERED UNDER THIS AGREEMENT.
THE BUYER RECOGNIZES THAT THE RIGHTS, WARRANTIES AND
REMEDIES IN THIS CLAUSE 12 (AND RELATED LETTER
AGREEMENTS) ARE ADEQUATE AND SUFFICIENT TO PROTECT THE
BUYER FROM ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY
KIND IN THE GOODS AND SERVICES SUPPLIED UNDER THIS
AGREEMENT. THE BUYER HEREBY WAIVES, RELEASES AND
RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS, GUARANTEES
AND LIABILITIES OF THE SELLER AND ALL OTHER RIGHTS,
CLAIMS AND REMEDIES OF THE BUYER AGAINST THE SELLER,
WHETHER EXPRESS OR IMPLIED BY CONTRACT, TORT, OR
STATUTORY LAW OR OTHERWISE, WITH RESPECT TO ANY
NONCONFORMITY OR DEFECT OR PROBLEM OF ANY KIND IN ANY
AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY, PART OR
SERVICE DELIVERED UNDER THIS AGREEMENT, INCLUDING BUT NOT
LIMITED TO, UNLESS OTHERWISE PROVIDED FOR IN THIS CLAUSE
12 (AND RELATED LETTER AGREEMENTS):
(1) ANY IMPLIED OR EXPRESS WARRANTY ARISING FROM
COURSE OF PERFORMANCE, COURSE OF DEALING OR
USAGE OF TRADE;
(2) ANY RIGHT, CLAIM OR REMEDY FOR BREACH OF CONTRACT;
(3) ANY RIGHT, CLAIM OR REMEDY FOR TORT, UNDER ANY
THEORY OF LIABILITY, HOWEVER ALLEGED, INCLUDING,
BUT NOT LIMITED TO, ACTIONS AND/OR CLAIMS FOR
NEGLIGENCE, GROSS NEGLIGENCE, INTENTIONAL ACTS,
WILLFUL DISREGARD, IMPLIED WARRANTY, PRODUCT
LIABILITY, STRICT LIABILITY OR FAILURE TO WARN;
(4) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER THE
UNIFORM COMMERCIAL CODE OR ANY OTHER STATE OR
FEDERAL STATUTE;
(5) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER ANY
REGULATIONS OR STANDARDS IMPOSED BY ANY
INTERNATIONAL, NATIONAL, STATE OR LOCAL STATUTE OR
AGENCY;
(6) ANY RIGHT, CLAIM OR REMEDY TO RECOVER OR BE
COMPENSATED FOR:
(a) LOSS OF USE OR REPLACEMENT OF ANY
AIRCRAFT, COMPONENT, EQUIPMENT,
ACCESSORY OR PART PROVIDED UNDER THIS
AGREEMENT;
(b) LOSS OF, OR DAMAGE OF ANY KIND TO, ANY
AIRCRAFT, COMPONENT, EQUIPMENT,
ACCESSORY OR PART PROVIDED UNDER THIS
AGREEMENT;
(c) LOSS OF PROFITS AND/OR REVENUES;
(d) ANY OTHER INCIDENTAL OR CONSEQUENTIAL
DAMAGE.
THE WARRANTIES AND SERVICE LIFE POLICY PROVIDED BY THIS
AGREEMENT WILL NOT BE EXTENDED, ALTERED OR VARIED EXCEPT
BY A WRITTEN INSTRUMENT SIGNED BY THE SELLER AND THE
BUYER. IN THE EVENT THAT ANY PROVISION OF THIS CLAUSE 12
(AND RELATED LETTER AGREEMENTS) SHOULD FOR ANY REASON BE
HELD UNLAWFUL, OR OTHERWISE UNENFORCEABLE, THE REMAINDER
OF THIS CLAUSE 12 (AND RELATED LETTER AGREEMENTS) WILL
REMAIN IN FULL FORCE AND EFFECT.
12.7 DUPLICATE REMEDIES
THE REMEDIES PROVIDED TO THE BUYER UNDER THIS CLAUSE 12
(AND RELATED LETTER AGREEMENTS) AS TO ANY DEFECT IN
RESPECT OF THE AIRCRAFT OR ANY PART THEREOF ARE NOT
CUMULATIVE. THE BUYER WILL BE ENTITLED TO THE ONE REMEDY
THAT PROVIDES THE MAXIMUM BENEFIT TO IT, AS THE BUYER MAY
ELECT, PURSUANT TO THE TERMS AND CONDITIONS OF THIS
CLAUSE 12 (AND RELATED LETTER AGREEMENTS) FOR ANY SUCH
PARTICULAR DEFECT FOR WHICH REMEDIES ARE PROVIDED UNDER
THIS CLAUSE 12 (AND RELATED LETTER AGREEMENTS); PROVIDED,
HOWEVER, THAT, *** THE BUYER WILL NOT BE ENTITLED TO
ELECT A REMEDY UNDER ONE PART OF THIS CLAUSE 12 (AND
RELATED LETTER AGREEMENTS) THAT CONSTITUTES A DUPLICATION
OF ANY REMEDY ELECTED BY IT UNDER ANY OTHER PART HEREOF
FOR THE SAME DEFECT.
***
UNQUOTE
IN CONSIDERATION OF THE ASSIGNMENT AND SUBROGATION BY THE
SELLER UNDER THIS CLAUSE 12 (AND RELATED LETTER
AGREEMENTS) IN FAVOR OF THE BUYER IN RESPECT OF THE
SELLER'S RIGHTS AGAINST AND OBLIGATIONS TO THE
MANUFACTURER UNDER THE PROVISIONS QUOTED ABOVE, THE BUYER
HEREBY ACCEPTS SUCH ASSIGNMENT AND SUBROGATION AND AGREES
TO BE BOUND BY ALL OF THE TERMS, CONDITIONS AND
LIMITATIONS THEREIN CONTAINED, SPECIFICALLY INCLUDING,
WITHOUT LIMITATION, THE EXCLUSIVITY OF WARRANTIES AND
GENERAL LIMITATIONS OF LIABILITY PROVISIONS AND DUPLICATE
REMEDIES PROVISIONS.
THIS CLAUSE 12 (INCLUDING ITS SUBPROVISIONS AND RELATED
LETTER AGREEMENTS) SETS FORTH THE EXCLUSIVE WARRANTIES,
EXCLUSIVE LIABILITIES AND EXCLUSIVE OBLIGATIONS OF THE
SELLER, AND THE EXCLUSIVE REMEDIES AVAILABLE TO THE
BUYER, WHETHER UNDER THIS AGREEMENT OR OTHERWISE, ARISING
FROM ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY KIND
IN ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY, PART OR
SERVICE DELIVERED UNDER THIS AGREEMENT.
THE BUYER RECOGNIZES THAT THE RIGHTS, WARRANTIES AND
REMEDIES IN THIS CLAUSE 12 (AND RELATED LETTER
AGREEMENTS) ARE ADEQUATE AND SUFFICIENT TO PROTECT THE
BUYER FROM ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY
KIND IN THE GOODS AND SERVICES SUPPLIED UNDER THIS
AGREEMENT. THE BUYER HEREBY WAIVES, RELEASES AND
RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS, GUARANTEES
AND LIABILITIES OF THE SELLER AND ALL OTHER RIGHTS,
CLAIMS AND REMEDIES OF THE BUYER AGAINST THE SELLER,
WHETHER EXPRESS OR IMPLIED BY CONTRACT, TORT, OR
STATUTORY LAW OR OTHERWISE, WITH RESPECT TO ANY
NONCONFORMITY OR DEFECT OR PROBLEM OF ANY KIND IN ANY
AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY, PART OR
SERVICE DELIVERED UNDER THIS AGREEMENT, INCLUDING BUT NOT
LIMITED TO, UNLESS OTHERWISE PROVIDED FOR IN THIS CLAUSE
12 (AND RELATED LETTER AGREEMENTS):
(1) ANY IMPLIED OR EXPRESS WARRANTY ARISING FROM
COURSE OF PERFORMANCE, COURSE OF DEALING OR
USAGE OF TRADE;
(2) ANY RIGHT, CLAIM OR REMEDY FOR BREACH OF CONTRACT;
(3) ANY RIGHT, CLAIM OR REMEDY FOR TORT, UNDER ANY
THEORY OF LIABILITY, HOWEVER ALLEGED, INCLUDING,
BUT NOT LIMITED TO, ACTIONS AND/OR CLAIMS FOR
NEGLIGENCE, GROSS NEGLIGENCE, INTENTIONAL ACTS,
WILLFUL DISREGARD, IMPLIED WARRANTY, PRODUCT
LIABILITY, STRICT LIABILITY OR FAILURE TO WARN;
(4) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER THE
UNIFORM COMMERCIAL CODE OR ANY OTHER STATE OR
FEDERAL STATUTE;
(5) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER ANY
REGULATIONS OR STANDARDS IMPOSED BY ANY
INTERNATIONAL, NATIONAL, STATE OR LOCAL STATUTE OR
AGENCY;
(6) ANY RIGHT, CLAIM OR REMEDY TO RECOVER OR BE
COMPENSATED FOR:
(a) LOSS OF USE OR REPLACEMENT OF ANY
AIRCRAFT, COMPONENT, EQUIPMENT,
ACCESSORY OR PART PROVIDED UNDER THIS
AGREEMENT;
(b) LOSS OF, OR DAMAGE OF ANY KIND TO, ANY
AIRCRAFT, COMPONENT, EQUIPMENT,
ACCESSORY OR PART PROVIDED UNDER THIS
AGREEMENT;
(c) LOSS OF PROFITS AND/OR REVENUES;
(d) ANY OTHER INCIDENTAL OR CONSEQUENTIAL
DAMAGE.
THE WARRANTIES AND SERVICE LIFE POLICY PROVIDED BY THIS
AGREEMENT WILL NOT BE EXTENDED, ALTERED OR VARIED EXCEPT
BY A WRITTEN INSTRUMENT SIGNED BY THE SELLER AND THE
BUYER. IN THE EVENT THAT ANY PROVISION OF THIS CLAUSE 12
(AND RELATED LETTER AGREEMENTS) SHOULD FOR ANY REASON BE
HELD UNLAWFUL, OR OTHERWISE UNENFORCEABLE, THE REMAINDER
OF THIS CLAUSE 12 (AND RELATED LETTER AGREEMENTS) WILL
REMAIN IN FULL FORCE AND EFFECT.
The remedies provided to the Buyer under this Clause 12
(and related Letter Agreements) as to any defect in
respect of the Aircraft or any part thereof are not
cumulative. The Buyer will be entitled to the one remedy
that provides the maximum benefit to it, as the Buyer may
elect, pursuant to the terms and conditions of this
Clause 12 (and related Letter Agreements) for any such
particular defect for which remedies are provided under
this Clause 12 (and related Letter Agreements); provided,
however, that, *** the Buyer will not be entitled to
elect a remedy under one part of this Clause 12 (and
related Letter Agreements) that constitutes a duplication
of any remedy elected by it under any other part hereof
for the same defect. ***
12.8 SURVIVABILITY
In respect of all delivered Aircraft, the provisions of
this Clause 12 (and related Letter Agreements) will
survive any termination of this Agreement.
13 - PATENT INDEMNITY
The Seller, in its capacity as "Buyer" under its
arrangements with the Manufacturer, has negotiated and
obtained the following Patent Indemnity from the
Manufacturer with respect to the Aircraft, subject to the
terms, conditions, limitations and restrictions
(including, but not limited to, the waiver, release and
renunciation provision) all as hereinafter set out. The
Seller hereby guarantees to the Buyer the performance by
the Manufacturer of the Manufacturer's obligations and
assigns to the Buyer, and the Buyer hereby accepts, all
of the rights and obligations of the Seller in the
Seller's capacity as "Buyer" as aforesaid under the said
Patent Indemnity and the Seller subrogates the Buyer into
all such rights and obligations in respect of the
Aircraft. The Seller hereby warrants to the Buyer that
the Seller has all requisite authority to make the
foregoing assignment and effect the foregoing subrogation
to and in favor of the Buyer and that the Seller will not
enter into any amendment of the provisions so assigned
without the prior written consent of the Buyer.
Capitalized terms utilized in the following provisions
have the meanings assigned thereto in this Agreement,
except that the term "Seller" refers to the Manufacturer
and the term "Buyer" refers to the Seller and
cross-references herein refer to Clauses and Exhibits in
this Agreement or to Paragraphs in any Letter Agreement
hereto.
QUOTE
13.1 Scope
The Seller will indemnify the Buyer from and against any
damages, costs and expenses including reasonable legal
costs (excluding damages, costs, expenses, loss of
profits and other liabilities in respect of or resulting
from loss of use of any Aircraft) in case of any actual
or alleged infringement by any Aircraft or any
Warranted Part or the use thereof of
(i) any British, French, German, Spanish or US
patent, or
(ii) any patent issued under the laws of any other
country in which the Buyer may lawfully operate
the Aircraft, provided that
(a) from the time of design of such
Aircraft, accessory, equipment or part
and until infringement claims are
resolved, such country and the flag
country of the Aircraft is each a party
to the Chicago Convention on
International Civil Aviation of
December 7, 1944, and is bound by and
entitled to all benefits of Article 27
thereof,
or in the alternative,
(b) from such time of design and until
infringement claims are resolved, such
country and the flag country of the
Aircraft is each a party to the
International Convention for the
Protection of Industrial property of
March 20, 1883 (known as the "Paris
Convention").
The Seller's undertaking under this Clause 13 will not
apply to components, accessories, equipment or parts
which are not Warranted Parts.
13.2 Seller's Action
Should the Buyer be enjoined (temporarily or permanently)
from using any part of an Aircraft by reason of actual or
alleged infringement of a patent covered by Subclause
13.1, the Seller will as soon as practicable, after good
faith consultation with the Buyer and at the Seller's
expense, either (i) procure for the Buyer the right to
use such part free of any liability for patent
infringement or (ii) as soon as possible replace such
part with a non-infringing substitute otherwise complying
with the requirements of this Agreement.
13.3 Seller's Obligation
The Seller's obligation hereunder with respect to any
actual or alleged infringement is conditioned upon
commencement of suit against the Buyer for infringement
or the Buyer's receipt of a written claim alleging
infringement, and upon written notice by the Buyer to the
Seller within ten (10) days after receipt by the Buyer of
notice of the institution of such suit or claim, giving
particulars thereof. The Seller will have the option but
not the obligation at any time to conduct negotiations
with the party or parties charging infringement and may
intervene in any suit commenced. Whether or not the
Seller intervenes in any such suit, it will be entitled
at any stage of the proceedings to assume, conduct or
control the defense thereof.
The Seller's obligation hereunder with respect to any
actual or alleged infringement is also conditioned upon
(i) the Buyer's promptly furnishing to the Seller all the
data, papers, records and other assistance within the
control of the Buyer material to the resistance of or
defense against any such charge or suits for
infringement, (ii) the Buyer's use of diligent efforts in
full cooperation with the Seller to reduce royalties,
damages, costs and expenses involved, (iii) the Seller's
prior approval of the Buyer's payment, assumption or
admission of any liabilities, expenses, costs or
royalties for which the Seller is asked to respond and
(iv) the Buyer's not otherwise acting in a manner
prejudicial to its or the Seller's defense of the action.
13.4 WAIVER
THE INDEMNITY PROVIDED IN THIS CLAUSE 13 AND THE
OBLIGATIONS AND LIABILITIES OF THE SELLER UNDER THIS
CLAUSE 13 ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE
BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER
INDEMNITIES, WARRANTIES, OBLIGATIONS, GUARANTEES AND
LIABILITIES ON THE PART OF THE SELLER AND RIGHTS, CLAIMS
AND REMEDIES OF THE BUYER AGAINST THE SELLER, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE (INCLUDING WITHOUT
LIMITATION ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY ARISING FROM OR WITH RESPECT TO LOSS OF USE OR
REVENUE OR CONSEQUENTIAL DAMAGES), WITH RESPECT TO ANY
ACTUAL OR ALLEGED PATENT INFRINGEMENT OR THE LIKE BY ANY
AIRCRAFT, ACCESSORY, EQUIPMENT OR PART, OR THE USE OR
SALE THEREOF, PROVIDED THAT, IN THE EVENT THAT ANY OF THE
AFORESAID PROVISIONS SHOULD FOR ANY REASON BE HELD
UNLAWFUL OR OTHERWISE INEFFECTIVE, THE REMAINDER OF THIS
SUBCLAUSE 13.4 WILL REMAIN IN FULL FORCE AND EFFECT. THIS
PATENT INDEMNITY WILL NOT BE EXTENDED, ALTERED OR VARIED
EXCEPT BY A WRITTEN INSTRUMENT SIGNED BY THE SELLER AND
THE BUYER.
UNQUOTE
In consideration of the assignment and subrogation by the
Seller under this Clause 13 in favor of the Buyer in
respect of the Seller's rights against and obligations to
the Manufacturer under the provisions quoted above, the
Buyer hereby accepts such assignment and subrogation and
agrees to be bound by all of the terms, conditions and
limitations therein contained (specifically including,
without limitation, the waiver, release and renunciation
provision).
THE INDEMNITY PROVIDED IN THIS CLAUSE 13 AND THE
OBLIGATIONS AND LIABILITIES OF THE SELLER UNDER THIS
CLAUSE 13 ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND THE
BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER
INDEMNITIES, WARRANTIES, OBLIGATIONS, GUARANTEES AND
LIABILITIES ON THE PART OF THE SELLER AND RIGHTS, CLAIMS
AND REMEDIES OF THE BUYER AGAINST THE SELLER, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE (INCLUDING WITHOUT
LIMITATION ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY ARISING FROM OR WITH RESPECT TO LOSS OF USE OR
REVENUE OR CONSEQUENTIAL DAMAGES), WITH RESPECT TO ANY
ACTUAL OR ALLEGED PATENT INFRINGEMENT OR THE LIKE BY ANY
AIRCRAFT, ACCESSORY, EQUIPMENT OR PART, OR THE USE OR
SALE THEREOF, PROVIDED THAT, IN THE EVENT THAT ANY OF THE
AFORESAID PROVISIONS SHOULD FOR ANY REASON BE HELD
UNLAWFUL OR OTHERWISE INEFFECTIVE, THE REMAINDER OF THIS
CLAUSE WILL REMAIN IN FULL FORCE AND EFFECT. THIS PATENT
INDEMNITY WILL NOT BE EXTENDED, ALTERED OR VARIED EXCEPT
BY A WRITTEN INSTRUMENT SIGNED BY THE SELLER AND THE
BUYER.
13.5 SURVIVABILITY
In respect of all delivered Aircraft, the provisions of
this Clause 13 will survive any termination of this
Agreement.
14 - TECHNICAL PUBLICATIONS
14.1 Scope
The Seller will provide the Buyer or cause the Buyer to
be provided with a set of technical publications to
support the operation of the Aircraft in accordance with
the terms set forth in this Clause 14 (the "Technical
Publications"). Such Technical Publications are listed in
Exhibit "F" of this Agreement together with the form,
type, format and quantity of each such Technical
Publication.
14.2 Specification
14.2.1 The Technical Publications are prepared according to
applicable ATA specifications. Exhibit "F" references the
relevant ATA specification for each affected Technical
Publication.
14.2.2 Technical Publications will be customized as indicated in
Exhibit "F." ***
14.2.3 Technical Publications at delivery of the Aircraft will
correspond to the Specifications of the Aircraft as
defined at least six (6) months before such delivery. The
Seller will continuously monitor technological and ATA
specification developments and apply them to the
production and method of transmission of Technical
Publications.
14.3 Delivery
The Technical Publications and corresponding revisions
that the Seller will supply or cause to be supplied in
accordance with the terms of this Clause 14 will be sent
to one address only, as defined by the Buyer.
The quantities of the Technical Publications to be
delivered on or before the delivery of the first Aircraft
will be mutually agreed. The Seller will send or cause to
be sent additional quantities of Technical Publications
as required by the Buyer upon thirty (30) days' prior
notice.
Technical Publications and their revisions will be
shipped by the quickest transportation methods. The
shipments ***.
14.4 Language
The Technical Publications (including drawings) will be
supplied in the English language using aeronautical
terminology in common use.
14.5 Revision Service
14.5.1 General
Unless otherwise specifically stated, ***.
14.5.2 Service Bulletins
Service Bulletin (SB) information will be incorporated
into the Technical Publications after notice from the
Buyer of embodiment of a Service Bulletin. The split
effectivity for the corresponding Service Bulletin will
remain in the Technical Publications until notification
from the Buyer that embodiment of such Service Bulletin
has been completed for all the Aircraft.
14.5.3 Customer Originated Changes
14.5.3.1 Buyer-originated data documented in the Buyer's own
Request for Publication Change ("Customer Originated
Changes" or "COC") may be introduced into the following
customized Technical Publications:
(i) Aircraft Maintenance Manual
(ii) Illustrated Parts Catalog
(iii) Trouble Shooting Manual
(iv) Wiring Manual (Schematics, Wirings, Lists)
14.5.3.2 The Buyer will issue COC in accordance with the
provisions of the "Guidelines for Customer Originated
Changes" issued by the Seller and will label such data
"COC."
14.5.3.3 The Seller will use all reasonable efforts to introduce
the COC into the relevant Technical Publications as soon
as possible following the receipt of complete and
accurate data for processing, but no later than two (2)
revisions after submission of the COC.
14.5.3.4 COC data will be incorporated by the Seller in all
affected customized Technical Publications, unless the
Buyer specifies in writing to the Seller into which
Technical Publications the COC data will be incorporated.
The customized Technical Publications into which the COC
data are incorporated will only show the Aircraft
configuration that reflects the COC data and not the
configuration before incorporation of such COC data.
14.5.3.5 The Buyer hereby acknowledges and accepts that the
incorporation of any COC into the Technical Publication
issued by or caused to be issued by the Seller will be
entirely at the Buyer's risk. Accordingly, the Seller
will be under no liability whatsoever in respect of
either the engineering contents of any COC, including any
omissions or inaccuracies therein, or the effect that
incorporation of such COC may have on the Technical
Publications.
14.5.3.6 The Seller will not be required to check any COC data
submitted for incorporation as aforementioned, and the
Buyer will ensure that all COC data submitted for
incorporation into a Technical Publication have received
prior approval from its local airworthiness authority.
14.5.3.7 IN THE EVENT THAT THE SELLER AND/OR THE MANUFACTURER IS
REQUIRED UNDER ANY COURT ORDER OR SETTLEMENT TO INDEMNIFY
IN WHOLE OR IN PART ANY THIRD PARTY FOR INJURY, LOSS OR
DAMAGE INCURRED DIRECTLY OR INDIRECTLY AS A RESULT OF
INCORPORATION OF ANY COC INTO THE TECHNICAL PUBLICATIONS
ISSUED OR CAUSED TO BE ISSUED BY THE SELLER, THE BUYER
AGREES TO DEFEND, INDEMNIFY OR HOLD HARMLESS THE SELLER
AND/OR THE MANUFACTURER FOR ALL PAYMENTS OR SETTLEMENTS
MADE IN RESPECT OF SUCH INJURY, LOSS OR DAMAGE INCLUDING
ANY EXPENSES INCURRED BY THE SELLER AND/OR THE
MANUFACTURER IN DEFENDING SUCH CLAIMS, PROVIDED THAT THE
BUYER IS PROVIDED AN OPPORTUNITY TO ASSUME THE DEFENSE
AND/OR A SETTLEMENT OF SUCH CLAIM. THIS INDEMNIFICATION
BY THE BUYER WILL IN NO EVENT BE AFFECTED BY ANY WRITTEN
OR ORAL COMMUNICATION THAT THE SELLER OR THE MANUFACTURER
MAY MAKE TO THE BUYER IN RESPECT OF SUCH DOCUMENTATION.
14.5.3.8 The price for the incorporation of any COC as aforesaid
will be invoiced to the Buyer under conditions specified
in the Seller's then current Support Services Price
Catalog. ***
14.6 Vendor Equipment
14.6.1 Information relating to Vendor equipment that is
installed on the Aircraft by the Seller will be included
free of charge in the basic issue of the Technical
Publications, to the extent necessary for the
understanding of the systems concerned.
14.6.2 The Buyer will supply or cause to be supplied to the
Seller the data related to Buyer Furnished Equipment and
Seller Furnished Equipment not covered in the Seller's
standard Seller Furnished Equipment definition at least
six (6) months before the scheduled delivery of the
customized Technical Publications.
14.6.3 The Seller will introduce into the basic issue of the
Technical Publications the data related to Buyer
Furnished Equipment and Seller Furnished Equipment, at no
charge to the Buyer.
14.7 Aircraft Identification for Technical Publications
For the customized Technical Publications the Buyer
agrees to the allocation of Fleet Serial Numbers from 001
up to 999. The sequence will be interrupted only if two
(2) different Propulsion Systems manufacturers are
selected and/or different aircraft models are chosen.
The Buyer will indicate to the Seller the Fleet Serial
Number allocated to the Aircraft Manufacturer's Serial
Number within forty-five (45) days after execution of
this Agreement. The allocation of Fleet Serial Numbers to
Manufacturer's Serial Numbers will not constitute any
proprietary, insurable or other interest whatsoever of
the Buyer in any Aircraft prior to delivery of and
payment for such Aircraft as provided in this Agreement.
The relevant customized Technical Publications are:
(i) Aircraft Maintenance Manual
(ii) Illustrated Parts Catalog
(iii) Trouble Shooting Manual
(iv) Wiring Manuals (Schematics, Wirings, Lists)
14.8 Airworthiness Authority
It will be the responsibility of the Buyer to provide its
local airworthiness authority with such Technical
Publications as it may require, using the Technical
Publications delivered by the Seller to the Buyer in
accordance with the terms hereof.
14.9 Additional Requirements
If feasible the Seller will comply with the Buyer's
request to change the form, quantity, type and/or
revisions of any of the data specified in Exhibit "F,"
upon receipt of the Buyer's purchase order. The charges
for such changes will be invoiced to the Buyer under
conditions specified in the Seller's then current Support
Services Price Catalog.
14.10 Future Developments
The Seller will continuously monitor technological
developments and apply them to document production and
method of transmission where beneficial and
economical.
14.11 Proprietary Rights
14.11.1 All proprietary rights, including but not limited to
patent, design and copyrights, relating to Technical
Publications and data supplied under this Agreement, will
remain with the Seller. All such Technical Publications
and data are supplied to the Buyer for the sole use of
the Buyer, who undertakes not to divulge the contents
thereof to any third party save as permitted therein, or
as provided in Subclause 14.11.2, or otherwise pursuant
to any governmental or legal requirement imposed upon the
Buyer. These proprietary rights will also apply to any
translation into a language or languages or media that
may have been performed or caused to be performed by the
Buyer.
14.11.2 This Agreement does not restrict the Buyer from using any
Technical Publications or data supplied by the Seller for
the purpose of maintenance, repair or modification of
Aircraft. ***
14.11.3 Drawings of the Manufacturer are provided to the Buyer
under the express condition that the Manufacturer will
have no liability, whether in contract or tort, arising
from or in connection with the use of a drawing of the
Manufacturer by the Buyer.
14.11.4 In the event that the Seller has authorized the
disclosure to third parties, either under this Agreement
or by express written authorization, the Buyer will
undertake to bind such third party to the same conditions
and restrictions as the Buyer with respect to such
disclosure, as set forth in this Subclause 14.11.
14.12 Warranties as to Technical Publications
The Seller warrants that the Technical Publications are
prepared in accordance with the state of the art at the
date of their conception. Should a Technical Publication
prepared by the Seller contain errors or omissions, the
sole and exclusive liability of the Seller will be, at
its option, to correct or replace such Technical
Publication. *** Notwithstanding the above, no warranties
of any kind are given for the Customer Originated
Changes, as set forth in Subclause 14.5.3. The
Exclusivity of Warranties and General Limitations of
Liability provisions of Subclause 12.6 of this Agreement
will apply to all Technical Publications.
15 - CUSTOMER ASSISTANCE
15.1 Field Assistance
15.1.1 The Seller will provide or cause to be provided at no
charge to the Buyer the following services at the Buyer's
main base or at locations to be designated by the Buyer.
15.1.2 The Seller will provide Resident Customer Support
Representatives acting in an advisory capacity at the
Buyer's main base ***. The actual number of Resident
Customer Support Representatives allocated to the Buyer
will be mutually agreed.
15.1.3 If requested by the Buyer, the Seller will arrange for
similar services to be procured by competent
representatives of the Propulsion Systems manufacturer
and, by representatives of Vendors (other than Vendors of
Buyer Furnished Equipment).
15.2 Customer Support Director
The Seller will provide one (1) Customer Support Director
based in Herndon, Virginia, to liaise between the
Manufacturer and the Buyer on product support matters
after execution of this Agreement for as long as any of
the Aircraft is operated by the Buyer.
15.3 Buyer's Service
For as long as the Resident Customer Support
Representative(s) specified in Subclause 15.1.1 above
remain(s) with the Buyer, the Buyer will furnish without
charge, suitable office space, office equipment and
facilities in or conveniently near the Buyer's
maintenance facilities. The Buyer will provide
telecommunications facilities at the Seller's cost to be
invoiced on a monthly basis.
15.4 Advisory Capacity
In providing the technical services contemplated by this
Agreement, all of the Seller's, Manufacturer's and
Associated Contractors, and any of their employees,
representatives, or agents are deemed to be acting in an
advisory capacity only and at no time will they be deemed
to be acting, either directly or indirectly, as the
agents or employees of the Buyer.
15.5 Temporary Assignment of Customer Support Representative
The Buyer agrees that the Seller will have the right upon
notice to and consultation with the Buyer to transfer or
recall any Customer Support Representative(s) on a
temporary or permanent basis. The Buyer will receive
credit for the man-days during which any Customer Support
Representative is absent from the Buyer's facility
pursuant to this Subclause 15.5.
15.6 INDEMNITY AND INSURANCE
15.6.1 SCOPE
IN CONNECTION WITH THE PROVISION OF SERVICES UNDER THIS
CLAUSE 15, THE BUYER AND THE SELLER PROVIDE THE
INDEMNITIES SET FORTH IN SUBCLAUSES 15.6.2 AND 15.6.3.
15.6.2 BUYER'S INDEMNITY
THE BUYER WILL INDEMNIFY AND HOLD HARMLESS THE SELLER,
THE MANUFACTURER, ASC AND EACH OF THE ASSOCIATED
CONTRACTORS AND THEIR RESPECTIVE SUBCONTRACTORS AND THEIR
RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, AGENTS AND
EMPLOYEES FROM AND AGAINST ALL LIABILITIES, DAMAGES,
LOSSES, LOSS OF USE, COSTS AND EXPENSES
(I) FOR ALL INJURIES TO AND DEATHS OF PERSONS
(EXCEPTING INJURIES TO AND DEATHS OF THE
SELLER'S REPRESENTATIVES PROVIDING THE SERVICES
UNDER THIS CLAUSE) CAUSED BY THE SELLER OR ITS
REPRESENTATIVES, AND
(II) FOR LOSS OF OR DAMAGE TO PROPERTY (EXCEPTING
LOSS OF OR DAMAGE TO PROPERTY OF THE SELLER'S
SAID REPRESENTATIVES), CAUSED BY THE SELLER OR
ITS REPRESENTATIVES.
ARISING OUT OF OR IN CONNECTION WITH THE PROVISION OF
SERVICES UNDER THIS CLAUSE 15.
THIS INDEMNITY OF THE BUYER WILL NOT APPLY FOR ANY SUCH
LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISING
OUT OF OR CAUSED BY THE WILLFUL MISCONDUCT OR GROSS
NEGLIGENCE OF THE SELLER'S, THE MANUFACTURER'S OR ANY OF
THE ASSOCIATED CONTRACTORS' OR THEIR RESPECTIVE
SUBCONTRACTORS' OR THEIR RESPECTIVE OFFICERS', AGENTS' OR
EMPLOYEES' SAID REPRESENTATIVES.
15.6.3 SELLER'S INDEMNITY
THE SELLER WILL INDEMNIFY AND HOLD HARMLESS THE BUYER,
ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND
AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND
EXPENSES
(I) FOR INJURIES TO OR DEATHS OF THE SELLER'S SAID
REPRESENTATIVES PROVIDING THE SERVICES UNDER THIS
CLAUSE,
(II) FOR LOSS OF OR DAMAGE TO PROPERTY OF THE SELLER'S
SAID REPRESENTATIVES, AND
(III) ARISING OUT OF OR CAUSED BY THE WILLFUL MISCONDUCT
OR GROSS NEGLIGENCE OF THE SELLER'S SAID
REPRESENTATIVES.
WITH RESPECT TO SUBCLAUSES (I) AND (II) OF THE PRECEDING
SENTENCE, THE SELLER WILL NOT BE OBLIGATED TO INDEMNIFY
OR HOLD HARMLESS THE BUYER WHERE THE SELLER'S
LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE
FROM THE BUYER'S WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.
15.6.4 CLAIMS
IN THE EVENT ANY CLAIM IS MADE OR LAWSUIT IS BROUGHT
AGAINST EITHER PARTY (OR ITS RESPECTIVE DIRECTORS,
OFFICERS, AGENTS OR EMPLOYEES) FOR DAMAGES FOR DEATH OR
INJURY OR FOR PROPERTY DAMAGE, THE LIABILITY FOR WHICH
HAS BEEN ASSUMED BY THE OTHER PARTY PURSUANT TO THIS
SUBCLAUSE 15.6, THE FORMER (INDEMNITEE) WILL PROMPTLY
GIVE NOTICE TO THE OTHER PARTY (INDEMNITOR), AND THE
INDEMNITOR WILL HAVE THE RIGHT TO INVESTIGATE, AND THE
RIGHT IN ITS SOLE DISCRETION TO ASSUME AND CONDUCT THE
DEFENSE OF OR SETTLE OR COMPROMISE, SUCH CLAIM, ACTION,
PROCEEDING OR LAWSUIT.
HOWEVER, IF IN THE REASONABLE OPINION OF THE INDEMNITEE,
SUCH DEFENSE, SETTLEMENT OR COMPROMISE INVOLVES THE
POTENTIAL IMPOSITION OF CRIMINAL LIABILITY ON THE
INDEMNITEE OR A CONFLICT OF INTEREST BETWEEN THE
INDEMNITOR AND THE INDEMNITEE, THE INDEMNITOR WILL NOT BE
ENTITLED TO ASSUME AND CONDUCT THE DEFENSE OF ANY SUCH
CLAIM, ACTION, PROCEEDING OR LAWSUIT. THE INDEMNITEES
WILL BE ENTITLED, AT THEIR OWN EXPENSE, ACTING THROUGH
ONE (1) COUNSEL, TO PARTICIPATE IN ANY CLAIM, ACTION,
PROCEEDING OR LAWSUIT THE DEFENSE OF WHICH HAS BEEN
ASSUMED BY THE INDEMNITOR PURSUANT TO THE PRECEDING
PROVISIONS, PROVIDED, THAT SUCH PARTICIPATION DOES NOT,
IN THE REASONABLE OPINION OF INDEPENDENT COUNSEL OF THE
INDEMNITOR, INTERFERE WITH THE CONDUCT OF SUCH DEFENSE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, NO SETTLEMENT
OR COMPROMISE WILL BE ENTERED INTO WITHOUT THE PRIOR
WRITTEN CONSENT OF THE INDEMNITEE, WHICH CONSENT WILL NOT
BE UNREASONABLY WITHHELD OR DELAYED. EACH INDEMNITEE WILL
COOPERATE WITH THE INDEMNITOR IN THE INVESTIGATION AND
CONDUCT OF THE DEFENSE OF ANY CLAIM, ACTION, PROCEEDING
OR LAWSUIT INDEMNIFIED HEREUNDER.
IN THE EVENT THAT THE INDEMNITOR DOES NOT ASSUME AND
CONDUCT THE DEFENSE OF THE CLAIM OR LAWSUIT, THEN THE
INDEMNITEE WILL HAVE THE RIGHT TO PROCEED WITH THE
DEFENSE OF THE CLAIM OR LAWSUIT AS IT DEEMS APPROPRIATE
AND WILL HAVE AN ACTION AGAINST THE INDEMNITOR FOR ANY
JUDGMENTS, SETTLEMENTS, COSTS OR EXPENSES INCURRED IN
CONDUCTING SAID DEFENSE. FOR THE PURPOSE OF THIS
SUBCLAUSE 15.6, A CLAIM OR LAWSUIT AGAINST THE
MANUFACTURER OR ANY OF THE ASSOCIATED CONTRACTORS OR ANY
OF THEIR RESPECTIVE SUBCONTRACTORS OR ANY OF THEIR
RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES WILL
BE DEEMED TO BE A CLAIM OR LAWSUIT AGAINST THE SELLER.
15.6.5 INSURANCE
FOR THE PERIOD OF PERFORMANCE DESCRIBED IN THIS CLAUSE,
THE BUYER WILL
(I) INDEMNIFY AND WAIVE ANY RIGHTS OF RECOURSE OR
SUBROGATION AGAINST THE SELLER, THE MANUFACTURER
AND ASC, AND EACH OF THE ASSOCIATED CONTRACTORS
AND THEIR RESPECTIVE SUBCONTRACTORS AND THEIR
RESPECTIVE DIRECTORS, OFFICERS, AGENTS,
EMPLOYEES AND SUBCONTRACTORS IN RESPECT OF ALL
RISKS HULL INSURANCE POLICY, AND
(II) EFFECT INSURANCE TO COVER THIRD-PARTY LIABILITY
RISKS ARISING DURING SAID PERFORMANCE IN AN
AMOUNT SATISFACTORY TO THE SELLER, NAMING THE
SELLER AND ITS DIRECTORS, OFFICERS, AGENTS AND
EMPLOYEES AS ADDITIONAL INSURED.
SUCH INSURANCE WILL CONTAIN A CROSS-LIABILITY CLAUSE AND
WILL ALSO CONTAIN A THIRTY (30)-DAY NOTICE-OF-CANCELLATION
PROVISION. UPON REQUEST, THE BUYER WILL DELIVER TO THE
SELLER A CERTIFICATE OF INSURANCE EVIDENCING THE
COVERAGE REQUIRED BY THIS CLAUSE.
16 - TRAINING
16.1 Scope
The Seller will provide or cause to be provided for the
Buyer's personnel training described in this Clause 16
("Training").
16.2 Course Organization and Administration
16.2.1 Location and Scheduling
In general, Training will be held either at the Airbus
Service Company Training Center, in Miami, Florida (the
"ATC-Miami"), or at the Airbus Training Center in
Toulouse, France (the "ATC-Toulouse"). Subject to
availability of training slots at the time and at the
selected location, the location of the Training will be
at the Buyer's choice. The Seller will ensure that the
Buyer's training plans (to be provided to the Seller
reasonably in advance of the delivery of Aircraft) are
implemented for a safe and smooth entry-into-service of
the Aircraft. However, certain Training courses may also
be held at the Buyer's base or other location, if
practicable, under terms and conditions to be mutually
agreed. The Buyer's training plans will include: (i)
just-in-time (determined on a reasonable basis) training
of flight crews, (ii) all necessary simulator time for
regular transition courses, and (iii) aircraft experience
for check pilots, and (iv) maintenance, dispatch and
flight attendant training.
Training courses will be scheduled for a minimum and
maximum number of participants, at dates mutually agreed
during a training conference to be held as soon
as practicable (the "Training Conference").
16.2.2 Course Content
Training courses will include features of the
Specifications required for training purposes, as known
at the latest six (6) months before the first Training
course starts. The Seller will endeavor to incorporate
training features that become known after the six-month
deadline. When the Seller does not provide maintenance or
flight attendant training on the Seller's approved Buyer
Furnished Equipment, the Seller will ensure that the
Buyer gets the relevant training support from the
supplier of the said equipment. Training courses will be
FAA approved "Transition Courses." The Seller will
provide the Buyer with A330/A340 differences training for
flight crew, maintenance, dispatch and/or flight
attendant personnel.
Training equipment used for flight and maintenance crew
training will reflect the Specifications as closely as
possible and will meet requirements to receive and
maintain the relevant FAA course approval. Maintenance
training will not assume prior knowledge of any Airbus
aircraft. The Seller will be responsible for all Training
course syllabi, training aids, equipment and materials.
16.2.3 Course Guidelines
Courses are designed and approved to bring jet transport
specialists to a professional knowledge of the Aircraft
and satisfy FAA requirements for training and checking.
The Seller will use reasonable efforts to satisfy the
Buyer's requirements and policies regarding training.
In addition:
(i) Training will be conducted in English, and all
training materials are written in English using
common aeronautical terminology.
(ii) Pilot trainees will have the prerequisite jet
transport category experience defined in
Appendix "A" to this Clause 16.
(iii) Avionics courses (listed in Appendix "B" to this
Clause 16) are designed for avionics specialists
knowledgeable of ARINC 429 liaisons.
(iv) The Buyer will give the Seller a list of
trainees enrolling in each Training course.
(v) The Seller will not be liable for the
unsatisfactory performance of individual
trainees for any reason solely and directly
outside the Seller's control.
(vi) The Seller will consult with the Buyer if the
Seller finds that a trainee lacks entry-level
knowledge. After such consultation, the trainee
will either be cycled through an entry-level
training program or be withdrawn from the
Training course. All costs associated with such
entry-level program and with the cancellation of
the scheduled transition training will be
charged to the Buyer's account.
(vii) The Seller will give all trainees who
satisfactorily complete Training courses a
certificate of completion including the
instructor's name and identification number.
This certificate will not represent authority or
qualification by any official civil aviation
authority, although it may be presented to such
authority as an attestation of completion of the
Seller's training courses.
(viii) An extension in duration, a repetition or a
deviation from the standard of any course to be
given or in progress (for reasons due to the
Buyer, including, but not limited to,
unsatisfactory performance of the trainees) will
be provided on the Buyer's request and/or on the
Seller's advice and subject to mutual agreement.
***
16.2.4 Additional Training
Besides the free-of-charge Training courses provided
pursuant to Subclause 16.3, the Seller will offer
additional training courses and training services at the
Buyer's expense, subject to availability.
16.2.5 Training at the Buyer's Base
16.2.5.1 At the Buyer's request, and if practicable, the Training
will be provided by the Seller's instructors at any
location other than ATC-Miami or ATC-Toulouse. ***
The Buyer may provide the Seller with air travel for the
Seller's instructors to and from ATC-Miami or
ATC-Toulouse, as applicable, and the place of assignment.
16.2.5.2 The Training equipment necessary for course performance
on the Buyer's request at any location other than
ATC-Miami or ATC-Toulouse will be provided by the Buyer
in accordance with the Seller's specifications. In the
event the Buyer cannot make available the relevant
equipment, the Seller will use reasonable efforts to
provide this equipment and send it by air from Miami,
Florida, or Toulouse, France, to the course location and
back to Miami, Florida, or Toulouse, France, at the
Buyer's expense.
16.2.6 Practical Training on Aircraft
16.2.6.1 [INTENTIONALLY LEFT BLANK]
16.2.6.2 Any *** Flight Crew Training involving the use of an
aircraft will be done on the Buyer's delivered Aircraft.
Should the Buyer require on-aircraft Flight Crew Training
to be done before delivery of the first Aircraft, then
(i) the Seller will help the Buyer find a substitute
aircraft, and
(ii) ***.
When on-aircraft Flight Crew Training is performed at
ATC-Toulouse, the Seller will provide free-of-charge line
maintenance, including servicing, preflight checks and
changing of minor components for the contractual training
sessions. In the case that the training is performed on
the Buyer's aircraft, the Buyer will provide a mutually
agreed batch of spare parts as required to support said
training and will bear all other expenses such as fuel,
oil and landing fees. In the event that the Seller is not
able to provide sufficient simulator time to train the
Buyer's crews, and it becomes necessary to use the
Aircraft instead, the Seller will compensate the Buyer US
$*** (US dollars-***) per flight hour.
Finally, the Buyer will meet the requirement for a
certificate of insurance set forth below in Subclause
16.6.5.
16.2.7 Buyer's Personnel Transportation
When flight crew, flight attendant, dispatch and
maintenance Training is done at ATC-Toulouse, the Seller
will provide free-of-charge local transportation by bus
for the Buyer's trainees to and from designated pick-up
points and the training center. The Seller will also
provide each flight crew with a rental car (with
unlimited mileage, the Buyer paying for gas) or taxi
transportation at the end of ground school to enable
crews to attend either simulator or flight sessions.
When training is done at ATC-Miami, the Seller will
provide a free-of-charge rental car (with unlimited
mileage, the Buyer paying for gas) or taxi transportation
for all of the Buyer's trainees, at the beginning of the
Training course. Due to local laws, the Buyer's trainees
must be over twenty-one (21) years of age to drive rental
cars.
16.2.8 Duration
The Training allowances provided in Subclause 16.3 will
be available ***.
16.3 Training Courses
16.3.1 Flight Crew Courses
16.3.1.1 Flight Crew Transition Course
The Seller will train free of charge *** flight crews
(each of which consists of a captain and a first officer)
per delivered Aircraft in accordance with the Buyer's
operational requirements. The courses will be either the
standard A330/A340 Flight Crew Transition course or, at
the election of the Buyer, the A320/A330/A340 Cross-Crew
Qualification ("CCQ") course for the pilots transitioning
from the A319 and/or A320 aircraft. The training manual
will be the Airbus Industrie Flight Crew Operating Manual
(FCOM) or the Buyer's flight crew training manual at the
Buyer's option. The Buyer's standard operating procedures
will be incorporated into the Seller's Flight Crew
Transition course, provided that the Buyer provides the
Seller such procedures at least one (1) month prior to
the start of the first Flight Crew Transition course. The
Buyer will receive no compensation from the Seller should
the Buyer elect to perform some Flight Crew Transition
courses partially or totally on dry lease.
16.3.1.2 Flight Crew Initial Operating Experience
To assist the Buyer with ETOPS/non-ETOPS Initial
Operating Experience during the Buyer's introduction of
the Aircraft into revenue service, the Seller will
provide the Buyer, or cause to be provided to the Buyer,
instructor-pilots free of charge *** to be used up to
nine (9) months after entry into service of the first
Aircraft. This assistance will be provided on the
Aircraft.
***
16.3.1.3 Flight Instructor Familiarization Course
The Seller will provide a certain number of the Buyer's
Instructor pilots with a Flight Instructor
Familiarization Course.
16.3.2 Maintenance Courses
16.3.2.1 Maintenance Training
The Seller will provide free-of-charge Training courses
for ground personnel for a total of *** trainee-days of
instruction. The range of maintenance courses is listed
in Appendix "B" to this Clause 16. The Buyer may elect to
use part of this Training allowance to perform some
maintenance training classes at another US carrier on a
space available basis.
The trainee days will be counted as follows:
(i) For instruction at ATC-Miami or at ATC-Toulouse,
the total number of trainee days counted will be
the number of trainees enrolled at the beginning
of a Training course multiplied by the number of
days of instruction.
(ii) For instruction at locations other than the
ATC-Miami or at the ATC-Toulouse, the total
number of trainee days counted will be the
greater of twelve (12) and the number of
trainees enrolled at the beginning of a Training
course multiplied by the number of days of
detachment of the Seller's
instructor(s).
16.3.2.2 Maintenance Initial Operating Experience
[INTENTIONALLY LEFT BLANK]
16.3.3 Flight Attendants/Operations/Performance Courses
The Seller will provide free of charge *** trainee days
of instruction to be used for the training courses listed
in Appendix "C" to this Clause 16. In the event the Buyer
would like the main features of the Specifications to be
covered during the aircraft visit of the Flight
Attendants Familiarization Course, such visit may be
given as of two (2) weeks before delivery of the first
Aircraft.
16.3.4 Familiarization Training
At the Buyer's request the Seller will conduct general
familiarization courses for the Buyer's employees.
Training allowance in Subclause 16.3.2.1 will be used to
cover such courses.
16.3.5 Vendors and Engine Manufacturer Training
The Seller will ensure that the major Vendors and the
Propulsion Systems manufacturer will provide maintenance
and overhaul training on their products at appropriate
times as required by the Buyer.
A list of such major Vendors will be supplied to the
Buyer on request.
16.4 Training Aids and Materials
16.4.1 Training Aids for Trainees at the Seller's Training Centers
For the purposes of this Subclause 16.4.1, it is
understood that training aids and materials provided to
the Buyer's trainees by the Seller (a) are supplied for
the sole and express purpose of providing Training in the
courses described in Subclause 16.3 of this Agreement and
therefore are labeled "For Training Only," (b) are free
of charge, (c) include all cockpit layouts, all printed
course materials, including manuals and supporting
documents. Computer hardware, software and Courseware
(including simulators and simulator data packages) and
all other equipment will be provided to the trainees
solely for use during the Seller's training courses.
Since the Training is for the Buyer's trainees only, the
Buyer undertakes not to divulge the contents of any
training aids or materials to any third party without the
prior agreement of the Seller, save as required pursuant
to any governmental, contractual or legal requirement
imposed upon the Buyer or as permitted by Subclause
16.4.2.
16.4.2 Training Aids for the Buyer's Training Organization
The Seller will provide free of charge *** sets of the
Courseware related to the Aircraft and similar to that
used by the Seller for the Buyer's training organization,
except as provided in this Subclause 16.4.2. Such
Courseware will be for the training of the Buyer's
personnel only and will include a revision service ***.
The Courseware to be provided to the Buyer will be:
(i) supplied with a license in the Buyer's name, and
(ii) compatible with the hardware platform defined by
the Aviation Industry CBT Committee (AICC),
which is fully approved by the Air Transport
Association and International Air Transport
Association.
***
Any additional sets of Courseware and/or any extension to
the Buyer's right to use such Courseware will be subject
to terms and conditions to be mutually agreed. General
conditions for the supply of the Courseware will apply
and will be detailed during the Training Conference.
16.5 Seller's Support
The Seller will help the Buyer with the development and
introduction of Aircraft training programs at the Buyer's
training center, on the Buyer's request and terms to be
agreed. The Seller will provide free-of-charge technical
assistance in modifying the standard Courseware routers
to the Buyer's in-house training programs.
16.6 INDEMNITY AND INSURANCE
16.6.1 SCOPE
IN CONNECTION WITH THE PROVISION OF SERVICES UNDER THIS
CLAUSE 16, THE BUYER AND THE SELLER PROVIDE THE
INDEMNITIES SET FORTH IN SUBCLAUSES 16.6.2 AND 16.6.3.
16.6.2 BUYER'S INDEMNITY
THE BUYER WILL INDEMNIFY AND HOLD HARMLESS THE SELLER,
THE MANUFACTURER, AND EACH OF THE ASSOCIATED CONTRACTORS
AND THEIR RESPECTIVE SUBCONTRACTORS AND THEIR RESPECTIVE
AFFILIATES, DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES
FROM AND AGAINST ALL LIABILITIES, DAMAGES, LOSSES, LOSS
OF USE, COSTS AND EXPENSES
(I) FOR ALL INJURIES TO AND DEATHS OF PERSONS
(EXCEPTING INJURIES TO AND DEATHS OF THE
SELLER'S REPRESENTATIVES PROVIDING THE SERVICES
UNDER THIS CLAUSE) CAUSED BY THE SELLER OR ITS
REPRESENTATIVES, AND
(II) FOR LOSS OF OR DAMAGE TO PROPERTY (EXCEPTING
LOSS OF OR DAMAGE TO PROPERTY OF THE SELLER'S
SAID REPRESENTATIVES), CAUSED BY THE SELLER OR
ITS REPRESENTATIVES.
ARISING OUT OF OR IN CONNECTION WITH THE PROVISION OF
SERVICES UNDER THIS CLAUSE 16.
THIS INDEMNITY OF THE BUYER WILL NOT APPLY FOR ANY SUCH
LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISING
OUT OF OR CAUSED BY THE WILLFUL MISCONDUCT OR GROSS
NEGLIGENCE OF THE SELLER'S, THE MANUFACTURER'S OR ANY OF
THE ASSOCIATED CONTRACTORS' OR THEIR RESPECTIVE
SUBCONTRACTORS' OR THEIR RESPECTIVE OFFICERS', AGENTS' OR
EMPLOYEES' SAID REPRESENTATIVES.
16.6.3 SELLER'S INDEMNITY
THE SELLER WILL INDEMNIFY AND HOLD HARMLESS THE BUYER,
ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND
AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND
EXPENSES
(I) FOR INJURIES TO OR DEATHS OF THE SELLER'S SAID
REPRESENTATIVES PROVIDING THE SERVICES UNDER THIS
CLAUSE,
(II) FOR LOSS OF OR DAMAGE TO PROPERTY OF THE SELLER'S
SAID REPRESENTATIVES, AND
(III) ARISING OUT OF OR CAUSED BY THE WILLFUL MISCONDUCT
OR GROSS NEGLIGENCE OF THE SELLER'S SAID
REPRESENTATIVES.
WITH RESPECT TO SUBCLAUSES (I) AND (II) OF THE PRECEDING
SENTENCE, THE SELLER WILL NOT BE OBLIGATED TO INDEMNIFY
OR HOLD HARMLESS THE BUYER WHERE THE SELLER'S
LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE
FROM THE BUYER'S WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.
16.6.4 CLAIMS
IN THE EVENT ANY CLAIM IS MADE OR LAWSUIT IS BROUGHT
AGAINST EITHER PARTY (OR ITS RESPECTIVE DIRECTORS,
OFFICERS, AGENTS OR EMPLOYEES) FOR DAMAGES FOR DEATH OR
INJURY OR FOR PROPERTY DAMAGE, THE LIABILITY FOR WHICH
HAS BEEN ASSUMED BY THE OTHER PARTY PURSUANT TO THIS
SUBCLAUSE 16.6, THE FORMER (INDEMNITEE) WILL PROMPTLY
GIVE NOTICE TO THE OTHER PARTY (INDEMNITOR), AND THE
INDEMNITOR WILL HAVE THE RIGHT TO INVESTIGATE, AND THE
RIGHT IN ITS SOLE DISCRETION TO ASSUME AND CONDUCT THE
DEFENSE OF OR SETTLE OR COMPROMISE, SUCH CLAIM, ACTION,
PROCEEDING OR LAWSUIT.
HOWEVER, IF IN THE REASONABLE OPINION OF THE INDEMNITEE,
SUCH DEFENSE, SETTLEMENT OR COMPROMISE INVOLVES THE
POTENTIAL IMPOSITION OF CRIMINAL LIABILITY ON THE
INDEMNITEE OR A CONFLICT OF INTEREST BETWEEN THE
INDEMNITOR AND THE INDEMNITEE, THE INDEMNITOR WILL NOT BE
ENTITLED TO ASSUME AND CONDUCT THE DEFENSE OF ANY SUCH
CLAIM, ACTION, PROCEEDING OR LAWSUIT. THE INDEMNITEES
WILL BE ENTITLED, AT THEIR OWN EXPENSE, ACTING THROUGH
ONE (1) COUNSEL, TO PARTICIPATE IN ANY CLAIM, ACTION,
PROCEEDING OR LAWSUIT THE DEFENSE OF WHICH HAS BEEN
ASSUMED BY THE INDEMNITOR PURSUANT TO THE PRECEDING
PROVISIONS, PROVIDED, THAT SUCH PARTICIPATION DOES NOT,
IN THE REASONABLE OPINION OF INDEPENDENT COUNSEL OF THE
INDEMNITOR, INTERFERE WITH THE CONDUCT OF SUCH DEFENSE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, NO SETTLEMENT
OR COMPROMISE WILL BE ENTERED INTO WITHOUT THE PRIOR
WRITTEN CONSENT OF THE INDEMNITEE, WHICH CONSENT WILL NOT
BE UNREASONABLY WITHHELD OR DELAYED. EACH INDEMNITEE WILL
COOPERATE WITH THE INDEMNITOR IN THE INVESTIGATION AND
CONDUCT OF THE DEFENSE OF ANY CLAIM, ACTION, PROCEEDING
OR LAWSUIT INDEMNIFIED HEREUNDER.
IN THE EVENT THAT THE INDEMNITOR DOES NOT ASSUME AND
CONDUCT THE DEFENSE OF THE CLAIM OR LAWSUIT, THEN THE
INDEMNITEE WILL HAVE THE RIGHT TO PROCEED WITH THE
DEFENSE OF THE CLAIM OR LAWSUIT AS IT DEEMS APPROPRIATE
AND WILL HAVE AN ACTION AGAINST THE INDEMNITOR FOR ANY
JUDGMENTS, SETTLEMENTS, COSTS OR EXPENSES INCURRED IN
CONDUCTING SAID DEFENSE. FOR THE PURPOSE OF THIS
SUBCLAUSE 16.6, A CLAIM OR LAWSUIT AGAINST THE
MANUFACTURER OR ANY OF THE ASSOCIATED CONTRACTORS OR ANY
OF THEIR RESPECTIVE SUBCONTRACTORS OR ANY OF THEIR
RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES WILL
BE DEEMED TO BE A CLAIM OR LAWSUIT AGAINST THE SELLER.
16.6.5 INSURANCE
FOR THE PERIOD OF PERFORMANCE DESCRIBED IN THIS CLAUSE,
THE BUYER WILL
(I) INDEMNIFY AND WAIVE ANY RIGHTS OF RECOURSE OR
SUBROGATION AGAINST THE SELLER, THE MANUFACTURER,
AND EACH OF THE ASSOCIATED CONTRACTORS AND THEIR
RESPECTIVE SUBCONTRACTORS AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND
SUBCONTRACTORS IN RESPECT OF ALL RISKS HULL
INSURANCE POLICY, AND
(II) EFFECT INSURANCE TO COVER THIRD-PARTY LIABILITY
RISKS ARISING DURING SAID PERFORMANCE IN AN
AMOUNT SATISFACTORY TO THE SELLER, NAMING THE
SELLER AND ITS DIRECTORS, OFFICERS, AGENTS AND
EMPLOYEES AS ADDITIONAL INSUREDS.
SUCH INSURANCE WILL CONTAIN A CROSS-LIABILITY CLAUSE AND
WILL ALSO CONTAIN A THIRTY (30)-DAY NOTICE-OF-CANCELLATION
PROVISION. UPON REQUEST, THE BUYER WILL DELIVER TO THE
SELLER A CERTIFICATE OF INSURANCE EVIDENCING THE
COVERAGE REQUIRED BY THIS CLAUSE.
CLAUSE 16 - APPENDIX "A"
RECOMMENDED PILOT EXPERIENCE
IN RELATION TO TRANSITION TRAINING
1. CAPTAINS
The Seller recommends that captains have a minimum of 1,000 hours'
experience in command of jet transport category aircraft prior to
transition training provided under Clause
16 of this Agreement.
2. SENIOR CO-PILOTS
Senior co-pilots upgrading to captain and who do not have the
recommended minimum described above in Paragraph 1 will be
considered for transition training provided under Clause 16 of
this Agreement on a case-by-case.
3. CO-PILOTS
The Seller recommends that copilots have a minimum of 500 hours'
experience operating transport aircraft, of which at least 300
hours' should be with jet transport aircraft. This recommended
minimum includes formal basic training.
4. ALL PILOTS
The Seller recognizes that some pilots have no experience with
FMS, AFCS, glass cockpits or two-person (as compared to
three-person) crews, features covered in the Seller's
"Introductory Course." Therefore, the Seller recommends that those
pilots take its "Introductory Course," before taking transition
training provided under Clause 16 of this Agreement. For pilots
who do not have jet transport experience, the Seller recommends
its "Jet Familiarization Course."
5. CROSS-CREW QUALIFICATION TRAINING ("CCQ")
In order to be entitled to take a CCQ course, all pilots will be
required to have a minimum of one hundred fifty (150) flight hours
on A319, A320 or A321 aircraft.
CLAUSE 16 - APPENDIX "B"
LIST OF STANDARD A330 MAINTENANCE COURSES
A330 Training
GM01 General Familiarization Course
GM02 Ramp Servicing Course
GM35 Line Mechanics Course
GM45 Line & Base Mechanics\Electrics Course
GM52 Line & Base Avionics\Electrics Course
GM42 Line & Base Mechanics\Avionics\Electrics Course
GM70 Engine Run Up Course
GM71 Engine Run Up & Taxing Course
GM09 Aircraft Rigging Course
GM10 Cabin Interior & Emergency Equipment Course
GM12 Mechanics\Electrics On Job Training Course
GM14 Avionics\Electrics On Job Training Course
GM22 Mechanics\Avionics\Electrics On Job Training Course
GM13 Maintenance Initial Operating Experience
GM18A1 ETOPS Maintenance Course
GM18A2 Accelerated ETOPS Maintenance Course
GM19 CAT II\ CAT III Course
XM15 Basic Digital
GM04 Cargo Loading & Handling Course
GM26 Field Trip
GM27 Simulator Sessions
GM28 Simulator plus Field Trip
XM29 Airbus Crew Resource Management Course
(For Maintenance Personnel)
Structure Courses
Shop Technicians
GSA1 Structure Maintenance for Technicians
XSA2 Basic Composite Repair for Technicians
XSA3 Advanced Composite Repair For Technicians
Inspectors
XSB1 NDT Inspection General
XSB2 Composite Structures NDT Inspections
Engineers
XSC1 Structure Repair for Engineers - Metallic Structures
XSC2 Materials and Processes for Engineers
CLAUSE 16 - APPENDIX "B"
LIST OF STANDARD A330 MAINTENANCE COURSES
Shortened Courses A319/A320/A321 ->A330
GM35S Line Mechanics Shortened Course
GM45S Line & Base Mechanics\Electrics Shortened Course
GM52S Line & Base Avionics\Electrics Shortened Course
GM42S Line & Base Mechanics\Avionics\Electrics Shortened Course
GM70S Engine Run Up Shortened Course
GM71S Engine Run Up & Taxing Shortened Course
CLAUSE 16 - APPENDIX "B"
LIST OF STANDARD A340 MAINTENANCE COURSES
A340 Training Maintenance Courses
FM01 General Familiarization Course
FM02 Ramp Servicing Course
FM35 Line Mechanics Course
FM45 Line & Base Mechanics\Electrics Course
FM52 Line & Base Avionics\Electrics Course
FM42 Line & Base Mechanics\Avionics\Electrics Course
FM70 Engine Run Up Course
FM71 Engine Run Up & Taxing Course
FM09 Aircraft Rigging Course
FM10 Cabin Interior & Emergency Equipment Course
FM12 Mechanics\Electrics On Job Training Course
FM14 Avionics\Electrics On Job Training Course
FM22 Mechanics\Avionics\Electrics On Job Training Course
FM13 Maintenance Initial Operating Experience
FM19 CAT II\ CAT III Course
XM15 Basic Digital
FM04 Cargo Loading & Handling Course
FM26 Field Trip
FM27 Simulator Sessions
FM28 Simulator plus Field Trip
XM29 Airbus Crew Resource Management Course
(For Maintenance Personnel)
Structure Courses
Shop Technicians
FSA1 Structure Maintenance for Technicians
XSA2 Basic Composite Repair for Technicians
XSA3 Advanced Composite Repair For Technicians
Inspectors
XSB1 NDT Inspection General
XSB2 Composite Structures NDT Inspections
Engineers
XSC1 Structure Repair for Engineers - Metallic Structures
XSC2 Materials and Processes for Engineers
CLAUSE 16 - APPENDIX "B"
LIST OF STANDARD A340 MAINTENANCE COURSES
Shortened Courses A319/A320/A321 ->A340
FM35S Line Mechanics Shortened Course
FM45S Line & Base Mechanics\Electrics Shortened Course
FM52S Line & Base Avionics\Electrics Shortened Course
FM42S Line & Base Mechanics\Avionics\Electrics Shortened Course
FM70S Engine Run Up Shortened Course
FM71S Engine Run Up & Taxing Shortened Course
CLAUSE 16 - APPENDIX "C"
LIST OF A330 OPERATIONS/PERFORMANCE COURSES
A330 Training
GG01 Management Survey Course Airbus documentation & programs (G02A2)
GG02 Performance Engineer Course
*Airbus Programs (G02A1)
*Airbus documentation & programs (G02A2)
*Airbus systems & documentation & programs (G02A3)
*Airbus systems & documentation & programs & theory
(G02A4)
GG03 Dispatcher transition Course *Airbus documentation &
performance (G03A1) *Airbus systems & documentation &
performance (G03A2) *ETOPS qualifications (G03A3) *Airbus
documentation,,performance & ETOPS (G03A4)
GG06 Weight & Balance Engineer Course
*Balance Chart Design (G06A1)
*Balance Chart Design & Load Master Transition Course (G06A2)
GG07 Load Master Transition Course
GFC5 Flight Crew Ground Instructor's Course
CLAUSE 16 - APPENDIX "C"
LIST OF A340OPERATIONS/PERFORMANCE COURSES
A340 Training
FG01 Management Survey Course
FG02 Performance Engineer Course
*Airbus Programs (G02A1)
*Airbus documentation & programs (G02A2)
*Airbus systems & documentation & programs (G02A3)
*Airbus systems & documentation & programs & theory
(G02A4)
FG03 Dispatcher transition Course *Airbus documentation &
performance (G03A1) *Airbus systems & documentation &
performance (G03A2)
FG06 Weight & Balance Engineer Course
*Balance Chart Design (G06A1)
*Balance Chart Design & Load Master Transition Course (G06A2)
FG07 Load Master Transition Course
FFC5 Flight Crew Ground Instructor's Course
17 - VENDORS' PRODUCT SUPPORT
17.1 Vendor Product Support Agreements
17.1.1 The Seller has obtained product support agreements
transferable to the Buyer from Vendors of Seller
Furnished Equipment listed in the Specifications
("Product Support Agreements").
17.1.2 These Product Support Agreements are based on the "World
Airlines and Suppliers Guide" and include Vendor
commitments as contained in the Supplier Product Support
Agreements, which include the following provisions:
17.1.2.1 Technical data and manuals required to operate, maintain,
service and overhaul the Vendor items. Such technical
data and manuals will be prepared in accordance with the
applicable provisions of ATA Specification 100 and 101 in
accordance with Clause 14 of this Agreement, will include
revision service and will be published in the English
language. The Seller recommends that software data,
supplied in the form of an appendix to the Component
Maintenance Manual, be provided in compliance with ATA
Specification 102 up to level 3.
17.1.2.2 Warranties and guarantees including Vendors' standard
warranties. In addition, Vendors of landing gear will
provide service life policies for landing gear
structures.
17.1.2.3 Training to ensure efficient operation, maintenance and
overhaul of the Vendors' items for the Buyer's
instructors, shop and line service personnel.
17.1.2.4 Spares data in compliance with ATA Specification 200 or
2000, initial provisioning recommendations, spares and
logistics service, including routine and emergency
deliveries.
17.1.2.5 Technical service to assist the Buyer with maintenance,
overhaul, repair, operation and inspection of Vendor
items as well as required tooling and spares
provisioning.
17.2 Vendor Compliance
The Seller will monitor Vendor compliance with support
commitments defined in the Product Support Agreements and
will promptly take remedial action.
17.3 Vendor Part Repair Stations
17.3.1 The Manufacturer has developed with the Vendors a program
aimed at building a comprehensive network of repair
stations in North America for those Vendor Parts
originating from outside this territory.
17.3.2 As a result of the above, most Vendor Parts are now
repairable in North America, and corresponding repair
stations are listed in a document, the AOG and Repair
Guide, which is issued and regularly updated by the
Manufacturer.
The Seller undertakes that the Vendor Parts that have to
be forwarded for repair outside North America will be
sent back to the Buyer with proper tagging as required
by the FAA.
17.3.3 The Seller will support the Buyer in cases where the
agreed repair turn time of an approved repair station is
not met by causing free-of-charge loans or exchanges (as
specified in the relevant Supplier Product Support
Agreements manual) to be offered to the Buyer ***.
18 - BUYER FURNISHED EQUIPMENT AND DATA
18.1 Installation and Delivery
18.1.1 Without additional charge, and in accordance with the
Specifications, the Seller will cause the Manufacturer to
provide for the installation of the Buyer Furnished
Equipment.
18.1.2 The Seller will cause the Manufacturer to advise the
Buyer reasonably in advance of the dates by which, in the
planned release of engineering for an Aircraft, the
Manufacturer requires a written detailed description of
the dimensions and weight of Buyer Furnished Equipment
for such Aircraft and information necessary for the
installation and operation thereof, and the Buyer will
furnish such detailed description and information by the
dates so specified. Such dimensions and weights will not
thereafter be revised unless mutually agreed and set
forth in an SCN.
18.1.3 The Seller will also cause the Manufacturer to furnish
reasonably in advance (but in no event less than eight
(8) months prior to the scheduled delivery date) to the
Buyer a schedule of dates by and locations to which Buyer
Furnished Equipment for such Aircraft must be delivered
to the Manufacturer to permit installation in and
delivery of such Aircraft in accordance with the delivery
schedule referred to in Clause 9. The Buyer will furnish
such equipment to the Manufacturer at such locations by
such dates. The Buyer, at its own expense, will also
furnish or cause to be present at the works where such
Buyer Furnished Equipment is to be installed, when
requested by the Manufacturer, field service
representatives to provide the Manufacturer technical
advice regarding the installation and calibration of
Buyer Furnished Equipment.
18.2 Specification and Airworthiness Approvals
The Buyer will ensure that all Buyer Furnished Equipment
will meet the requirements of the Specifications, will
comply with applicable DGAC and FAA regulations and will
be approved by the DGAC and the FAA for installation and
use on an Aircraft at the time of delivery of such
Aircraft. The Seller will bear no expense in connection
with adjusting and calibrating Buyer Furnished Equipment
to the extent necessary to obtain DGAC and FAA approval,
unless such adjusting and calibrating is made necessary
by improper installation by the Seller of the Buyer
Furnished Equipment.
18.3 Delay and Nonperformance
Any delay or failure in complying with the obligation in
the foregoing Subclause 18.2, in providing the
descriptive information and services mentioned in
Subclause 18.1 hereof, in furnishing the Buyer Furnished
Equipment or in obtaining any required approval of such
equipment under the DGAC or FAA regulations *** will be,
to the extent that such delay or failure will in turn,
(i) delay the performance of any act to be performed
by or on behalf of the Seller or the
Manufacturer, or
(ii) cause the Final Contract Price of the Aircraft
to be increased by the amount of the Seller's
reasonable additional costs, if any,
attributable to such delay or failure by the
Buyer, including, without limitation, storage,
taxes, insurance and costs of out-of-sequence
installation,
the responsibility of the Buyer, and any resulting cost
will be borne by the Buyer.
Further, in any such event, the Seller may elect to take
any of the actions set forth below in Subclauses 18.3.2,
18.3.3 or 18.3.4:
18.3.2 The Seller will be entitled to cause the Manufacturer to
select, purchase and install the Buyer Furnished
Equipment involved, in which event the Final Contract
Price of the affected Aircraft will be increased by the
purchase price of such Buyer Furnished Equipment plus
reasonable costs and expenses incurred by the
Manufacturer for handling charges, transportation,
insurance, packaging and, if so required and not already
provided for in the Final Contract Price of such
Aircraft, for adjustment and calibration.
18.3.3 If (i) delivery of the Buyer Furnished Equipment is
delayed by more than thirty (30) days after the date
specified by the Manufacturer for the delivery of such
Buyer Furnished Equipment or (ii) the Buyer Furnished
Equipment required to obtain certification of the
Aircraft in accordance with Subclause 2.3 hereof is not
approved by the DGAC or FAA within thirty (30) days after
the date specified by the Manufacturer for the delivery
of such Buyer Furnished Equipment, then, notwithstanding
the terms of Subclause 2.3, the Seller will be entitled
to deliver the affected Aircraft without installing the
Buyer Furnished Equipment, but otherwise in full
compliance with the terms, conditions and requirements of
this Agreement (including, without limitation, Subclause
2.3) and all performance guarantees. Upon such delivery
the Seller will be relieved of all obligations to install
such Buyer Furnished Equipment.
18.3.4 If (i) the Buyer Furnished Equipment is delayed by more
than thirty (30) days after the date specified by the
Manufacturer for the delivery of such Buyer Furnished
Equipment or (ii) the Buyer Furnished Equipment is not
required for certification of the Aircraft and is not
approved by the DGAC or FAA within thirty (30) days after
the date specified by the Manufacturer for the delivery
of such Buyer Furnished Equipment, then the Seller will
be entitled to deliver the Aircraft with no obligation to
install such Buyer Furnished Equipment. The Buyer may
also elect to have the Aircraft so delivered, whereupon
the Seller will be relieved of all obligations to install
such Buyer Furnished Equipment.
18.4 Tax-Free Zones
The Buyer will cause all Buyer Furnished Equipment to be
delivered at its own expense to the tax-free zone at the
following address, unless the Seller notifies the Buyer
otherwise in writing. Final destinations are specified in
the Buyer Furnished Equipment delivery instructions.
AEROSPATIALE, SOCIETE NATIONALE INDUSTRIELLE
316, Route de Bayonne
31300 TOULOUSE
FRANCE
The Seller represents and warrants that there are no
taxes, duties, imposts or similar charges of any nature
whatsoever in connection with the delivery of Buyer
Furnished Equipment in the tax-free zone specified above
(or subsequently by the Seller).
18.5 Risk of Loss
Title to and risk of loss of Buyer Furnished Equipment
will at all times remain with the Buyer. When Buyer
Furnished Equipment is in the possession of the Seller,
the Seller will have only such responsibility therefor as
is chargeable by law to a bailee for hire, but will not
be liable for loss of use.
18.6 Seller-Supplied Buyer Furnished Equipment
If the Buyer requests the Seller to cause the
Manufacturer to supply directly certain items that are
considered Buyer Furnished Equipment pursuant to the
Specifications, and if compliance with such request by
the Seller and the Manufacturer in their judgment will
not affect the delivery date of an Aircraft referred to
in Clause 9, then the Seller will order such items
subject to the execution of an SCN reflecting the effect
on price and any other items and conditions of this
Agreement. In such a case, the Seller will be entitled to
the payment of a reasonable handling charge (with respect
to Buyer Furnished Equipment not manufactured by the
Manufacturer) and will bear no liability in respect of
any delay caused and product support commitments assumed
by the Vendor of such Buyer Furnished Equipment, provided
that the Seller has exercised due diligence in procuring
such Buyer Furnished Equipment. The provisions of
Subclauses 18.2 and 18.3 will apply to Buyer Furnished
Equipment covered under this Subclause 18.6 in the event
of any delay in approval or delivery of such Buyer
Furnished Equipment.
18.7 ***
19 - ASSIGNMENT
19.1 Successors and Assigns
Subject to the provisions of this Subclause 19.1, this
Agreement will inure to the benefit of and be binding
upon the successors and assigns of the parties hereto.
This Agreement will not be assigned in whole or in part
by either party without the prior written consent of the
other party, such consent not to be unreasonably
withheld. Notwithstanding anything herein to the
contrary, the Seller may at any time, without the Buyer's
consent, assign any of its rights to receive money, and
any of its duties to effect sale and delivery of any
Aircraft, or any of its responsibilities, duties or
obligations to perform any other obligations hereunder to
the Manufacturer, any of the Associated Contractors, ASC
or any Affiliate of the Seller, the Manufacturer or of
any Associated Contractor provided that (i) such
assignment will not release or diminish the obligations
and liabilities of the Seller hereunder or in respect of
any Aircraft and (ii) such assignment does not increase
the obligations, liabilities, risk, burden, costs or
expenses of the Buyer hereunder.
19.2 Seller's Designations
The Seller may at any time by notice to the Buyer
designate particular facilities or particular personnel
of the Manufacturer, ASC, any of the Associated
Contractors or any Affiliate of the Manufacturer or any
Associated Contractor at which or by whom the services to
be performed under this Agreement will be performed
provided that (i) such designation will not release or
diminish the obligations and liabilities of the Seller
hereunder or in respect of any Aircraft, and (ii) such
designation does not increase the obligations,
liabilities, risk, burden, costs or expenses of the Buyer
hereunder. The Seller may also designate the
Manufacturer, any Associated Contractor or any Affiliate
of the Manufacturer or any Associated Contractor as the
party responsible on behalf of the Seller for providing
to the Buyer all or any of the services described in this
Agreement provided that (i) such designation will not
release or diminish the obligations and liabilities of
the Seller hereunder or in respect of any Aircraft, and
(ii) such designation does not increase the obligations,
liabilities, risk, burden, costs or expenses of the Buyer
hereunder.
19.3 Assignment in Case of Resale or Lease
In the event of the resale or lease of any Aircraft,
pursuant to a financing arrangement, by the Buyer before,
upon, or after delivery thereof to the Buyer, the Buyer's
rights with respect to such Aircraft under this
Agreement, other than the Buyer's rights under Clauses 3,
14, 15, 16 and 17 hereof and Letter Agreements hereto,
other than Letter Agreement No. 1, may be assigned to the
extent necessary to complete the financing on
commercially reasonable terms. The Seller will consent to
such assignment provided that, prior to such assignment,
the Buyer furnishes to the Seller a true copy of such
agreement with such purchaser or lessor, clearly stating
that such purchaser or lessor acknowledges that it is
bound by and will comply with all applicable terms,
conditions and limitations of this Agreement.
19.4 ***
19.5 ***
19.6 ***
20 - DATA RETRIEVAL
On the Seller's reasonable request, the Buyer may provide
the Seller with data customarily compiled by the Buyer
and pertaining to the operation of the Aircraft, to
assist the Seller in making an efficient and coordinated
survey of all reliability, maintenance, operational and
cost data with a view to improving the safety,
availability and operational costs of the Aircraft.
21 - TERMINATION FOR CERTAIN EVENTS
21.1 Seller's Termination Rights
21.1.1 Any of the following will be considered a material breach
of the Buyer's obligations under this Agreement
("Material Breach"):
(1) The Buyer or any other party will commence any
case, proceeding or other action with respect to
the Buyer in any jurisdiction relating to
bankruptcy, insolvency, reorganization or relief
from debtors or seeking a reorganization,
arrangement, winding-up, liquidation,
dissolution or other relief with respect to its
debts and such case, proceeding or action
remains undismissed or unstayed for more than
ninety (90) consecutive days.
(2) An action is commenced seeking the appointment
of a receiver, trustee, custodian or other
similar official for the Buyer for all or
substantially all of its assets and such action
remains undismissed or unstayed for more than
ninety (90) consecutive days, or the Buyer makes
a general assignment for the benefit of its
creditors.
(3) An action is commenced against the Buyer seeking
issuance of a warrant of attachment, execution,
distraint or similar process against all or any
substantial part of its assets and such action
remains undismissed or unstayed for more than
ninety (90) consecutive days.
(4) The Buyer generally admits in writing that it is
unable to pay its debts as they come due.
(5) There is a voluntary liquidation, winding up or
analogous event with respect to the Buyer.
(6) The Buyer is in default on its obligation to
make any Predelivery Payment pursuant to
Subclause 6.2 of this Agreement and ***.
(7) The Buyer defaults on any payment obligation
relating to any Aircraft and such default is not
cured within the applicable grace periods, with
respect to ***.
(8) The Buyer is in default for more than thirty
(30) consecutive days in its obligation to take
delivery of an Aircraft as provided in Subclause
9.3 of this Agreement, subject to the provisions
of Subclause 22.3.4.
21.1.2 In the event of any Material Breach by the Buyer, the
Seller will at its option by written notice to the Buyer
have the right to resort to any remedy provided herein or
under applicable law, including, without limitation, the
right by written notice, effective immediately, to (i)
suspend its performance with respect to undelivered
Aircraft under the Agreement, (ii) reschedule the
delivery dates for Aircraft or for other goods and
services to be provided with respect to undelivered
Aircraft, (iii) terminate this Agreement with respect to
any or all undelivered Aircraft, and to any or all
services, data and other items with respect to
undelivered Aircraft on the effective date of such
termination and (iv) retain, as part of the damages for
breach and not as a penalty, an amount equal to all
Predelivery Payments and all other payments made
theretofore under this Agreement.
21.2 ***
21.2.1 ***
21.2.2 ***
22 - MISCELLANEOUS PROVISIONS
------------------------
22.1 Notices
All notices and requests required or authorized hereunder
will be given in writing either by personal delivery to a
responsible officer of the party to whom the same is
given or by commercial express courier, facsimile or
other mutually agreeable electronic transmission at the
addresses and numbers set forth below. The date upon
which any such notice or request is so personally
delivered, or if such notice or request is given by
commercial express courier, facsimile or other electronic
transmission, the date upon which sent, will be deemed to
be the effective date of receipt of such notice or
request.
The Seller will be addressed at:
2, rond-point Maurice Bellonte
31700 BLAGNAC FRANCE
Attention: Director - Contracts
Telephone: (33) 5 61 30 40 12
Fax: (33) 5 61 30 40 11
Telex: AVSA 521155F
The Buyer will be addressed at:
2345 Crystal Drive
Arlington, VA 22227
Attention: Vice President, Purchasing
Telephone: 703-872-5918
Fax: 703-872-5936
with a copy to the attention of the Buyer's
Office of the General Counsel at the same
address:
Attention: Aircraft Counsel
Fax: 703-872-5252
From time to time, the party receiving the notice or
request may designate another address or another person.
22.2 Waiver
The failure of either party to enforce at any time any of
the provisions of this Agreement, to exercise any right
herein provided or to require at any time performance by
the other party of any of the provisions hereof will in
no way be construed to be a present or future waiver of
such provisions nor in any way to affect the validity of
this Agreement or any part hereof or the right of the
other party thereafter to enforce each and every such
provision. The express waiver by either party of any
provision, condition or requirement of this Agreement
will not constitute a waiver of any future obligation to
comply with such provision, condition or requirement.
22.3 INTERPRETATION AND LAW; SUBMISSION TO JURISDICTION;
WAIVER OF IMMUNITY; DISPUTE RESOLUTION
22.3.1 INTERPRETATION AND LAW
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND THE
PERFORMANCE THEREOF WILL BE DETERMINED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS
CONVENTION ON THE INTERNATIONAL SALE OF GOODS WILL NOT
APPLY TO THIS TRANSACTION.
22.3.2 SUBMISSION TO JURISDICTION
EACH OF THE BUYER AND THE SELLER IRREVOCABLY AGREES THAT
ANY LEGAL ACTION OR PROCEEDING ARISING UNDER THIS
AGREEMENT MAY BE BROUGHT AND DETERMINED IN THE SUPREME
COURT OF THE STATE OF NEW YORK, NEW YORK COUNTY, IN THE
GENERAL DISTRICT COURTS OF FAIRFAX COUNTY OR ARLINGTON
COUNTY, VIRGINIA, OR IN THE UNITED STATES DISTRICT COURTS
FOR THE SOUTHERN DISTRICT OF NEW YORK, OR THE EASTERN
DISTRICT OF VIRGINIA AND IRREVOCABLY ACCEPTS WITH REGARD
TO ANY SUCH ACTION OR PROCEEDING THE NONEXCLUSIVE
JURISDICTION OF THOSE COURTS.
The Seller hereby irrevocably designates CT Corporation,
New York City offices, to receive for and on its behalf
service of process in any proceeding with respect to any
matter as to which it submits to jurisdiction as set
forth above, it being agreed that service upon CT
Corporation will constitute valid service upon the Seller
in any legal action or proceeding with respect to this
Agreement.
22.3.3 Waiver of Immunity
The Seller irrevocably waives the benefit of Articles 14
and 15 of the French Civil Code, for the purpose of this
Agreement. The Seller hereby irrevocably waives, and
agrees not to assert, the defense of sovereign immunity,
and, to the extent permitted by law, the defense that the
action or proceeding is brought in an inconvenient forum,
that the venue of the action or proceeding is improper,
or that this Agreement may not be enforced in or by such
courts.
22.3.4 ***
22.4 Confidentiality
Subject to any legal or governmental requirements of
disclosure, the parties (which for this purpose will
include their employees, agents and advisors) will
maintain the terms and conditions of this Agreement, any
reports or other data furnished, and other documents
furnished by the Seller hereunder strictly confidential.
Without limiting the generality of the foregoing, each
party will use its best efforts to limit the disclosure
of the contents of this Agreement to the extent legally
permissible in any filing required to be made by it with
any governmental agency and will make such applications
as will be necessary to implement the foregoing. With
respect to any public disclosure or filing, the
disclosing party agrees to submit to the other party a
copy of the proposed document to be filed or disclosed
and will give the other party a reasonable period of time
in which to review the said document. The Buyer and the
Seller will consult with each other prior to the making
of any public disclosure or filing, permitted hereunder,
of this Agreement or the terms and conditions thereof.
The provisions of this Subclause 22.4 will survive any
termination of this Agreement.
22.5 Severability
In the event that any provision of this Agreement should
for any reason be held to be without effect, the
remainder of this Agreement will remain in full force and
effect. To the extent permitted by applicable law, each
party hereto hereby waives any provision of law which
renders any provision of this Agreement prohibited or
unenforceable in any respect.
22.6 Alterations to Contract
This Agreement, including its Exhibits, Appendixes and
Letter Agreements, contains the entire agreement between
the parties with respect to the subject matter hereof and
thereof and supersedes any previous understanding,
commitments or representations whatsoever, whether oral
or written (including, without limitation, that certain
AVSA Term Sheet dated July 2, 1998 (Reference AVSA
5211.9), between the Seller and the Buyer and all letter
agreements ancillary thereto). This Agreement will not be
varied except by an instrument in writing of even date
herewith or subsequent hereto executed by both parties or
by their fully authorized representatives.
22.7 Inconsistencies
In the event of any inconsistency between the terms of
this Agreement and the terms contained in either (i) the
Specifications, or (ii) any other Exhibit or Letter
Agreement attached to this Agreement, in each such case
the terms of such Specifications, Exhibit or Letter
Agreement will prevail over the terms of this Agreement.
For the purpose of this Subclause 22.7, the term
Agreement will not include the Specifications or any
other Exhibit or Letter Agreement hereto.
22.8 Language
All correspondence, documents and any other written
matters in connection with this Agreement will be in
English.
22.9 Headings
All headings in this Agreement are for convenience of
reference only and do not constitute a part of this
Agreement.
22.10 Counterparts
This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and
delivered will be an original, but all such counterparts
will together constitute but one and the same instrument.
IN WITNESS WHEREOF, these presents were entered into as of the day and year
first above written.
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
Title: Director Contracts
US Airways Group, Inc.
By: /s/ Thomas A. Fink
Title: Treasurer
CONSENT AND GUARANTY
Airbus Industrie, G.I.E., established under "Ordonnance"
No. 67-821 dated September 23, 1967, of the Republic of France (the
"Guarantor"), hereby acknowledges notice of and consents to all of the
terms of the Airbus A330/A340 Purchase Agreement dated as of November 24,
1998 (as amended, modified, or supplemented from time to time, the
"Agreement"), between AVSA, S.A.R.L. (the "Seller"), and US Airways Group,
Inc. (the "Buyer"), including, without limitation, the assignments of the
Seller's rights under its agreements with the Guarantor, contained in
Clauses 12 and 13, Letter Agreements Nos. 1, 8A, 8B, 8C and 8D, 9, 10, 12
and 13 of such Agreement, and hereby irrevocably and unconditionally
guarantees the due and punctual payment and performance by the Seller of
all of the latter's liabilities and obligations as set forth in the said
Agreement subject to the terms and limitations therein contained. The
Guarantor hereby agrees that its obligations hereunder will be
unconditional and absolute and, without limiting the generality of the
foregoing, will not be released, discharged or otherwise affected by (i)
any modification or amendment of or supplement to said Agreement (other
than release, discharge or waiver of this guarantee hereunder) or (ii) any
assignment of said Agreement or of any rights or obligations thereunder
made in accordance with Clause 19 thereof. The Guarantor further agrees
that it will execute and deliver such other and further instruments as may
be reasonably requested by the Buyer (as such term is defined in the said
Agreement), its successors or assigns to reaffirm its obligations
hereunder. This Consent and Guaranty constitutes a guaranty of performance
and of payment, and the Guarantor agrees that, in case of default by the
Seller, the Buyer will not be required to file suit against the Seller as a
condition to enforcement of this Consent and Guaranty.
The Guarantor irrevocably agrees that any legal action or
proceeding against the Guarantor with respect to this Consent and Guaranty
may be brought and determined in the Supreme Court of the State of New
York, New York County, in the General District Courts of Fairfax County or
Arlington County, Virginia, in the United States District Courts for the
Southern District of New York or the Eastern District of Virginia, or in
the commercial Court ("Tribunal de Commerce") of Toulouse, France, and
irrevocably accepts with regard to any such action or proceeding the
nonexclusive jurisdiction of those courts. The Guarantor irrevocably waives
the benefit of Articles 14 and 15 of the French Civil Code. The Guarantor
hereby irrevocably waives, and agrees not to assert, the defense of
sovereign immunity, and, to the extent permitted by law, the defense that
the action or proceeding is brought in an inconvenient forum, that the
venue of the action or proceeding is improper, or that this Consent and
Guaranty may not be enforced in or by such courts. However, the preceding
sentence will not be construed as a waiver of any requirement of service of
process. The Guarantor hereby irrevocably designates CT Corporation as the
Guarantor's agent to receive service of process in any legal action or
proceeding with respect to this Consent and Guaranty.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND THE
PERFORMANCE THEREOF WILL BE DETERMINED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
Airbus Industrie, G.I.E.,
By /s/ Jean-Marc Orlando
----------------------
Title: VP Financial Reporting
and Treasury
By /s/ Benoit Debains
------------------------
Title: VP Finance
EXHIBIT "A-1"
The A330-200 Standard Specification is contained in a separate folder.
EXHIBIT "A-2"
The A330-300 Standard Specification is contained in a separate folder.
EXHIBIT "A-3"
The A340-200 Standard Specification is contained in a separate folder.
EXHIBIT "A-4"
The A340-300 Standard Specification is contained in a separate folder.
EXHIBIT "B"
Change Orders to Standard Specification (SCNs)
[INTENTIONALLY LEFT BLANK]
EXHIBIT "B"
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
REF TITLE BFE A330-300 COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
USA11G001C Interior placards *** As per A319
USA11G002C Additional certificate holders As per A319
USA11G003C Additional exterior markings *** As per A319
USA11G004C Cargo bay placard "NO LIVE ANIMALS" *** For each cargo bay which is not
heated.
11-35-101-01 Cargo placards in both kilos and pounds ***
21-20-110-01 Cabin Recirc filter alternate *** Le bozec or Pall
22-70-100-01 New standard for FMS *** Sextant
22-70-116-01 Automatic erasing of flight path data after landing
23-71-175 st Installation of Cockpit Voice Recorder *** 2 Hour Unit basic 980-6022-001
23-11-134-xx Installation of dual HF BFE *** Allied signal 964-0452-001
23-50-126-15 Installation of Alternate Boomsets *** Telex as per A319 P/N 64300-110
23-12-130-xx Third VHF system installation all three radios VDR *** Sextant ###-##-####A
BASIC Installation of FANS A inc ATSU and DCDUs BFE *** Allied signal for ACARS software.
23-28-116-xx Installation of High Gain or Intermediate Gain
SATCOM system BFE *** Choice of Collins or Honeywell
for Avionics
Choice of Top or Side mounted
antennas Allied Signal, Ball,
Marconi
26-23-106-02 Fire extinguisher system for fwd and aft cargo
compartments alt vendor *** HTL - Extended duration to cover
180 mins ETOPS
26-21-107-std Engine Fire extinguishing Bottles alt vendor *** HTL as per A319
26-24-110-01 Alternate cockpit portable fire extinguisher *** TOTAL as per A319
27-92-101-02 Simultaneous sidestick indication (aural/visual)
28-25-11x-01 Relocation of refuel panel to LH wing ***
28-25-117-01 Additional refuel/defuel couplings on LH wing ***
31-33-114-st Installation of SSFDR *** Allied signal 980-470-003
31-00-128-01 Use of US units rather than metric ***
31-14-103-01 Overhead toggle panel switch reorientation ***
31-52-102-01 OEB Reminder function ***
32-40-134-xx Wheels and Brakes selection *** Choice of Allied Signal, ABS, BF
Goodrich-Messier.
USA32G001C Installation of small bore tyre valves. ***
USA33G001A "Please turn off electronic devices " signs ***
34-10-113-01 ADIRS equipment 4MCU *** Litton
34-43-113-01 Installation TCAS II BFE *** Allied signal
BASIC TCAS display option *** Sextant p/n C124-04-AA01
BASIC ATC transponders Arinc 900 *** Allied signal
34-55-102-03 VOR/Marker alternate vendor *** Allied signal
34-42-100-01 Radio altitude automatic call outs ***
34-41-151-01 Dual Weather radar system installation with
Predictive windshear system *** Allied signal
34-51-108-06 DME interrogator Arinc 900 *** Allied signal
34-48-128-01 Installation of Enhanced GPWS *** Allied Signal Unit
34-58-310-11 Installation of a Multi Mode Receiver (Replaces
ILS and GPS) *** Sextant
BASIC Reduced Vertical Seperation Minima ***
USA34G001A Standby instruments on LCD display *** Sextant
USA34G002A Weather radar specific Control panel *** Allied signal
USA34G003A Optional warnings for EGPWS ***
USA34G004A Removal of the ADF receivers and antenna ***
35-11-112-01 Flight crew O2 bottle 115 cuft steel ***
35-30-106-04 Alternate PBE installation in cockpit *** Scott
USA38G001A Cold weather package installation ***
25-50-222-01 Heated cargo drainage system ***
USA51G001A Exterior paint process *** Courtaulds desothane
USA51G002A Exterior painting of non standard surfaces,
wings, ths, ths fairing, nacelles. ***
USA51G003A Painted exterior markings ***
USA51G004A Additional corrosion protection using AV8 and
AV30 from Dinotrol ***
USA55G001C Anti erosion protection on fin leading edge. ***
56-10-104-01 Cockpit windows *** PPG
72-00-118-01 Engine selection ***
79-20-100-xx ESSO 2380 engine and APU oil ***
BASIC Boarding music via Audio reproducer BFE ***
BASIC System provisions and installation for pax
audio entertainment BFE ***
USA23G001A System povisions and Installation of IN seat
video all pax inc airshow (Sony VOD) BFE *** All pax ISV, inc In-seat
telephones, and PVIS but not
O/Head monitors
USA24G001A System provisions for Electrically powered F/C
seats and B/C including PC power for SFE ***
USA24G002A Installation of PC power supply at each Y/C
Pax seat SFE ***
USA23G003A Modified wiring seat to seat in first class *** F/C only seat to seat cables under
floor to allow deletion of seat
track covers.
USA23G002A CIDS Definition *** Same definition as per A319
USA25G00XA Installation of individual pax air outlets ***
Installation of additional C/A seats out of
flexibility concept *** Total of 14 Cabin Attendant seats
all std (No high comfort ones)
Installation of Galley cooling for Five galleys BFE *** Chillers are BFE ducting and
structural installation SFE
Installation of additional Galley BFE *** 6 galleys basic USA request 7
Installation of additional lavatory *** 8 lavs basic in spec USA request 9
Installation of H/C lavatory block U/V ***
Installation of stowages BFE *** Includes VCC all stowages with
cooling up to 1KW, curtain rails
and partitions.
Installation of doghouses BFE ***
Colour specification BFE *** Textiles only are BFE
Installation of NTF in Galley entrance area BFE ***
Installation of NTF in Lavs BFE ***
Installation of Textile covered bulkheads BFE *** Charge for SFE bulkheads only
Installation of textile covered dado panels BFE ***
Installation of SFE waste bins on ctr lavs lavs
(L62 L61) ***
Lav interior definition *** Bi folding doors, and associated
options refer to CCG
Seat row numbering in OHSC hand rails ***
Tedlar covered OHSC doors ***
Cabin Attendant seats covered with leather BFE ***
CABIN LAYOUT IS BASED ON A###-##-#### REV A
USA52G002A Common cockpit door key ***
USA25G002A Inst. of slide rafts at Type A doors SFE ***
33-50-011 Installation of DA/Air signia EEPMS *** As per A319
35-22-021 Additional OXY masks throughout the cabin *** One additional oxy max per box
throughout the cabin.
All prices are in jan 98 delivery conditions. ***
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
REF TITLE BFE A330-300 COMMENTS A319 A330-200 A340-300
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
21-28-100-01 Installation of aft cargo ventilation system ***
21-28-101-01 Installation of aft cargo ventilation system with
increased cooling ***
21-28-105-01 Installation of Ventilation and Heating system for
FWD cargo compt *** *** *** ***
21-28-106-01 Fwd cargo temp selection on cargo compartment
servicing panel *** requires prior
acceptance of
21-28-105-01 Fwd
Cargo compt vent
and temp control
21-28-107-01 Ground vent installation for bulk and fwd cargo
compartment ***
25-51-107-01 Continuous side guides in fwd cargo compartment ***
25-51-108-01 Continuous side guides in aft compartment ***
25-51-112-01 continuous entrance guides rear of aft cargo
compartment door ***
25-52-100-01 Installation of additional tie-down points in the
forward cargo compartment ***
25-52-117-01 Installation of a pallet stop in the ballmat area
of the fwd cargo compartment ***
25-53-100-01 Alternate LD3 position with four 96 in pallets in
the aft cargo compartment ***
25-53-102-01 LD2 container transport in aft cargo compartment ***
25-54-126-01 LD3 container capability in Bulk cargo compartment ***
notes 1) All prices are catalogue prices and have been
reduced by 15% as per agreement.
2) All prices are in delivery conditions 1/98.
</TABLE>
EXHIBIT "C"
AVSA SCN No.
SPECIFICATION CHANGE NOTICE Issue
(SCN) Dated
Page No.
TITLE
DESCRIPTION
EFFECT ON WEIGHT
Manufacturer's Weight Empty Change:
Operational Weight Empty Change:
Allowable Payload Change:
REMARKS/REFERENCES
Response to RFC
SPECIFICATION CHANGED BY THIS SCN
THIS SCN REQUIRES PRIOR OR CONCURRENT ACCEPTANCE OF THE FOLLOWING SCN(s)
PRICE PER AIRCRAFT
US DOLLARS: Base Year: _____________ Current Year: ___________
AT DELIVERY CONDITIONS: ________________________________________________
This change will be effective on ____________________ Aircraft No. _______
and subsequent provided approval is received by __________________________.
BUYER APPROVAL SELLER APPROVAL
By: By:
Title: (Authorized finance department officer) Date:
By:
Title: (Authorized maintenance or flight operations officer)
Date:
AVSA SCN No.
SPECIFICATION CHANGE NOTICE Issue
(SCN) Dated
Page No.
After contractual agreement with respect to weight, performance, delivery,
etc., the indicated part of the specification wording will read as follows:
AVSA SCN No.
SPECIFICATION CHANGE NOTICE Issue
(SCN) Dated
Page No.
SCOPE OF CHANGE (FOR INFORMATION ONLY)
EXHIBIT "D"
SELLER SERVICE LIFE POLICY
1. The Items of primary and auxiliary structure described
hereunder are covered by the Service Life Policy described in
Subclause 12.2 of the Agreement.
2. WINGS - CENTER AND OUTER WING BOX
2.1 Spars, Spar Webs, Chords and Stiffeners
2.2 Ribs Inside the Wing Box
2.3 Upper and Lower Panels of the Wing Box
2.4 Fittings
2.4.1 Attachment fittings for the flap structure
2.4.2 Attachment fittings for the engine pylons and engine mounts
2.4.3 Attachment fittings and support structure for the main
landing gear
2.4.4 Attachment fittings for the center wing box
2.4.5 Wing-to-body structural attachments
2.5 Auxiliary Support Structure
2.5.1 For the slats:
2.5.1.1 Ribs supporting the track rollers on wing box structure
2.5.1.2 Ribs supporting the actuators on wing box structure
2.5.2 For the ailerons:
2.5.2.1 Hinge brackets and ribs on wing box rear spar or shroud box
2.5.2.2 Actuator fittings/support stays on wing box rear spar or
shroud box
2.5.3 For airbrakes, spoilers, lift dumpers:
2.5.3.1 Hinge brackets and ribs on wing box rear spar or shroud box
2.5.3.2 Actuator fittings on wing box rear spar or shroud box
2.5.3.3 Trailing edge support structure
2.6 Engine pylons
3. FUSELAGE
3.1 Fuselage Structure
3.1.1 Fore and aft bulkheads
3.1.2 Pressurized floors and bulkheads surrounding/including the
main and nose gear wheel well and center wing box
3.1.3 Skins with doublers, stringers/longitudinal stringers and
frames from the forward pressure bulkheads to the frame
supporting the rear attachment of horizontal stabilizer
3.1.4 Window and windscreen attachment structure but excluding
transparencies
3.1.5 Escape hatches
3.1.6 Passenger and cargo doors internal structure and fixed attachment
3.1.7 Sills excluding scuff plates and upper beams surrounding
passenger and cargo door apertures
3.1.8 Cockpit floor structure and passenger cabin floor beams
excluding floor panels and seat rails
3.1.9 Keel beam structure
3.2 Fittings
3.2.1 Landing gear attachment fittings
3.2.2 Support structure and attachment fittings for the vertical
and horizontal stabilizers
4. STABILIZERS
4.1 Horizontal Stabilizer Main Structural Box
4.1.1 Spars, chords, webs and stiffeners
4.1.2 Ribs
4.1.3 Upper and lower skins and stringers
4.1.4 Attachment fittings to fuselage and trim screw actuator
4.1.5 Elevator support structure
4.1.5.1 Hinge bracket
4.1.5.2 Servocontrol attachment brackets
4.2 Vertical Stabilizer Main Structural Box
4.2.1 Spars, chords, webs and stiffeners
4.2.2 Ribs
4.2.3 Skins and stringers
4.2.4 Attachment fittings to fuselage
4.2.5 Rudder support structure
4.2.5.1 Hinge brackets
4.2.5.2 Servocontrol attachment brackets
5. Bearing and roller assemblies, bearing surfaces, bushings,
bolts, rivets, access and inspection doors, including manhole
doors, latching mechanisms, all system components, commercial
interior parts, insulation and related installation and
connecting devices are excluded from this Seller Service Life
Policy.
EXHIBIT "E"
CERTIFICATE OF ACCEPTANCE
In accordance with the terms of that certain Airbus A330/A340 Purchase
Agreement (the "Purchase Agreement") dated as of , 19___ between AVSA,
S.A.R.L. ("AVSA") and US Airways Group, Inc. (the "Buyer"), the acceptance
inspection relating to the AIRBUS [A330] [A340] aircraft (the "Aircraft"),
manufacturer's serial no. , FAA Registration No.:__________, with ____ (__)
series propulsion systems installed thereon, serial nos. (position #1),
(position #2)[, (position #3), and (position #4)] has taken place at
[Toulouse, --------- --------- ----------- France,] on the ______ day of
________, -----.
In view of said inspection having been carried out with satisfactory
results, the Buyer hereby accepts delivery of the Aircraft as being in
conformity with the provisions of the Purchase Agreement.
This acceptance will not impair the rights of the Buyer that derive from
the warranties and patent indemnities relating to the Aircraft set forth in
the Purchase Agreement.
The Buyer specifically recognizes that it has waived any right it may have
at law or otherwise to revoke this acceptance of the Aircraft.
RECEIPT AND ACCEPTANCE OF THE
ABOVE-DESCRIBED AIRCRAFT
ACKNOWLEDGED
US Airways Group, Inc.
By:___________________________
Title: _________________________
EXHIBIT "F"
TECHNICAL PUBLICATIONS
GENERAL
This Exhibit F lists the form, type, quantity and delivery
dates for the Technical Publications to be provided to the
Buyer pursuant to Clause 14 of the Agreement.
The Technical Publications are published in accordance with
ATA Specification 100 revision 23, with the exception of
certain Component Maintenance Manuals, which may be written
to an ATA Specification 100 revision other than revision 23.
The designation "C" after the title of a Technical
Publication indicates that such Technical Publication may be
customized.
EXHIBIT "F"
1. ENGINEERING DOCUMENTS
1.1 Installation and Assembly Drawings (IAD)--C
The IAD will be delivered according to the Buyer's standard
for the major Assembly and Installation drawings, including
detail drawings.
1.2 Parts Usage Data (PU)
The PU provides the next higher assembly and associated
effectivity for a part.
1.3 Schedules Lists (S)
The S lists the detail parts called up on corresponding
drawings, enabling to go from the assembly down to the detail
part.
1.4 Drawing Number Index (DNI)--C
The DNI lists applicable drawings of the Aircraft delivered
under the Agreement.
1.5 Electrical Load Analysis (ELA)
The ELA details the electrical load on each busbar and is
delivered once only with first of each aircraft type.
1.6 Process and Material Specification (PMS)
The PMS contains data related to manufacturing processes,
material identification and treatments used in the
construction and assembly of the Aircraft.
1.7 Standards Manual (SM)
The SM contains data about Seller approved standards and
includes cross reference lists. The SM will include US
standards/equivalents for all hardware clamps, O-rings,
bearings, fasteners, sealants, adhesive and compounds, raw
materials, processes and procedures.
2. MAINTENANCE AND ASSOCIATED MANUALS
2.1 APU Build-up Manual (ABM)
The ABM follows the format adopted for the Power Plant
Build-up Manual.
2.2 Aircraft Maintenance Manual (AMM)--C
The component location section of the AMM will show those
components detailed in the AMM maintenance procedures. The
trouble shooting part is covered in Subparagraph 2.21 below.
*Aircraft Maintenance Manual Chapter 05 Time Limits (Service
Life Limits) and Maintenance Checks are only delivered in
hard copies.
2.3 Aircraft Schematics Manual (ASM)--C
The ASM is part of the Wiring Manual. Supplied as a separate
manual for schematics.
2.4 Aircraft Wiring Manual (AWM)--C
The AWM is part of the Wiring Manual. Supplied as a separate
manual for wirings.
2.5 Aircraft Wiring Lists (AWL)--C
The AWL is part of the Wiring Manual. Supplied as a separate
document for lists. The AWL includes wire terminations,
connector, terminal, strip locations, wire routings, and
clamping diagrams.
2.6 Component Location Manual (CLM)
The CLM identifies and illustrates the location of all Line
Replacement Units.
2.7 Consumable Material List (CML)
The CML details the characteristics and gives procurement
sources of consumable materials such as grease, oil, etc.
2.8 Duct Repair Manual (DRM)
The DRM contains all the data necessary to locate, identify,
repair and/or replace sub-assemblies of metallic ducts. It
also includes details of tests necessary after repair.
2.9 Fuel Pipe Repair Manual (FPRM)
The FPRM provides workshop repair procedures and data for
specific fuel pipes, after removal from any aircraft of the
Manufacturer of the type of the Aircraft.
2.10 Illustrated Parts Catalog (IPC)--C
The IPC identifies and illustrates all line replaceable parts
and units of the aircraft, excluding the power plant parts.
2.11 Illustrated Parts Catalog (power plant) (PPIPC)--C
The PPIPC covers line replaceable parts and units of the
power plant, provided by the Propulsion Systems manufacturer.
2.12 Illustrated Tool and Equipment Manual (TEM)
The TEM provides information on Ground Equipment and Tools
listed in the Seller's Aircraft Maintenance Manual.
2.13 Maintenance Facility Planning (MFP)
The MFP provides information that will assist airline
personnel concerned with long term planning of ramp or
terminal operations, Aircraft maintenance on the ramp and in
the hangar, overhaul and testing of structure and system
components.
2.14 Maintenance Planning Document (MPD)
The MPD provides maintenance data necessary to plan and
conduct Aircraft maintenance checks and inspections.
2.15 Power Plant Build-up Manual (PPBM)
The PPBM provides instructions for the installation of a
quick engine change kit on a bare engine.
2.16 Support Equipment Summary (SES)
The SES lists support equipment recommended by the Seller,
the Propulsion Systems manufacturer and Vendors.
2.17 Time Limits and Maintenance Checks/Service Limits and
Maintenance Checks (TLMC\SLMC)
The TLMC\SLMC document provides the Manufacturer's
recommended scheduled time limits for inspections and
maintenance checks.
2.18 Tool\Equipment Drawings (TED)
TED's will be supplied in the form of aperture cards for the
Seller and, when available, Vendor maintenance tools.
2.19 Tool and Equipment Drawing Index (TEI)
The TEI is an alpha-numeric listing of the TED's.
2.20 Trouble Shooting Manual (TSM)--C
The TSM complements the CFDS and provides trouble-shooting
data in the following three levels:
Level 1 - Aimed at line use. Fault isolation guidance for
systems or parts of systems monitored mainly by
CFDS. Also guidance for systems not monitored by
CFDS.
Level 2 - Aimed at hangar use. Fault isolation guidance
for non-CFDS monitored systems in the form of
functional block diagrams, charts and tables.
Level 3 - Aimed at engineering use. List of CFDS messages
and decoding of trouble shooting data (decoding
of coded messages provided by the CFDS). Level 3
is supplied on floppy disk.
2.21 Aircraft Documentation Retrieval System (ADRES)
This system allows the retrieval of the Aircraft Maintenance
Manual (AMM) and the Illustrated Parts Catalog (IPC).
2.22 Computer Assisted Aircraft Troubleshooting (CAATS)
CAATS contains extracts from the Aircraft Maintenance Manual
(AMM) and Illustrated Parts Catalog (IPC) and the complete
Trouble Shooting Manual (TSM) and provides an efficient
trouble-shooting aid on CD-ROM.
3. MISCELLANEOUS DOCUMENTATION
3.1 Airplane Characteristics for Airport Planning (AC)
The AC will be in general accordance with Specification NAS
3601.
3.2 Aircraft Recovery Manual (ARM)
The ARM provides the following planning information:
preparing and moving a disabled aircraft that may be
obstructing airport traffic.
3.3 Cargo Loading System Manual (CLS)
The CLS details handling procedures for the Cargo Loading
System.
3.4 Crash Crew Chart (CCC)
The CCC provides information concerning access to the
Aircraft interior, location of safety equipment, hazardous
liquids, etc.
3.5 Guidelines for Customer Originated Changes (GCOC)
The GCOC provides production and presentation rules for the
data covering Buyer originated changes on the Aircraft to be
incorporated by the Seller in the Technical Publications as
per Subclause 14.11 of the Agreement.
3.6 List of Radioactive and Hazardous Elements (LRE)
The LRE provides information on components and materials for
which specific precautions have to be taken.
3.7 List of Applicable Publications (LAP)--C
The LAP will record the Seller's various Airframe Technical
Publications indicating the last valid revision number and
issue date.
3.8 Livestock Transportation Manual (LTM)
The LTM details the facilities, equipment and procedures
necessary for live animal transportation in aircraft of the
Manufacturer of the type of the Aircraft.
3.9 Service Bulletins (SB)--C
The Buyer will receive all Service Bulletins applicable to
the Aircraft.
3.10 Service Information Letters (SIL)
SILs give information of a general nature and also about
minor changes or inspections the Buyer may wish to apply
under the Buyer's authority.
3.11 Technical Publications Combined Index (TPCI)
The TPCI is an electronic index. It is used for easy
identification of the index references and links the
following documents: MOD, SB, SIL, TFU, AOT, OIT, FOT, OEB,
AD and CN.
3.12 Transportability Manual (TM)
The TM gives cargo hold dimensions for currently available
cargo Aircraft, transportation information and requirements
for large Aircraft components. Component dimensions, weights
and shelf life limitations are also given.
3.13 Supplier Product Support Agreements (SPSA)
The SPSA is a collection of product support conditions
negotiated by the Manufacturer with the suppliers of Aircraft
equipment.
3.14 Vendor Information Manual (VIM)
The VIM provides Vendor contact information.
3.15 Vendor Information Manual (GSE) (VIM/GSE)
The VIM/GSE gives contact names and addresses of Ground
Support Equipment (GSE) vendors and their product support
organizations.
4. OPERATIONAL MANUALS
4.1 Check List\Abnormal\Emergency\Quick Reference Handbook
(CL\QRH)--C
The CL is an extract from the FCOM presented as a booklet for
quick in-flight use.
4.2 FAA Approved Flight Manual (FM)--C
The AFM provides Aircraft performance operating limitations
and other flight data required by the relevant airworthiness
authorities for certification. It includes the Configuration
Deviation List (CDL).
4.3 Flight Crew Operating Manual (FCOM)--C
The FCOM provides Aircraft and systems descriptions, normal,
abnormal and emergency procedures as well as operational
performance.
4.4 Master Minimum Equipment List (MMEL)
The MMEL defines the components and the related conditions
under which, when the components are defective, the Aircraft
may be cleared for flight. In addition, the MMEL provides the
necessary information to establish the Buyer's own Minimum
Equipment List (MEL).
4.5 Performance Engineer's Program (PEP)
The PEP consists of a Low Speed Performance data base and a
High Speed Performance data base together with their
respective programs. The Performance Engineering Program may
be used by the Buyer under the license conditions set forth
in Appendix A to this Exhibit F.
The Low Speed Performance programs consist of the Take-off
and Landing Chart computation program (TLC) which permits the
computation of:
- regulatory take-off and landing performance,
- noncertified take-off performance accounting for runway
data and weather, together with the Tabulation and
Interpolation program (TAB), issued with the AFM, which
permits the reading, editing and interpolation of the tables
listed in the AFM.
The High Speed Performance programs are the In Flight
Performance computation program (IFP) which permits
computation of Aircraft performance for each flight phase and
the Aircraft Performance Monitoring program (APM) which
permits analysis of Aircraft cruise performance from data
recorded during stabilized flight periods.
4.6 Performance Program Manual (PPM)
The PPM is the users' guide for the Performance Engineering
Program (PEP).
4.7 Weight and Balance Manual (WBM) and
Weight and Balance Manual Supplements--C
The corresponding supplements:
-Delivery Weighing Report,
-Equipment List,
will be delivered with each Aircraft.
5. OVERHAUL DATA
5.1 Cable Fabrication Manual (CFM)
The CFM contains all the data necessary to locate, identify,
manufacture and test control cables used on the Aircraft. An
appendix contains cable end fitting specification sheets, and
detailed manufacturing instructions.
5.2 Component Documentation Status (CDS)--C
The CDS lists Component Maintenance Manuals in accordance
with Subparagraphs 5.4 and 5.5 below.
5.3 Component Evolution List (CEL)
The CEL is a noncustomized document listing all components on
the Aircraft and also gives the evolution of each component.
The information is provided in order of:
- part number
- FSCM
- ATA reference.
5.4 Component Maintenance Manual Manufacturer (CMMM)
The CMMM contains all the data necessary to locate, identify
and maintain Aircraft components manufactured by the
Manufacturer.
5.5 Component Maintenance Manual Vendor (CMMV)
The Seller will to ensure that each Vendor of repairable
components will deliver to the Buyer a Component Maintenance
Manual Vendor with revision service.
6. STRUCTURAL MANUALS
6.1 Nondestructive Testing Manual (NTM)
The NTM supplies Airframe data necessary to carry out
nondestructive testing.
6.2 Structural Repair Manual (SRM)
The SRM contains descriptive information for identification
and repair of the Airframe primary and secondary structure
and will include substantial structural analysis.
FORM
AC APERTURE CARD. Refers to 35mm film contained on punched aperture
cards.
CD CD-ROM.
D FLOPPY DISK
F MICROFILM. Refers to 16mm roll film in 3M type cartridges.
MP Refers to paper printed one side, unpunched quality will be
suitable for further reproduction or microfilming.
MT MAGNETIC TAPE
P1 PRINTED ONE SIDE. Refers to manuals in paper with print on one
side of the sheets only.
P2 PRINTED BOTH SIDES. Refers to manuals with print on both sides of
the sheets.
SMF SILVER MASTER FILM. Refers to thick diazo film suitable for
further reproduction.
+ Denotes a combined A319/A320/A321/A330/A340 Technical Publication.
* Denotes Technical Publications will be supplied in SGML format if
such format becomes available from the Manufacturer.
TYPE
C CUSTOMIZED. Refers to manuals which are customized to specific MSNs.
E ENVELOPE. Refers to manuals which are not customized.
P PRELIMINARY. Refers to preliminary data or manuals which may
consist of:
-either one time issue not maintained by revision service, or
-preliminary issues maintained by revision service until final
manual or data delivery, or
-supply of best available data under final format with progressive
completion through revision service.
DELIVERY
Manual delivery is expressed either as the number of days prior to delivery
of the first Aircraft or as nil (0), which designates the date of delivery
of the first Aircraft.
It is agreed that the number of days indicated will be rounded up to the
next regular revision release date.
MANUALS AVAILABLE (headlines)
1 - ENGINEERING DOCUMENTS
2 - MAINTENANCE & ASSOCIATED MANUALS
3 - MISCELLANEOUS PUBLICATIONS
4 - OPERATIONAL MANUALS AND DATA
5 - OVERHAUL DATA
6 - STRUCTURAL MANUALS
<TABLE>
<CAPTION>
MANUALS AVAILABLE Abbr Form Type Qty. Rev Deliv.
---- ---- ---- ---- --- ------
(detailed)
1. ENGINEERING DOCUMENTS
<S> <C> <C> <C> <C> <C> <C> <C>
* Installation and Assembly IAD AC C *** AN1 0
Drawings (including detail
drawings)
Parts Usage (Effectivity) PU F E *** AN 0
* Schedule (Drawing S F E *** AN 0
Nomenclature)
* Drawing Number Index DNI P1 C *** AN 0
+ Process and Material PMS F E *** AN 90
* Specification
+ Standards Manual SM F E *** AN 90
SMF E *** AN 90
* Electrical Load Analysis ELA P2 E *** AN 0
- ------------
1 Revision service for the manufacture drawings is restricted to cover
the Aircraft configuration at delivery.
</TABLE>
<TABLE>
<CAPTION>
MANUALS AVAILABLE Abbr Form Type Qty. Rev Deliv.
---- ---- ---- ---- --- ------
(detailed)
2. MAINTENANCE & ASSOCIATED MANUALS
<S> <C> <C> <C> <C> <C> <C> <C>
APU Build-up Manual ABM P2 E *** AN 90
Aircraft Maintenance Manual AMM F C *** 4 90
SMF C *** 4 90
MP C *** 4 90
P2 C *** 4 90
MT C *** 4 90
Aircraft Schematics Manual ASM SMF C *** 4 90
MT C *** 4 90
F C *** 4 90
MP C *** 4 90
P1 C *** 4 90
SGML C *** 4 90
Aircraft Wiring Manual AWM SMF C *** 4 90
F1 C *** 4 90
MP C *** 4 90
MT C *** 4 90
SGML C *** 4 90
Aircraft Wiring Lists AWL P2 C *** 4 90
F C *** 4 90
SMF C *** 4 90
SGML C *** 4 90
</TABLE>
<TABLE>
<CAPTION>
MANUALS AVAILABLE Abbr Form Type Qty. Rev Deliv.
---- ---- ---- ---- --- ------
(detailed)
<S> <C> <C> <C> <C> <C> <C> <C>
+ Consumable Material List CML F E *** AN 90
*
Component Location Manual CLM P C *** 4 90
Duct Repair Manual DRM P2 E *** AN 90
SMF E *** AN 90
Fuel Pipe Repair Manual FPRM P2 E *** AN 90
SMF E *** AN 90
Illustrated Parts Catalog IPC F C *** 4 90
(Airframe) and Additional SMF C *** 4 90
Cross-Reference Table
Illustrated Parts Catalog PIPC MT C *** 4 90
(Power Plant)5 MP C *** 4 90
F C *** 4 90
SMF C *** 4 90
* Illustrated Tool and TEM P2 E *** AN 360
Equipment Manual
* Maintenance Facility Planning MFP P2 E *** AN 360
</TABLE>
- ------------
5 Supplied by the Propulsion Systems Manufacturer
<TABLE>
<CAPTION>
MANUALS AVAILABLE Abbr Form Type Qty. Rev Deliv.
---- ---- ---- ---- --- ------
(detailed)
<S> <C> <C> <C> <C> <C> <C> <C>
* Maintenance Planning MPD P2 E *** AN 360
Document
Power Plant Build-up Manual PPBM P2 E *** AN 90
5 F E *** AN 90
SMF E *** AN 90
+ Support Equipment Summary SES P2 E *** AN 360
* F E *** AN 360
SMF E *** AN 360
Time Limits and Maintenance TLMC/ P2 C *** 4 180
Checks/Service Limits and SLMC
Maintenance Checks
+ Tool and Equipment Drawings TED AC E *** AN 360
* Tool and Equipment Drawing TEI P2 E *** AN 360
Index
Trouble Shooting Manual TSM F C *** 4 90
SMF C *** 4 90
P2 C *** 4 90
</TABLE>
- ----------------
5 Supplied by the Propulsion Systems manufacturer
<TABLE>
<CAPTION>
MANUALS AVAILABLE Abbr Form Type Qty. Rev Deliv.
---- ---- ---- ---- --- ------
(detailed)
<S> <C> <C> <C> <C> <C> <C> <C>
* Aircraft Documentation ADRES CD C *** 4 90
Retrieval System
* Computer Assisted Aircraft CAATS CD C *** 4 90
Troubleshooting
3. MISCELLANEOUS PUBLICATIONS
* Airplane Characteristics for AC P2 E *** AN 360
Airport Planning
* Aircraft Recovery Manual ARM P2 E *** AN 90
F E *** AN 90
SMF E *** AN 90
Cargo Loading System CLS P2 E *** AN 180
Manual
Crash Crew Chart CCC P1 E *** AN 180
+ Guidelines for Customer GCOC P2 E *** AN 0
Originated Changes
+ List of Radioactive and LRE P2 E *** AN 90
Hazardous Elements
+ List of Applicable Publications LAP P2 C *** 4 90
Livestock Transportation LTM P2 E *** AN 90
Manual
* Service Bulletins SB P2 C *** ANA 90
SMF C *** N 90
F C *** AN 90
SGML C *** AN 90
* Service Bulletin Index SBI P1 E *** AN 90
* Service Information Letters SIL P2 E *** AN 90
+ Technical Publications TPCI CD C *** AN 90
* Combined Index
Transportability Manual TM P2 E *** AN 90
Supplier Product Support SPSA P2 E *** AN 360
Agreements (SPSA)
* Vendor Information Manual VIM D E *** AN 360
+
+ Vendor Information Manual VIM\ P2 E *** AN 360
* GSE GSE
4. OPERATIONAL MANUALS AND DATA
Check CL/QR P2 C *** AN 90
List/Abnormal/Emergency/ H
Quick Reference Handbook
FAA Approved Flight Manual AFM P1 C *** AN 0
Flight Crew Operating Manual FCOM P2 C *** AN 90
Master Minimum Equipment MMEL P2 E *** AN 90
List
Performance Engineering PEP D E *** AN 90
Program
* Performance Program Manual PPM P2 E *** AN 90
MT E *** AN 90
Weight and Balance Manual WBM P1 C *** AN 0
5. OVERHAUL DATA
+ Cable Fabrication Manual CFM P2 E *** AN 90
*
* Component Documentation CDS P2 C *** AN 180
Status F C *** AN 180
SMF C *** AN 180
+ Component Evolution List6 CEL F E *** AN 180
* Component Maintenance CMMM F E *** AN 180
Manual Airframe SMF E *** AN 180
Manufacturer
* Component Maintenance CMMV P2 E *** AN 180
Manual Vendor
6. STRUCTURAL MANUALS
* Nondestructive Testing NTM P2 E *** 4 180
Manual
* Structural Repair Manual SRM F E *** 4 90
SMF E *** 4 90
SGML E *** 4 90
- ------------
6 Optional - Delivered as follow-on for CDS.
</TABLE>
LICENSE FOR USE
OF THE PERFORMANCE ENGINEERING PROGRAMS (PEP)
1. GRANT
The Seller grants to the Buyer the right to use the Performance
Engineering Programs (PEP) in machine readable form on a single
computer during the term of this license agreement (the "License
Agreement").
Use of the PEP in readable form will be limited to one (1) copy.
However, the Seller may make duplicate copies, provided that they
are either contained in the same computer as the original copy, or
produced for checkpoint and restart purposes or made with the
consent of the Seller for a specific need.
2. MERGING
The PEP may be used and adapted in machine readable form for the
purpose of merging it into other program material of the Buyer,
but, on termination of this License Agreement, the Buyer will
remove the PEP from the other program material with which it has
been merged.
The Buyer agrees to reproduce the copyright and other notices as
they appear on or within the original media on any copies that the
Buyer makes of the PEP.
3. PERSONAL LICENSE
The above described license is personal to the Buyer,
nontransferable and nonexclusive.
4. INSTALLATION
It is the Buyer's responsibility to install the PEP and to perform
any mergings and checks. The Seller will, however, assist the
Buyer's operations engineers in the initial phase following the
delivery of the PEP until such personnel reach the familiarization
level required to make inputs and correlate outputs.
5. PROPRIETARY RIGHTS AND NONDISCLOSURE
5.1 The PEP and the copyright and other proprietary rights of whatever
nature in the PEP are and will remain with the Seller. The PEP and
its contents are designated as confidential.
5.2 The Buyer undertakes not to disclose the PEP, parts thereof or its
contents to any third party without the prior written consent of
the Seller. Insofar as it is necessary to disclose aspects of
the PEP to employees, such disclosure is permitted only for the
purpose for which the PEP is supplied and only to the employee who
needs to know the same.
6. CONDITIONS OF USE
6.1 The Seller does not warrant that the PEP will contain no errors.
However, should the PEP be found to contain any error at delivery,
the Buyer will notify the Seller promptly thereof and the Seller
will take all proper steps to correct the same at its own expense.
6.2 The Buyer will ensure that the PEP is correctly used in
appropriate machines as indicated in the Performance Programs
Manual (PPM) and that staff are properly trained to use the same,
to trace and correct running faults, to restart and recover after
fault and to operate suitable checks for accuracy of input and
output.
6.3 It is understood that the PPM is the user's guide of the PEP and
that the Buyer will undertake to use the PEP in accordance with
the PPM.
6.4 The PEP is supplied under the express condition that the Seller
will have no liability in contract or in tort arising from or in
connection with the Buyer's use of or inability to use the PEP.
7. DURATION
Subject to the Buyer's compliance with the terms of this License
Agreement, the rights under this License Agreement will be granted
to the Buyer for as long as the Buyer operates an Aircraft to
which the PEP refers.
EXHIBIT "G"
AIRFRAME PRICE REVISION FORMULA
l. BASE PRICE
The Base Price of the Airframe is as quoted in Subclause 4.1.1.1,
4.1.1.2, 4.1.1.3 or 4.1.1.4 of the Agreement, as applicable.
2. BASE PERIOD
***
These Base Prices are subject to adjustment for changes in
economic conditions as measured by data obtained from the United
States Department of Labor, Bureau of Labor Statistics, and in
accordance with the provisions of Paragraphs 4 and 5 of this
Exhibit "G."
Should the Bureau of Labor Statistics change the base year
indicated below in Paragraph 3, it will be necessary to restate
such values in an appropriate manner. Other changes (such as
benchmark revision), except those related to established errors
from the Bureau of Labor Statistics, will not be taken into
consideration.
3. REFERENCE INDEXES
***
Material Index: "Industrial Commodities Index" (hereinafter
referred to as "ICI-Index"), published monthly by the United
States Department of Labor, Bureau of Labor Statistics, in
"Producer Prices and Price Indexes" (Table 6: "Producer prices
and price indexes for commodity groupings and individual items").
(Base year 1982 = 100.)
4 - REVISION FORMULA
***
In determining the Revised Base Price at delivery of the Aircraft,
each quotient will be calculated to the nearest ten thousandth (4
decimals). If the next succeeding place is five (5) or more, the
preceding decimal place will be raised to the next higher figure.
The final factor will be rounded to the nearest ten thousandth (4
decimals).
After final computation, Pn will be rounded to the next whole
number (0.5 or more rounded to l).
5. GENERAL PROVISIONS
5.1 Substitution of Indexes
In the event that:
(i) the United States Department of Labor substantially
revises its methodology for calculating any of the
indexes referred to here above, or
(ii) the United States Department of Labor discontinues,
either temporarily or permanently, any of the indexes
referred to here above and publication thereof, or
(iii) the data samples used to calculate any of the indexes
referred to here above are substantially changed,
The Seller and the Buyer will agree on a substitute index.
Such substitute index will reflect as closely as possible the
actual variations in wage rates or in material prices, as the case
may be, used in the calculation of the original index.
As a result of this selection of a substitute index, the Seller
and the Buyer will agree on appropriate adjustments to be made to
the price revision formula; such adjustments may include, but will
not be limited to, allowing to combine the successive utilization
of the original index and of the substitute index, and other
methodologies designed to ensure consistency in the numerators and
denominators of the various quotients.
5.2 Final Index Values
The Revised Base Price at the date of Aircraft delivery will be
final and will not be subject to further adjustments, of any kind,
to the applicable indexes as published at the date of Aircraft
delivery.
EXHIBIT "H-1"
PRATT & WHITNEY PRICE REVISION FORMULA
l. REFERENCE PRICE
The Reference Price of a set of two (2) Pratt & Whitney PW4168A
Propulsion Systems is as quoted in Subclause 4.1.2.1 of the
Agreement.
This Reference Price is valid for A330 Aircraft delivered through
*** and is subject to adjustment for changes in economic
conditions as measured by data obtained from the US Department of
Labor, Bureau of Labor Statistics, and in accordance with the
provisions of Paragraphs 4 and 5 of this Exhibit "H-1."
2. REFERENCE PERIOD
The above Reference Price has been established in accordance with
the economic conditions prevailing in *** as defined, according to
Pratt & Whitney, by the *** index values indicated in Paragraph 4
of this Exhibit "H-1."
3. REFERENCE INDEXES
***
4. REVISION FORMULA
Pn = Pb x [0.60(HEn/HEb) + 0.30(MMPn/MMPb) + 0.10(EPn/EPb)]
Where
Pn = Revised Reference Price of a set of two (2) Propulsion
Systems at delivery of the A330 Aircraft
Pb = Reference Price at economic conditions December 1996
HEn = HE SIC 3724 for the fourth month prior to the month of
delivery of the A330 Aircraft
HEb = HE SIC 3724 for December 1996 (= 18.50)
MMPn = MMP-Index for the fourth month prior to the month of
delivery of the A330 Aircraft
MMPb = MMP-Index for December 1996 (= 129.9)
EPn = EP-Index for the fourth month prior to the month of delivery
of the A330 Aircraft
EPb = EP-Index for December 1996 (= 93.3)
In determining the Revised Reference Price each quotient will be
calculated to the nearest ten thousandth (4 decimals). If the next
succeeding place is five (5) or more the preceding decimal place
will be raised to the next higher figure. The final factor will be
rounded to the nearest ten thousandth (4 decimals).
After final computation, Pn will be rounded to the next whole
number (0.5 or more rounded to 1).
5. GENERAL PROVISIONS
5.1 The Revised Reference Price at delivery of the A330 Aircraft will
be the final price and will not be subject to further adjustments
in the indexes.
5.2 The Revised Reference Price at delivery of the A330 Aircraft will
in no event be less than the Reference Price defined in Paragraph
1 of this Exhibit "H-1."
5.3 If no final index value is available for any of the applicable
months, the published preliminary figures will be the basis on
which the Revised Reference Price will be computed.
5.4 If the US Department of Labor substantially revises the
methodology of calculation of the indexes referred to in this
Exhibit "H-1" or discontinues any of these indexes, the Seller
will, in agreement with Pratt & Whitney, apply a substitute for
the revised or discontinued index, such substitute index to lead
in application to the same adjustment result, insofar as possible,
as would have been achieved by continuing the use of the original
index as it may have fluctuated had it not been revised or
discontinued.
Appropriate revision of the formula will be made to accomplish
this result.
5.5 Should the above escalation provisions become null and void by
action of the US Government, the Reference Price will be adjusted
to reflect increases in the cost of labor, material and fuel which
have occurred from the period represented by the applicable
Reference Price Indexes to the fourth month prior to the scheduled
delivery of the A330 Aircraft.
EXHIBIT "H-2"
CFM INTERNATIONAL PRICE REVISION FORMULA
l. REFERENCE PRICE
The Reference Price of a set of four (4) CFM INTERNATIONAL CFM
56-5C4 Propulsion Systems, including four (4) nacelles and four
(4) thrust reversers, is as quoted in Subclause 4.1.2.2 of the
Agreement.
This Reference Price is valid for A340 Aircraft delivered no later
than ***, and is subject to adjustment for changes in economic
conditions as measured by data obtained from the US Department of
Labor, Bureau of Labor Statistics, and in accordance with the
provisions of Paragraphs 4 and 5 of this Exhibit "H-2."
2. REFERENCE PERIOD - REFERENCE COMPOSITE PRICE INDEX
The above Reference Price has been established in accordance with
the economic conditions prevailing in ***, as defined, according
to CFM International, by the Reference Composite Price Index of
***.
3. REFERENCE INDEXES
Labor Index: "Aircraft Engines and Engine Parts," Standard Industrial
Classification 3724--Average hourly earnings (hereinafter referred to
as "HE SIC 3724"), published by the US Department of Labor, Bureau of
Labor Statistics, in "Employment and Earnings," (Table B-15: Average
hours and earnings of production or nonsupervisory workers on private
nonfarm payrolls by detailed industry) or such other names which may
be from time to time used for the publication title and/or table.
Material Index (I): "Industrial Commodities" (hereinafter referred to
as "IC-Index"), published monthly by the US Department of Labor,
Bureau of Labor Statistics, in "PPI Detailed Report" (Table 6:
Producer prices indexes and percent changes for commodity groupings
and individual items, not seasonally adjusted) (Base year 1982 = 100)
or such other names which may be from time to time used for the
publication title and/or table.
Material Index (II): "Metals and Metal Products" Code l0 (hereinafter
referred to as "MMP-Index"), published monthly by the US Department of
Labor, Bureau of Labor Statistics, in "PPI Detailed Report" (Table 6:
Producer prices indexes and percent changes for commodity groupings
and individual items, not seasonally adjusted) (Base year 1982 = 100)
or such other names which may be from time to time used for the
publication title and/or table.
Energy Index: "Fuels and Related Products and Power" Code 5
(hereinafter referred to as "EP-Index"), published monthly by the US
Department of Labor, Bureau of Labor Statistics, in "PPI Detailed
Report" (Table 6: Producer prices indexes and percent changes for
commodity groupings and individual items, not seasonally adjusted)
(Base year 1982 = 100) or such other names which may be from time to
time used for the publication title and/or table.
4. REVISION FORMULA
Pn = (Pb + F) x CPIn/145.03
Where
Pn = Revised Reference Price of a set of four (4) Propulsion
Systems at delivery of the A340 Aircraft.
Pb = Reference Price as defined in Paragraph 1 of this Exhibit
"H-2."
F = (0.0011 x N x Pb) Where N = The calendar year of delivery
of the A340 Aircraft minus 1987.
CPIn = Composite Price Index for the sixth month prior to the
month of delivery of the A340 Aircraft.
Said Composite Price Index is composed as follows:
CPIn = 0.55 (HEn x 100)/(11.16) + 0.10 ICn + 0.25 MMPn
+ 0.10 EPn
Where
HEn = HE SIC 3724 for the sixth month prior to the month of
delivery of the A340 Aircraft; the quotient HEn/11.16 is
rounded to the nearest third decimal place. The product by
0.55 is rounded to the nearest second decimal place.
ICn = IC-Index for the sixth month prior to the month of delivery
of the A340 Aircraft.
MMPn = MMP-Index for the sixth month prior to the month of delivery
of the A340 Aircraft. The product by 0.25 is rounded to the
nearest second decimal place.
EPn = EP-Index for the sixth month prior to the month of delivery
of the A340 Aircraft.
The Composite Price Index will be determined to the second decimal
place. If the next succeeding decimal place is five (5) or more,
the preceding decimal figure will be raised to the next higher
figure.
The final factor will be rounded to the nearest thousandth (3
decimals).
5. GENERAL PROVISIONS
5.1 The Revised Reference Price at delivery of the A340 Aircraft will
be the final price and will not be subject to further adjustments
in the indexes.
5.2 If no final index value is available for any of the applicable
months, the published preliminary figures will be the basis on
which the Revised Reference Price will be computed.
5.3 If the US Department of Labor substantially revises the
methodology of calculation of the indexes referred to in this
Exhibit "H-2" or discontinues any of these indexes, the Seller
will, in agreement with CFM International, apply a substitute for
the revised or discontinued index, such substitute index to lead
in application to the same adjustment result, insofar as possible,
as would have been achieved by continuing the use of the original
index as it may have fluctuated had it not been revised or
discontinued.
Appropriate revision of the formula will be made to accomplish
this result.
5.4 Should the above escalation provisions become null and void by
action of the US Government, the Reference Price will be adjusted
to reflect increases in the cost of labor, material and fuel which
have occurred from the period represented by the applicable
Reference Price Indexes to the sixth month prior to the scheduled
delivery of the A340 Aircraft.
5.5 The Revised Reference Price at delivery of the A340 Aircraft in no
event will be less than the Reference Price defined in Paragraph 1
of this Exhibit "H-2."
LETTER AGREEMENT NO. 1
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: SPARE PARTS PROCUREMENT
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A330/A340 Purchase Agreement dated
as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
1 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
CONTENTS
CLAUSES
1 - GENERAL
2 - INITIAL PROVISIONING
3 - STORES
4 - DELIVERY
5 - PRICE
6 - PAYMENT PROCEDURES AND CONDITIONS
7 - TITLE
8 - PACKAGING
9 - DATA RETRIEVAL
10 - BUY-BACK
11 - WARRANTIES
12 - LEASING
13 - ***
14 - TERMINATION
15 - ASSIGNMENT
1. GENERAL
1.1 Material
This Letter Agreement covers the terms and conditions for
the services offered by the Seller to the Buyer
("Material Support") in respect of Aircraft spare parts
and other equipment itemized below in Subparagraphs
1.1(a) through 1.1(f) ("Material") and is intended by the
parties to be and will constitute an agreement of sale of
all Material furnished to the Buyer by the Seller
pursuant hereto, except as to Material leased to the
Buyer pursuant to Clause 12 of this Letter Agreement.
The Material will comprise:
(a) Seller Parts
(b) Vendor Parts classified as rotable line
replacement units.
(c) Vendor Parts classified as expendable line
maintenance parts.
(d) Ground support equipment (GSE) and
special-to-type tools.
(e) Hardware and standard material.
(f) Consumables and raw material.
It is expressly understood that Seller Parts will not
include parts manufactured pursuant to a Parts
Manufacturing Authority.
1.2 Scope of Material Support
1.2.1 The Material Support to be provided by the Seller under
the conditions hereunder covers the following:
(a) all Material purchased by the Buyer from the
Seller during the Initial Provisioning Period
(defined below in Paragraph 2) (the "Initial
Provisioning") and all items in Subparagraphs
1.1(a) through 1.1(d) for purchases additional
to the Initial Provisioning Period, and
(b) the Seller's leasing of Seller Parts to the
Buyer for the Buyer's use on its Aircraft in air
transport service as set forth in Paragraph 12
of this Letter Agreement.
1.2.2 Propulsion Systems, including associated parts and spare
parts therefore, are not covered under this Letter
Agreement and will be subject to direct negotiations
between the Buyer and the relevant Propulsion Systems
manufacturer(s).
1.2.3 During a period commencing on the date hereof and
continuing as long as at least five (5) aircraft of the
type of the Aircraft are operated by airlines in
commercial air transport service (the "Term"), the Seller
will maintain or cause to be maintained such stock of
Seller Parts as the Seller deems reasonable (upon
consultation with the Buyer) and will furnish Seller
Parts adequate to meet the Buyer's needs for repairs and
replacements on the Aircraft. Such Seller Parts will be
priced, sold and delivered in accordance with Paragraphs
4 and 5 of this Letter Agreement, upon receipt of the
Buyer's orders.
The Seller will use its best efforts to obtain a similar
service from all Vendors of parts that are originally
installed on the Aircraft and not manufactured by the
Seller.
1.3 Purchase Source of Seller Parts
The Buyer agrees to purchase from the Seller's designee
ASC the Seller Parts required for the Buyer's own needs
during the Term, provided that this Paragraph 1.3 will
not in any way prevent the Buyer from resorting to the
stocks of Seller Parts of other airlines operating
aircraft of the type of the Aircraft or from purchasing
items equivalent to Seller Parts from said airlines,
distributors or dealers, on the condition that said
Seller Parts have been designed and manufactured by, or
obtained from, the Seller, and provided also that this
Paragraph 1.3 will not prevent the Buyer from exercising
its rights under Subparagraph 1.4 of this Letter
Agreement.
1.4 Manufacture of Seller Parts *** by the Buyer
1.4.1 The provisions of Subparagraph 1.3 of this Letter
Agreement notwithstanding, the Buyer may manufacture or
have manufactured for its own use or may purchase from
any other source whatsoever Seller Parts in the following
cases:
(a) after expiration of the Term, if at such time
the Seller is out of stock of a required Seller
Part;
(b) at any time, to the extent Seller Parts are
needed to effect AOG repairs on any Aircraft
delivered under the Agreement and are not
available from the Seller within a lead time
shorter than or equal to the time in which the
Buyer can provide said Seller Parts, provided
the Buyer will sell or lease such Seller Parts
only if they are assembled in an Aircraft that
is sold or leased;
(c) in the event that the Seller fails to fulfill
its obligations with respect to any Seller Parts
pursuant to Subparagraph 1.2 above within a
reasonable period after written notice thereof
from the Buyer;
(d) when, with respect to certain Seller Parts, the
Seller has granted, under the Illustrated Parts
Catalog supplied in accordance with this Letter
Agreement, the right of local manufacture of
Seller Parts, and
(e) ***
1.4.2 ***
1.4.3 The rights granted to the Buyer in Subparagraph 1.4.1
will not in any way be construed as a license, nor will
they in any way obligate the Buyer to pay any license
fee, royalty or obligation whatsoever, nor will they in
any way be construed to affect the rights of third
parties.
1.4.4 The Seller will provide the Buyer with all technical data
reasonably necessary to manufacture Seller Parts and ***,
in the event the Buyer is entitled to do so pursuant to
Subparagraphs 1.4.1 and 1.4.2 of this Letter Agreement.
The proprietary rights to such technical data will be
subject to the terms of Subclause 14.10.1 of the
Agreement.
1.5 ***
1.6 Language
1.6.1 Words and expressions used in this Letter Agreement will
have the same meanings as they do in the rest of the
Agreement, unless otherwise stated in this Letter
Agreement.
1.6.2 Technical and trade items used but not defined herein or
in the Agreement will be defined as generally accepted in
the aircraft manufacturing industry.
2. INITIAL PROVISIONING
The period up to and expiring on the ninetieth (90th) day
after delivery of the last Aircraft subject to firm order
under the Agreement will hereinafter be referred to as
the Initial Provisioning Period.
2.1 Seller-Supplied Data
The Seller will prepare and supply to the Buyer the
following documents:
2.1.1 Initial Provisioning Data
The Seller will provide the Buyer initial provisioning
data provided for in Chapter 1 of ATA 2000 for the
Aircraft ("Initial Provisioning Data") in a form, format
and within a time period to be mutually agreed upon.
A revision service will be provided free of charge and
will be effected every ninety (90) days or more
frequently if reasonably requested by the Buyer, up to
the end of the Initial Provisioning Period, or until the
configuration of the Buyer's delivered Aircraft is
included.
In any event, the Seller will ensure that Initial
Provisioning Data are released to the Buyer in time to
allow the necessary evaluation time by the Buyer and the
on-time delivery of ordered Material.
2.1.2 Supplementary Data
The Seller will provide the Buyer with Local Manufacture
Tables (X-File), as part of the Illustrated Parts Catalog
(Additional Cross-Reference Tables), which will be a part
of the Initial Provisioning Data Package.
2.1.3 Initial Provisioning Data for Reconfirmable Aircraft
2.1.3.1 All Reconfirmable Aircraft and Additional Aircraft which
are acquired by the Buyer (the "Reconfirmed Aircraft")
pursuant to the terms and conditions of Letter Agreement
No. 2 to the Agreement will be included in the revision
to the provisioning data that is issued after
reconfirmation of a Reconfirmable Aircraft or the Buyer's
exercise of its option to purchase an Additional
Aircraft, if such revision is not scheduled to be issued
within four (4) weeks from the date of reconfirmation or
of the date of exercise of such option. If the date of
reconfirmation or the date of the exercise of the option
does not allow the Seller four (4) weeks' preparation
time, the Aircraft concerned will be included in the next
scheduled revision.
2.1.3.2 The Seller will, from the date of reconfirmation of an
Aircraft until three (3) months after delivery of such
Aircraft, submit to the Buyer details of particular
Vendor components being installed on the Aircraft and
will recommend the quantity to order. A list of such
Vendor components will be supplied at the time of the
provisioning data revision as specified above.
2.1.3.3 The Seller will deliver to the Buyer T-files for
particular Vendor components, as applicable, in time to
allow the Buyer's planning of repair and overhaul tasks.
2.1.3.4 At delivery of each Reconfirmed Aircraft, the data with
respect to Material will at least cover such Aircraft's
technical configuration as known six (6) months before
Aircraft delivery and will be updated to reflect the
final build status of such Aircraft. Such update will be
included in the data revisions issued three (3) months
after delivery of such Aircraft.
2.2 Vendor-Supplied Data
2.2.1 General
Vendors will prepare and issue T-files in the English
language for those Vendor components for which the Buyer
has elected to receive data.
Said data (initial issue and revisions) will be
transmitted to the Buyer through the Seller. The Seller
will review the compliance of such data with relevant ATA
requirements, but will not be responsible for the
substance of such data, other than any errors or
omissions attributable to the Seller's compilation of the
data. The Seller will use its best efforts to ensure that
such data will be adequate to enable the Buyer to
undertake in-house repair and/or overhaul of such
components.
In any event, the Seller will exert its best efforts to
supply Initial Provisioning Data to the Buyer in time to
allow the necessary evaluations by the Buyer and on-time
deliveries.
2.2.2 Initial Provisioning Data
Initial Provisioning Data for Vendor products provided
for in Chapter 1 of ATA 2000 for the Aircraft will be
furnished as mutually agreed upon during a
Preprovisioning Meeting (defined below), with
free-of-charge revision service assured up to the end of
the Initial Provisioning Period, or until it reflects the
configuration of the delivered Aircraft.
2.3 Preprovisioning Meeting
2.3.1 The Seller will organize a meeting at its Material
Support Center in Hamburg, Germany ("MSC"), to formulate
an acceptable schedule and working procedure to
accomplish the Initial Provisioning of Material (the
"Preprovisioning Meeting").
2.3.2 The date and location of the Preprovisioning Meeting will
be mutually agreed upon.
2.4 Initial Provisioning Training
The Seller will furnish, at the Buyer's request and at no
charge, training courses related to the Seller's
provisioning documents, purchase order administration and
handling at MSC.
2.5 Initial Provisioning Conference
The Seller will organize an Initial Provisioning
conference at MSC that will include Vendor participation,
as agreed upon during the Preprovisioning Meeting (the
"Initial Provisioning Conference").
2.6 Initial Provisioning Data Compliance
2.6.1 Initial Provisioning Data generated by the Seller and
supplied to the Buyer will comply with the latest
configuration of the Aircraft to which such data relate,
as known three (3) months before the data are issued.
Said data will enable the Buyer to order Material
conforming to its Aircraft as required for maintenance
and overhaul.
This provision will not cover parts embodying those Buyer
modifications that are unknown to the Seller, and parts
embodying modifications neither agreed to nor designed by
the Seller.
2.6.2 During the Initial Provisioning Period, Material will
conform with the latest configuration standard of the
affected Aircraft and with the Initial Provisioning Data
transmitted by the Seller. Should the Seller default in
this obligation, it will immediately replace such parts
and/or authorize return shipment at no transportation
cost to the Buyer. The Buyer will make reasonable efforts
to minimize such cost, in particular by using its own
airfreight system for transportation *** at no charge to
the Seller, ***. The Seller, in addition, will use its
best efforts to cause Vendors to provide a similar
service for their items.
2.7 Delivery of Initial Provisioning Material
2.7.1 To support the operation of the Aircraft, the Seller will
use its best efforts to deliver Initial Provisioning
Material in Subparagraph 1.1(a) of this Letter Agreement
against the Buyer's orders from the Seller and according
to the following schedule, provided the orders are
received by the Seller in accordance with published lead
time:
Each block of Aircraft referred to in the schedule below
will be defined in the Initial Provisioning Conference.
(a) At least fifty percent (50%) of the ordered
quantity of each Line Replacement or Line
Maintenance item three (3) months before
delivery of the first Aircraft of each block of
Aircraft for which the Buyer has placed Initial
Provisioning orders for Material defined above
in Subparagraph 1.1(a).
(b) At least seventy-five percent (75%) of the
ordered quantity of each Line Replacement or
Line Maintenance item one (1) month (for items
identified as line station items, two (2)
months) before delivery of the first Aircraft of
each block of Aircraft for which the Buyer has
placed Initial Provisioning orders for Material
defined above in Subparagraph 1.1(a).
(c) Fifty percent (50%) of the ordered quantity of
each item except as specified in Subparagraphs
2.7.1 (a) and 2.7.1 (b) above at delivery of the
first Aircraft of each block of Aircraft for
which the Buyer has placed Initial Provisioning
orders for Material defined above in
Subparagraph 1.1(a).
(d) One hundred percent (100%) of the ordered
quantity of each item, including line station
items, three (3) months after delivery of the
first Aircraft of each block of Aircraft for
which the Buyer has placed Initial Provisioning
orders for Material, as defined above in
Subparagraph 1.1(a). If said one hundred percent
(100%) cannot be accomplished, the Seller will
have such items available at its facilities for
immediate supply, in case of an AOG.
2.7.2 In the event that less than eighty-five percent (85%) of
the Buyer's orders of Initial Provisioning Material
defined above in Subparagraph 1.1(a), supporting each
block of Aircraft (the "IP Block"), is delivered by the
Seller to the Buyer in accordance with the
provisions set forth above in Subparagraph 2.7.1(d) for
reasons other than Excusable Delay as defined in Clause
10 of the Agreement, then the Seller will provide the
Buyer with a credit equal to (i) eighty-five percent
(85%) minus the actual percentage of the IP Block
delivered, up to a maximum of ten percent (10%),
multiplied by (ii) the aggregate value of the undelivered
portion of the IP Block ordered by the Buyer from the
Seller in accordance with all published lead times.
Subparagraph 4.4 of this Letter Agreement will apply to
the Seller's undertakings under this Subparagraph 2.7.2.
Such credit will be made available by the Seller to the
Buyer upon mutual agreement of the computation.
2.7.3 The Buyer may, subject to the Seller's agreement, cancel
or modify Initial Provisioning orders placed with the
Seller with no cancellation charge as follows:
(a) "Long Lead-Time Material" (lead time exceeding
twelve (12) months) not later than six (6)
months before scheduled delivery of said
Material,
(b) normal lead time Material not later than three
(3) months before scheduled delivery of said
Material,
(c) Buyer-specific Material and Material in
Subparagraphs 1.1(b) through 1.1(f) no later
than the quoted lead time before scheduled
delivery of said Material.
2.7.4 Should the Buyer cancel or modify any orders for Material
outside the time limits defined above in Subparagraph
2.7.3, the Seller will have no liability for the
cancellation or modification, and the Buyer will
reimburse the Seller for any direct cost incurred in
connection therewith to the extent that such cost has
been properly documented by the Seller to the
satisfaction of the Buyer.
3. STORES
3.1 ASCO Spares Center
The Seller has established and will maintain or cause to
be maintained, as long as at least five (5) aircraft of
the type of the Aircraft are operated by US airlines in
commercial air transport service (the "US Term"), a US
store adjacent to Dulles International Airport,
Washington, DC, known as the ASCO Spares Center -
Washington ("ASCO Spares Center"). The ASCO Spares Center
will be operated twenty-four (24) hours/day, seven (7)
days/week, all year, for the handling of AOG and critical
orders for Seller Parts. ASCO Spares Center will maintain
a stock of Seller Parts, including Leased Parts listed in
Appendix A to this Letter Agreement. In the event of the
recurrence of the nonavailability to the Buyer of a part
from the ASCO Spares Center, the Seller will take all
necessary steps to ensure availability thereof at the
ASCO Spares Center at the Buyer's next request. In the
event that the Buyer is still operating one or more
Aircraft at the end of the Term, the Seller will use its
best efforts to ensure the Buyer's access to Seller
Parts.
3.2 Material Support Center, Germany
The Manufacturer has set up and will maintain or cause to
be maintained during the Term a store of Seller Parts at
MSC. MSC will be operated twenty-four (24) hours/day,
seven (7) days/week, all year.
3.3 Other Points of Shipment
The Seller reserves the right to effect deliveries from
distribution centers other than the ASCO Spares Center or
MSC and from any of the production facilities of the
Associated Contractors.
4. DELIVERY
4.1 General
The Buyer's purchase orders will be administered in
accordance with ATA Specification 2000.
The provisions of this Paragraph 4 do not apply to
Initial Provisioning Data and Material.
4.2 Lead Times
4.2.1 In general, the lead times are (and, unless otherwise
agreed, will at all times be) in accordance with the
definition in the "World Airline and Suppliers Guide"
(1994 edition).
4.2.2 Material will be dispatched within the lead times quoted
in the published Seller's price catalog for Material
described in Subparagraph 1.1(a), and within the Vendor's
or supplier's lead time augmented by the Seller's own
order and delivery processing time (such in-house
processing time not to exceed fifteen (15) days) for
Material described in Subparagraphs 1.1(b) through
1.1(d). The Seller will endeavor to improve its lead
times and neither the Seller, the Manufacturer nor any of
their Affiliates will discriminate against the Buyer in
delivery processing time.
4.2.3 Expedite Service
The Seller operates a twenty-four (24) hour-a-day, seven
(7) day-a-week expedite service to supply the relevant
Seller Parts available in the Seller's stock, workshops
and assembly line, including high-cost long-lead-time
items, to the international airport nearest the location
of such items (the "Expedite Service").
The Expedite Service is operated in accordance with the
"World Airline and Suppliers Guide." Accordingly, the
Seller will notify the Buyer of the action taken to
effect the Expedite Service as follows:
(a) four (4) hours after receipt of an AOG order,
(b) twenty-four (24) hours after receipt of a
critical order (imminent AOG or work stoppage),
(c) seven (7) days after receipt of an expedite
order from the Buyer.
The Seller and its subcontractors will deliver Seller
Parts requested on expedite basis against normal orders
previously placed by the Buyer or upon requests by
telephone or telex by the Buyer's representatives, such
requests to be confirmed by the Buyer's subsequent order
for such Seller Parts within a reasonable time.
4.3 Delivery Status
The Seller agrees to report to the Buyer the status of
supplies against orders on a monthly basis.
4.4 Excusable Delay
Subclause 10.1 of the Agreement will apply to the
Material Support as defined in Paragraph 1 of this Letter
Agreement.
4.5 Shortages, Overshipments, Nonconformance in Orders
4.5.1 Within thirty (30) days after receipt of Material
delivered pursuant to a purchase order, the Buyer will
use all best efforts to advise the Seller of any alleged
shortages or overshipments with respect to such order and
of all nonconformance to specification of parts in such
order inspected by the Buyer.
In the event that the Buyer has not reported such alleged
shortages, overshipments or nonconformance within the
above defined period, the Buyer will be deemed to have
accepted the deliveries unless the Buyer can prove within
a reasonable period of time that it did not receive the
Material.
4.5.2 In the event that the Buyer reports overshipments or
nonconformance to the specifications within the period
defined above in Subparagraph 4.5.1, the Seller will, if
accepted, either replace the Material concerned or credit
the Buyer for Material returned. In such case,
transportation charges will be borne by the Seller.
The Buyer will endeavor to minimize such costs,
particularly by using its own airfreight system on a
space-available basis for transportation at no charge to
the Seller.
4.6 Delivery Performance of Material
The Seller hereby agrees to participate in a Material
delivery performance incentive.
Based upon the Material delivery performance criteria for
response under Expedite Service as set forth in
Subparagraph 4.2.3 and for routine orders in accordance
with the Seller's published lead times, and provided all
above shipments *** (the "Delivery Criteria"), the Seller
commits to an overall delivery performance of eighty-five
percent (85%) on an annual basis. In the event that the
Seller's performance falls below the eighty-five percent
(85%) level, the Seller will provide the Buyer with a
credit equal to (i) eighty-five (85%) minus the actual
percentage of orders delivered on time, up to a maximum
of ten percent (10%), multiplied by (ii) the aggregate
value of the orders delivered late according to the
Delivery Criteria set forth above. Subparagraph 4.4 above
will apply to the Seller's undertakings under this
Subparagraph 4.6.
At the end of each year following delivery of the first
Aircraft, the Seller will compute the above-described
figures in order to determine a credit or debit for the
account of the Buyer.
In the event the Seller records a credit for the account
of the Buyer, the Seller will make available to the Buyer
a credit memorandum in the amount described in this
Subparagraph 4.6 for the purchase of Material from the
Seller.
4.7 Exclusivity of Remedy
The remedies provided to the Buyer under Subparagraphs
2.7.2 and 4.6 above are mutually exclusive and not
cumulative.
4.8 Cessation of Deliveries
The Seller reserves the right to stop or otherwise
suspend deliveries of Material if the Buyer fails to meet
its obligations under Paragraphs 6 and 7 of this Letter
Agreement.
5. PRICE
5.1 Point of Shipment
***
5.2 Validity of Prices
5.2.1 The prices are the Seller's published prices in effect on
the date of receipt of the order (subject to reasonable
quantities and delivery time) and will be expressed in US
dollars. Payment will be made by the Buyer to the Seller
in US dollars as set forth below in Subparagraph 6.1.
5.2.2 Prices of Seller Parts will be in accordance with the
then current Seller's Spare Parts Price List. Prices will
be firm for each calendar year. The Seller, however,
reserves the right to revise the prices of Seller Parts
during the course of the calendar year in the event of
manifest error in estimation or expression of any price.
In the event of a significant revision in manufacturing
costs or a significant revision in the purchase price to
the Manufacturer of Seller Parts (including significant
variation in exchange rate) during any particular
calendar year, the Seller will notify the Buyer of such
revisions, whereupon the Buyer may, within such
quantities of affected Seller Parts still available for
sale at the former prices, order such quantities of said
Seller Parts reasonably required to maintain its
customary stock levels of such Seller Parts for the
remainder of the calendar year in effect at that time
provided the Seller is not thereby required to deplete
the Seller's AOG inventory level unless such Seller Parts
are required by the Buyer on an AOG basis. In the event
the Seller is out of stock of such Seller Parts at the
former prices, the Seller will, upon request by the
Buyer, reasonably substantiate the price revisions
affecting such Seller Parts.
5.2.3 ***
5.2.4 Prices of Material as defined above in Subparagraphs
1.1(b) through 1.1(d) will be the valid list prices of
the Vendor or supplier augmented by the Seller's handling
charge. The percentage of the handling charge will vary
with the Material's value and will be determined item by
item.
5.2.5 The Seller warrants that, should the Buyer purchase from
the Seller one hundred percent (100%) of the recommended
Initial Provisioning of Material defined above in
Subparagraphs 1.1(b) through 1.1(d), the average handling
charge on the total package will not exceed fifteen
percent (15%). This average handling charge will be
increased to eighteen percent (18%) in the event that all
orders have not been placed nine (9) months prior to
delivery of the first Aircraft.
5.2.6 Prices of Material as defined above in Subparagraphs
1.1(e) and 1.1(f) will be the Seller's purchase prices
augmented by a variable percentage of handling charge.
6. PAYMENT PROCEDURES AND CONDITIONS
6.1 Currency
Payment will be made in immediately available funds in US
dollars.
6.2 Time and Means of Payment
Payment will be made by the Buyer to the Seller within
thirty (30) days from the date of invoice. It is also
agreed that the Seller will provide the Buyer with a
credit equal to one percent (1%) of each payment,
provided such payment is received within ten (10) days
from the date of invoice.
6.3 Bank Accounts
The Buyer will make all payments hereunder in full
without setoff or counterclaim, and without deduction of
any kind to the accounts listed below, unless otherwise
directed by the Seller:
(a) For wire transfer, in favor of Airbus Service
Company:
CoreStates Bank N.A.
Account Number 14096-31312
ABA Number 031000011
(b) For direct deposit (lockbox), in favor of Airbus
Service Company:
Airbus Service Company
PO Box 8500-4555
Philadelphia, PA 19178-4555
6.4 No Setoff
All payments due the Seller hereunder will be made in
full without setoff or counterclaim and without deduction
or withholding of any kind. Consequently, the Buyer will
assure that the sums received by the Seller under this
Letter Agreement will be equal to the full amounts
expressed to be due the Seller hereunder.
6.5 If any payment due the Seller is not received in
accordance with the time period provided above in
Subparagraph 6.2, the Seller will have the right to claim
from the Buyer and the Buyer will promptly pay to the
Seller interest on the unpaid amount at a rate equal to
*** to be calculated from (and including) the due date to
(but excluding) the date payment is received by the
Seller. The Seller's claim to such interest will not
prejudice any other rights the Seller may have under this
Letter Agreement.
7. TITLE
Title to any Material purchased under this Letter
Agreement will ***.
8. PACKAGING
All material will be packaged in accordance with ATA 300
specification, Category III for consumable/expendable
Material and Category II for rotables. Category I
containers will be used if requested by the Buyer and the
difference between Category I and Category II packaging
costs will be paid by the Buyer together with payment for
the respective Material.
9. DATA RETRIEVAL
On the Seller's reasonable request, the Buyer may provide
periodically to the Seller, during the Term, a
quantitative list of the parts used for maintenance and
overhaul of the Aircraft as customarily compiled by the
Buyer and pertaining to the operation of the Aircraft to
assist the Seller in making an efficient and coordinated
survey of spare parts data with a view to improving
maintenance and overhaul of the Aircraft. The range and
contents of this list will be established by mutual
agreement between the Seller and the Buyer.
10. BUY-BACK
10.1 Buy-Back of Obsolete Material
The Seller agrees to buy back unused Seller Parts that
may become obsolete for the Buyer's fleet *** to the
Buyer as a result of mandatory modifications required by
the Buyer's or Seller's airworthiness authorities,
subject to the following:
(a) the Seller Parts involved will be those which
the Seller directs the Buyer to scrap or dispose
of and which cannot be reworked or repaired to
satisfy the revised standard;
(b) the Seller will grant the Buyer a credit equal
to the purchase price paid by the Buyer for any
such obsolete parts, such credit being limited
to quantities ordered in the Initial
Provisioning recommendation; and
(c) the Seller will use its reasonable efforts to
obtain for the Buyer the same protection from
Vendors.
10.2 Buy-Back of Surplus Material
10.2.1 The Seller agrees that at any time within twelve (12)
months after the end of the Initial Provisioning Period,
the Buyer will have the right to return to the Seller, at
a credit of one hundred percent (100%) of the original
purchase price paid by the Buyer, unused and undamaged
Material set forth above in Subparagraphs 1.1(a) and
1.1(b) originally purchased from the Seller under the
terms hereof, provided (i) that the selected protection
level for all Material does not exceed ninety-six percent
(96%) with a turnaround time of forty-five (45) days,
(ii) *** and (iii) that the Material is returned with the
Seller's original documentation and any such
documentation (including tags, certificates) required to
identify, substantiate the condition of and enable the
resale of such Material.
10.2.2 The Seller's agreement in writing is necessary before any
Material in excess of the Seller's recommendation may be
considered for buy-back.
10.2.3 It is expressly understood and agreed that the rights
granted to the Buyer under this Subparagraph 10.2 will
not apply to Material that may become obsolete at any
time or for any reason other than as set forth in
Subparagraph 10.1 above.
10.2.4 Further, it is expressly understood and agreed that all
credits referred to above in Subparagraph 10.1(b) will be
provided by the Seller to the Buyer exclusively by means
of credit notes to be entered into the Buyer's account
with the Seller for Material.
10.3 All transportation costs for the return of obsolete and
surplus Material under this Paragraph 10, including any
applicable insurance and customs duties or other related
expenditures, will be borne by the Seller, in the case of
obsolete Material and by the Buyer, in the case of
surplus Material.
11. WARRANTIES
The Seller in its capacity as "Buyer" under its
arrangements with the Manufacturer has negotiated and
obtained the following warranties for Seller Parts from
the Manufacturer, in its capacity as "Seller", with
respect to the Seller Parts, subject to the terms,
conditions, limitations and restrictions all as
hereinafter set out. The Seller hereby guarantees to the
Buyer the performance by the Manufacturer of the
Manufacturer's obligations and assigns to the Buyer, and
the Buyer hereby accepts, all of the rights and
obligations of the Seller in the Seller's capacity as
"Buyer" as aforesaid under the said warranties for Seller
Parts delivered to the Buyer pursuant to this Letter
Agreement and the Seller subrogates the Buyer as to all
such rights and obligations in respect of such Seller
Parts. The Seller hereby warrants to the Buyer that the
Seller has all the requisite authority to make the
foregoing assignment and effect the foregoing subrogation
to and in favor of the Buyer and that the Seller will not
enter into any amendment of the provisions so assigned or
subrogated without the prior written consent of the
Buyer. Capitalized terms utilized in the following
provisions have the meanings assigned thereto in this
Letter Agreement, except that the term "Seller" refers to
the Manufacturer and the term "Buyer" refers to the
Seller. References to clauses and paragraphs in the
following provisions refer to clauses in the Agreement
and/or to paragraphs in this Letter Agreement.
QUOTE
11.1 Seller Parts
Subject to the limitations and conditions as hereinafter
provided, the Seller warrants to the Buyer that all
Seller Parts as defined above in Subparagraph 1.1(a) will
at the time of delivery to the Buyer:
(a) be free from defects in material,
(b) be free from defects in workmanship, including,
without limitation, processes of manufacture,
(c) conform to the applicable specification for such
part,
(d) be free from defects in design (including,
without limitation, selection of materials)
having regard to the state of the art at the
date of such design,
(e) permit complete interchangeability among
Aircraft and parts of like part-numbered parts,
and
(f) be free and clear of all liens and other
encumbrances.
11.2 Warranty Period
The standard warranty period for defects (i) for Seller
Parts defined above in Subparagraphs 1.1(a) is thirty-six
(36) months after delivery of such Seller Parts to the
Buyer (the "Warranty Period(s)").
11.3 Buyer's Remedy and Seller's Obligation
The Buyer's remedy and Seller's obligation and liability
under this Paragraph 11 are limited to, at the Seller's
expense, the repair, replacement or correction of, any
defective Seller Part, ***.
The Seller, at its option, may furnish a credit to the
Buyer for the future purchase of Seller Parts equal to
the price at which the Buyer is then entitled to acquire
a replacement for the defective Seller Part.
The provisions of Subclauses 12.1.5, 12.1.6, 12.1.7 and
12.1.8 of the Agreement will, as applicable, also apply
to this Paragraph 11.
11.4 Exclusivity of Warranties and General Limitations of
Liability and Duplicate Remedies
The Buyer and the Seller recognize and agree that the
Exclusivity of Warranties and General Limitations of
Liability provisions and the Duplicate Remedies
provisions contained in Clause 12 of the Agreement will
also apply to the foregoing warranties provided for in
this Paragraph 11.
UNQUOTE
In consideration of the assignment and subrogation by the
Seller under this Paragraph 11 in favor of the Buyer in
respect of the Seller's rights against and obligations to
the Manufacturer under the provisions quoted above, the
Buyer hereby accepts such assignment and subrogation and
agrees to be bound by all of the terms, conditions and
limitations therein contained.
EXCLUSIVITY OF WARRANTIES AND GENERAL LIMITATIONS
OF LIABILITY AND DUPLICATE REMEDIES
THIS PARAGRAPH 11 (INCLUDING ITS SUBPROVISIONS) SETS
FORTH THE EXCLUSIVE WARRANTIES, EXCLUSIVE LIABILITIES AND
EXCLUSIVE OBLIGATIONS OF THE SELLER, AND THE EXCLUSIVE
REMEDIES AVAILABLE TO THE BUYER, WHETHER UNDER THIS
LETTER AGREEMENT OR OTHERWISE, ARISING FROM ANY DEFECT OR
NONCONFORMITY OR PROBLEM OF ANY KIND IN ANY SELLER PART
DELIVERED UNDER THIS LETTER AGREEMENT.
THE BUYER RECOGNIZES THAT THE RIGHTS, WARRANTIES AND
REMEDIES IN THIS PARAGRAPH 11 ARE ADEQUATE AND SUFFICIENT
TO PROTECT THE BUYER FROM ANY DEFECT OR NONCONFORMITY OR
PROBLEM OF ANY KIND IN THE GOODS AND SERVICES SUPPLIED
UNDER THIS LETTER AGREEMENT. THE BUYER HEREBY WAIVES,
RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS,
GUARANTEES AND LIABILITIES OF THE SELLER AND ALL OTHER
RIGHTS, CLAIMS AND REMEDIES OF THE BUYER AGAINST THE
SELLER, WHETHER EXPRESS OR IMPLIED BY CONTRACT, TORT, OR
STATUTORY LAW OR OTHERWISE, WITH RESPECT TO ANY
NONCONFORMITY OR DEFECT OR PROBLEM OF ANY KIND IN ANY
SELLER PART DELIVERED UNDER THIS LETTER AGREEMENT,
INCLUDING BUT NOT LIMITED TO, UNLESS OTHERWISE PROVIDED
FOR IN THIS PARAGRAPH 11:
(1) ANY IMPLIED OR EXPRESS WARRANTY ARISING FROM
COURSE OF PERFORMANCE, COURSE OF DEALING, OR
USAGE OF TRADE;
(2) ANY RIGHT, CLAIM OR REMEDY FOR BREACH OF CONTRACT;
(3) ANY RIGHT, CLAIM OR REMEDY FOR TORT, INCLUDING
ACTIONS FOR NEGLIGENCE, RECKLESSNESS,
INTENTIONAL TORTS, IMPLIED WARRANTY IN TORT
AND/OR STRICT LIABILITY;
(4) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER THE
UNIFORM COMMERCIAL CODE, OR ANY OTHER STATE OR
FEDERAL STATUTE;
(5) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER ANY
REGULATIONS OR STANDARDS IMPOSED BY ANY
INTERNATIONAL, NATIONAL, STATE OR LOCAL STATUTE
OR AGENCY;
(6) ANY RIGHT, CLAIM OR REMEDY TO RECOVER OR BE
COMPENSATED FOR:
(a) LOSS OF USE OR REPLACEMENT OF ANY
AIRCRAFT, COMPONENT, EQUIPMENT,
ACCESSORY OR PART PROVIDED UNDER THE
AGREEMENT;
(b) LOSS OF, OR DAMAGE OF ANY KIND TO, ANY
AIRCRAFT, COMPONENT, EQUIPMENT,
ACCESSORY OR PART PROVIDED UNDER THE
AGREEMENT;
(c) LOSS OF PROFITS AND/OR REVENUES;
(d) ANY OTHER INCIDENTAL OR CONSEQUENTIAL
DAMAGE.
THE WARRANTIES PROVIDED BY THIS LETTER AGREEMENT WILL NOT
BE EXTENDED, ALTERED OR VARIED EXCEPT BY A WRITTEN
INSTRUMENT SIGNED BY THE SELLER AND THE BUYER. IN THE
EVENT THAT ANY PROVISION OF THIS PARAGRAPH 11 SHOULD FOR
ANY REASON BE HELD UNLAWFUL, OR OTHERWISE UNENFORCEABLE,
THE REMAINDER OF THIS PARAGRAPH 11 WILL REMAIN IN FULL
FORCE AND EFFECT.
The remedies provided to the Buyer under this Paragraph
11 as to any defect in respect of the Aircraft or any
part thereof are not cumulative. The Buyer will be
entitled to the one remedy that provides the maximum
benefit to it, as the Buyer may elect, pursuant to the
terms and conditions of this Paragraph 11 for any such
particular defect for which remedies are provided under
this Paragraph 11; provided, however, that, *** the Buyer
will not be entitled to elect a remedy under one part of
this Paragraph 11 that constitutes a duplication of any
remedy elected by it under any other part hereof for the
same defect. ***
12. LEASING
12.1 Applicable Terms
The terms and conditions of this Paragraph 12 will apply
to the Lessor's (as defined below) stock of Seller Parts
listed in Appendix "A" to this Paragraph 12 ("Leased
Parts") and will form a part of each lease of any Leased
Part by the Buyer from the Seller after the date hereof.
Except for the description of the Leased Part, the Lease
Term, the Leased Part delivery and return locations and
the Lease Charges (defined below in Subparagraph 12.4),
all other terms and conditions appearing on any order
form or other document pertaining to Leased Parts will be
deemed inapplicable, and in lieu thereof the terms and
conditions of this Paragraph 12 will prevail. For
purposes of this Paragraph 12, the term "Lessor" refers
to the Seller and the term "Lessee" refers to the Buyer.
Parts not included in Appendix "A" to this Paragraph 12
may be supplied under a separate lease agreement between
the Seller and the Buyer.
12.2 Lease Procedure: Spare Parts Leased
At the Lessee's request by telephone (to be confirmed
promptly in writing), telegram, letter or other written
instrument, the Lessor will lease Leased Parts, which
will be made available in accordance with Subparagraph
4.2.3 of this Letter Agreement, to the Lessee as
substitutes for parts withdrawn from an Aircraft for
repair or overhaul. Each lease of Leased Parts will be
evidenced by a lease document ("Lease") issued by the
Lessor to the Lessee no later than seven (7) days after
delivery of the Leased Part.
12.3 Lease Term: Return
The term of the lease ("Lease Term") will commence on the
date of receipt of the Leased Part by the Lessee or its
agent at the Lessee's facility in a serviceable condition
and will end on the date of receipt at the Lessor's
facility of the Leased Part in a serviceable condition.
The Lease Term will not exceed ninety (90) days after the
Lessee's receipt of the Leased Part, unless extended by
written agreement between Lessor and Lessee within such
ninety (90)-day period (such extension not to exceed an
additional ninety (90) days). Notwithstanding the
foregoing, the Lease Term will end in the event, and upon
the date, of exercise of the Lessee's option to purchase
the Leased Part, as provided herein.
12.4 Lease Charges and Taxes
The Lessee will pay the Lessor (a) a daily rental charge
for the Lease Term in respect of each Leased Part equal
to one-three-hundred-sixty-fifth (1/365) of the Catalog
Price of such Leased Part, as set forth in the Seller's
Spare Parts Price List in effect on the date of
commencement of the Lease Term, (b) any reasonable
additional costs which may be incurred by the Lessor
solely and directly as a result of such Lease, such as
inspection, test, repair, overhaul and repackaging costs
as required to place the Leased Part in serviceable
condition, (c) all transportation and insurance charges
and (d) any taxes (excluding any taxes based on income or
gross receipts), charges or customs duties imposed upon
the Lessor or its property as a result of the lease,
sale, delivery, storage or transfer of any Leased Part
(the "Lease Charges"). All payments due hereunder will be
made in accordance with Paragraph 6 of this Letter
Agreement.
In the event that the Leased Part has not been returned
to the Lessor's designated facilities within the time
period provided in Subparagraph 12.3 above, the Lessor
will be entitled, in addition to any other remedy it may
have at law or under this Paragraph 12, to charge to the
Lessee, and the Lessee will pay, all of the charges
referred to in this Subparagraph 12.4 accruing for each
day after the end of the Lease Term and for as long as
such Leased Part is not returned to the Lessor and as
though the Lease Term were extended to the period of such
delay.
Notwithstanding the foregoing, the Lessor hereby agrees
not to charge the Lessee any daily rental charge as
referred to above in Subparagraph 12.4(a) from the date
that is ninety (90) days after the date of receipt of the
Leased Part by the Lessee, provided that (i) the Lessee
reasonably demonstrates that the repair station
designated by the Lessor and to which the Lessee has sent
the damaged item (which is the cause of the lease
described in this Paragraph 12) (the "Damaged Item") has
failed to perform the repair of the Damaged Item within
ninety (90) days, and (ii) the repair station is unable
to provide adequate and satisfactory reasons for its
nonperformance.
12.5 Title
Title to each Leased Part will remain with the Lessor at
all times unless the Lessee exercises its option to
purchase or exchange it in accordance with Subparagraph
12.8 of this Letter Agreement, in which case title will
pass to the Lessee in accordance with Paragraph 7 of this
Letter Agreement.
12.6 Risk of Loss
Except for normal wear and tear, each Leased Part will be
returned to the Lessor in the same condition as when
delivered to the Lessee. However, the Lessee will not
without the Lessor's prior written consent repair, modify
or alter any Leased Part (other than routine
maintenance). Risk of loss or damage to each Leased Part
will remain with the Lessee until such Leased Part is
redelivered to the Lessor at the return location
specified in the applicable Lease. If a Leased Part is
lost or damaged beyond repair, the Lessee will be deemed
to have exercised its option to purchase the part in
accordance with Subparagraph 12.8 of this Letter
Agreement, as of the date of such loss or damage.
12.7 Record of Flight Hours
All flight hours accumulated by the Lessee on each Leased
Part during the Lease Term will be documented by the
Lessee. Records will be delivered to the Lessor upon
return of such Leased Part to the Lessor. In addition,
all documentation pertinent to inspection, maintenance
and/or rework of the Leased Part to maintain said Leased
Part serviceable in accordance with the standards of the
Lessor will be delivered to the Lessor upon return of the
Leased Part to the Lessor on termination of the Lease.
Such documentation will include but not be limited to
evidence of incidents such as hard landings,
abnormalities of operation and corrective action taken by
the Lessee as a result of such incidents.
12.8 Option to Purchase
The Lessee may at its option, exercisable by written
notice given to the Lessor, elect during or at the end of
the Lease Term to purchase the Leased Part, in which case
the then current purchase price for such Leased Part as
set forth in the Seller's Spare Parts Price List will be
paid by the Lessee to the Lessor. The immediately
preceding sentence will apply to new Leased Parts only.
In the event the Leased Part is not new at commencement
of the Lease Term, eighty-five percent (85%) of the then
current purchase price for such Leased Part will be paid
by the Lessee to the Lessor. Such option will be
contingent upon the Lessee providing the Lessor with
evidence satisfactory to the Lessor that the original
part fitted to the Aircraft is beyond economical repair.
Should the Lessee exercise such option, *** of the Lease
rental charges already invoiced pursuant to Subparagraph
12.4 (a) will be credited to the Lessee against the said
purchase price of the Leased Part.
Should the Lessee fail to return the Leased Part to the
Lessor at the end of the Lease Term, such failure will be
deemed to be an election by the Lessee to purchase the
Leased Part.
In the event of purchase, the Leased Part will be
warranted in accordance with Clause 11 of this Letter
Agreement as though such Leased Part were a Seller Part,
provided, however, that (i) the Seller will prorate the
full Warranty Period granted to the Buyer according to
the actual usage of such Leased Part and (ii) in no event
will such Warranty Period be less than six (6) months
from the date of purchase of such Leased Part. A warranty
granted under this Subparagraph 12.8.3 will be in
substitution for the warranty granted under Subparagraph
12.9 at the commencement of the Lease Term.
12.9 Warranties
The Lessor, in its capacity as "Lessee," under its
arrangements with the Manufacturer, in its capacity as
"Lessor," has negotiated and obtained the following
warranties from the Manufacturer with respect to the
Leased Parts, subject to the terms, conditions,
limitations and restrictions all as hereinafter set out.
The Lessor hereby assigns to the Lessee, and the Lessee
hereby accepts, all of the rights and obligations of the
Lessor in the Lessors's capacity as "Lessee" as aforesaid
under the said warranties and the Lessor subrogates the
Lessee as to all such rights and obligations in respect
of Leased Parts during the Lease Term with respect
thereto. The Lessor hereby warrants to the Lessee that
the Lessor has all requisite authority to make the
foregoing assignment and effect the foregoing subrogation
to and in favor of the Lessee and that the Lessor will
not enter into any amendment of the provisions so
assigned or subrogated without the prior written consent
of the Lessee. Capitalized terms utilized in the
following provisions have the meanings assigned thereto
in this Letter Agreement, except that the term "Lessor"
refers to the Manufacturer and the term "Lessee" refers
to the Lessor. References to clauses and paragraphs in
the following provisions refer to clauses in the
Agreement and/or to paragraphs in this Letter Agreement.
QUOTE
12.9.1 The Lessor warrants that each Leased Part will at the
time of delivery thereof:
(a) be free from defects in material,
(b) be free from defects in workmanship, including,
without limitation, processes of manufacture,
(c) conform to the applicable specification for such
part,
(d) be free from defects in design (including,
without limitation, selection of materials)
having regard to the state of the art at the
date of such design,
(e) permit complete interchangeability among
Aircraft and parts of like part-numbered parts,
and
(f) be free and clear of all liens and other
encumbrances.
12.9.2 Survival of Warranties
With respect to each Leased Part, the warranty set forth
above in Subparagraph 12.9.1(a) will not survive
delivery, and the warranties set forth above in
Subparagraphs 12.9.1(b) through 12.9.1(f) will survive
delivery only upon the conditions and subject to the
limitations set forth below in Subparagraphs 12.9.3
through 12.9.8.
12.9.3 Warranty and Notice Periods
The Lessee's remedy and the Lessor's obligation and
liability under this Subparagraph 12.9, with respect to
each defect, are conditioned upon (i) the defect having
become apparent within the Lease Term and (ii) the
Lessor's warranty administrator having received written
notice of the defect from the Lessee within ***.
12.9.4 Return and Proof
The Lessee's remedy and the Lessor's obligation and
liability under this Subparagraph 12.9, with respect to
each defect, are also conditioned upon:
(a) the return by the Lessee as soon as practicable
to the return location specified in the
applicable Lease, or such other place as may be
mutually agreeable, of the Leased Part claimed
to be defective, and
(b) the submission by the Lessee to the Lessor's
warranty administrator of reasonable proof that
the claimed defect is due to a matter embraced
within the Lessor's warranty under this
Subparagraph 12.9 and that such defect did not
result from any act or omission of the Lessee,
including but not limited to any failure to
operate or maintain the Leased Part claimed to
be defective or the Aircraft in which it was
installed in accordance with the Lessee's
FAA-approved maintenance program.
12.9.5 Remedies
The Lessee's remedy and the Lessor's obligation and
liability under this Subparagraph 12.9 with respect to
each defect are limited to the repair of such defect in
the Leased Part in which the defect appears, or, as
mutually agreed, to the replacement of such Leased Part
with a similar part free from defect.
Any replacement part furnished under this Subparagraph
12.9.5 will for the purposes of this Letter Agreement be
deemed to be the Leased Part so replaced.
12.9.6 Suspension and Transportation Costs
12.9.6.1 If a Leased Part is found to be defective and is covered
by this warranty, the Lease Term and the Lessee's
obligation to pay rental charges as provided in
Subparagraph 12.4(a) of this Letter Agreement will be
suspended from the date on which the Lessee notifies the
Lessor of such defect until the date on which the Lessor
has repaired, corrected or replaced the defective Leased
Part, provided, however, that the Lessee has withdrawn
such defective Leased Part from use, promptly after
giving such notice to the Lessor. If the defective Leased
Part is replaced, such replacement will be deemed to no
longer be a Leased Part under the Lease as of the date on
which such part was received by the Lessor at the return
location specified in the applicable Lease.
If a Leased Part is found to be defective on first use by
the Lessee and is covered by this warranty, no rental or
other charges as provided in Subparagraph 12.4(a) will
accrue and be payable by the Lessee until the date on
which the Lessor has repaired, corrected or replaced the
defective Leased Part in a manner satisfactory to the
Lessee.
12.9.6.2 All transportation and insurance costs associated with
the return of the defective Leased Part to the Lessor and
the return of the repaired, corrected or replacement part
to the Lessee will be borne by the Lessor.
12.9.7 Wear and Tear
Normal wear and tear and the need for regular maintenance
and overhaul will not constitute a defect or
nonconformance under this Subparagraph 12.9.
12.9.8 Exclusivity of Warranties and General Limitations of
Liability and Duplicate Remedies
The Lessee and the Lessor recognize and agree that the
Exclusivity of Warranties and General Limitations of
Liability provisions and the Duplicate Remedies
provisions contained in Clause 12 of the Agreement will
also apply to the foregoing warranties provided for in
this Subparagraph 12.9.
UNQUOTE
In consideration of the assignment and subrogation by the
Seller under this Subparagraph 12.9 in favor of the Buyer
in respect of the Seller's rights against and obligations
to the Manufacturer under the provisions quoted above,
the Buyer hereby accepts such assignment and subrogation
and agrees to be bound by all of the terms, conditions
and limitations therein contained.
EXCLUSIVITY OF WARRANTIES AND GENERAL LIMITATIONS
OF LIABILITY AND DUPLICATE REMEDIES
THIS PARAGRAPH 12 (INCLUDING ITS SUBPROVISIONS) SETS
FORTH THE EXCLUSIVE WARRANTIES, EXCLUSIVE LIABILITIES AND
EXCLUSIVE OBLIGATIONS OF THE SELLER, AND THE EXCLUSIVE
REMEDIES AVAILABLE TO THE BUYER, WHETHER UNDER THIS
LETTER AGREEMENT OR OTHERWISE, ARISING FROM ANY DEFECT OR
NONCONFORMITY OR PROBLEM OF ANY KIND IN ANY LEASED PART
DELIVERED UNDER THIS LETTER AGREEMENT.
THE BUYER RECOGNIZES THAT THE RIGHTS, WARRANTIES AND
REMEDIES IN THIS PARAGRAPH 12 ARE ADEQUATE AND SUFFICIENT
TO PROTECT THE BUYER FROM ANY DEFECT OR NONCONFORMITY OR
PROBLEM OF ANY KIND IN THE GOODS AND SERVICES SUPPLIED
UNDER THIS LETTER AGREEMENT. THE BUYER HEREBY WAIVES,
RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS,
GUARANTEES AND LIABILITIES OF THE SELLER AND ALL OTHER
RIGHTS, CLAIMS AND REMEDIES OF THE BUYER AGAINST THE
SELLER, WHETHER EXPRESS OR IMPLIED BY CONTRACT, TORT, OR
STATUTORY LAW OR OTHERWISE, WITH RESPECT TO ANY
NONCONFORMITY OR DEFECT OR PROBLEM OF ANY KIND IN ANY
LEASED PART DELIVERED UNDER THIS LETTER AGREEMENT,
INCLUDING BUT NOT LIMITED TO, UNLESS OTHERWISE PROVIDED
FOR IN THIS PARAGRAPH 12:
(1) ANY IMPLIED OR EXPRESS WARRANTY ARISING FROM
COURSE OF PERFORMANCE, COURSE OF DEALING OR
USAGE OF TRADE;
(2) ANY RIGHT, CLAIM OR REMEDY FOR BREACH OF CONTRACT;
(3) ANY RIGHT, CLAIM OR REMEDY FOR TORT, INCLUDING
ACTIONS FOR NEGLIGENCE, RECKLESSNESS,
INTENTIONAL TORTS, IMPLIED WARRANTY IN TORT
AND/OR STRICT LIABILITY;
(4) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER THE
UNIFORM COMMERCIAL CODE, OR ANY OTHER STATE OR
FEDERAL STATUTE;
(5) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER ANY
REGULATIONS OR STANDARDS IMPOSED BY ANY
INTERNATIONAL, NATIONAL, STATE OR LOCAL STATUTE
OR AGENCY;
(6) ANY RIGHT, CLAIM OR REMEDY TO RECOVER OR BE
COMPENSATED FOR:
(a) LOSS OF USE OR REPLACEMENT OF ANY
AIRCRAFT, COMPONENT, EQUIPMENT,
ACCESSORY OR PART PROVIDED UNDER THE
AGREEMENT;
(b) LOSS OF, OR DAMAGE OF ANY KIND TO, ANY
AIRCRAFT, COMPONENT, EQUIPMENT,
ACCESSORY OR PART PROVIDED UNDER THE
AGREEMENT;
(c) LOSS OF PROFITS AND/OR REVENUES;
(d) ANY OTHER INCIDENTAL OR CONSEQUENTIAL
DAMAGE.
THE WARRANTIES PROVIDED BY THIS LETTER AGREEMENT WILL NOT
BE EXTENDED, ALTERED OR VARIED EXCEPT BY A WRITTEN
INSTRUMENT SIGNED BY THE SELLER AND THE BUYER. IN THE
EVENT THAT ANY PROVISION OF THIS PARAGRAPH 12 SHOULD FOR
ANY REASON BE HELD UNLAWFUL, OR OTHERWISE UNENFORCEABLE,
THE REMAINDER OF THIS PARAGRAPH 12 WILL REMAIN IN FULL
FORCE AND EFFECT.
The remedies provided to the Buyer under this Paragraph
12 as to any defect in respect of the Aircraft or any
part thereof are not cumulative. The Buyer will be
entitled to the one remedy which provides the maximum
benefit to it, as the Buyer may elect, pursuant to the
terms and conditions of this Paragraph 12 for any such
particular defect for which remedies are provided under
this Paragraph 12; provided, however, that, *** the Buyer
will not be entitled to elect a remedy under one part of
this Paragraph 12 which constitutes a duplication of any
remedy elected by it under any other part hereof for the
same defect. ***
APPENDIX "A" TO CLAUSE 12
SELLER PARTS LEASING LIST
(Leased Parts)
AILERONS
AUXILIARY POWER UNIT (APU) DOORS
CARGO DOORS
PASSENGER DOORS
ELEVATORS
FLAPS
LANDING GEAR DOORS
RUDDER
TAIL CONE
WING SLATS
SPOILERS
AIRBRAKES
WING TIPS
RADOMES
13. ***
13.1 ***
13.2 ***
13.3 ***
13.4 ***
14. TERMINATION
Any termination under Clause 10, 11 or 21 of the
Agreement or under the Letter Agreements thereto will
discharge all obligations and liabilities of the parties
hereunder with respect to such undelivered Material,
services, data or other items to be purchased hereunder
that are applicable to those undelivered Aircraft as to
which the Agreement has been terminated. Termination
under this Paragraph 14 notwithstanding new and unused
Material in excess of the Buyer's requirements due to
such Aircraft cancellation will be repurchased by the
Seller as provided in Subparagraph 10.2 of this Letter
Agreement.
15. ASSIGNMENT
This Letter Agreement may be assigned in accordance with
Clause 19 of the Agreement.
If the foregoing correctly sets forth our understanding,
please execute the original and one (1) copy hereof in the space provided
below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
Its: Treasurer
Date: November 24, 1998
LETTER AGREEMENT NO. 2
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: DELIVERIES
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L.
(the "Seller"), have entered into an Airbus A330/A340 Purchase Agreement
dated as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
2 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will
constitute an integral, nonseverable part of said Agreement, that the
provisions of said Agreement are hereby incorporated herein by reference,
and that this Letter Agreement will be governed by the provisions of said
Agreement, except that if the Agreement and this Letter Agreement have
specific provisions which are inconsistent, the specific provisions
contained in this Letter Agreement will govern.
1. [INTENTIONALLY LEFT BLANK]
2. RECONFIRMABLE AIRCRAFT
In order to provide the Buyer with flexibility to meet
its future fleet mix requirements, the Seller grants the
Buyer the right to reconfirm its order for each and any
Reconfirmable Aircraft. The Buyer will notify the Seller
in writing by no later than *** before the scheduled
month of delivery of a Reconfirmable Aircraft as to
whether it reconfirms the order for the applicable
Reconfirmable Aircraft. Upon reconfirmation of a
Reconfirmable Aircraft by the Buyer, such Reconfirmable
Aircraft will be considered Firm Aircraft for all
purposes under the Agreement.
*** Upon such nonreconfirmation, the Buyer's rights with
respect to the Reconfirmable Aircraft that was not
reconfirmed will expire and the parties will have no
further obligations to one another with respect to such
Reconfirmable Aircraft.
3. ***
4. ***
4.1 ***
(i) ***
(ii) ***
(iii) ***
(a) ***
(b) ***
(iv) ***
(vi) ***
5. LEASED AIRCRAFT
If the Buyer wishes to lease A330 or A340 aircraft, the
Seller will assist the Buyer in locating such aircraft
(the "Leased Aircraft") from leasing companies. In the
event that the Leased Aircraft need to have a ***.
6. ***
6.1 ***
6.2 ***
7. EXCUSABLE DELAYS
7.1 Unanticipated Delay
Subclause 10.2 of the Agreement is hereby amended as
follows:
***.
7.2 Anticipated Delay
***
8. INEXCUSABLE DELAYS
8.1 Subclause 11.1 of the Agreement is hereby amended as follows:
***.
8.2 Subclause 11.4 of the Agreement is hereby amended as follows:
***.
9. ***
10. BUYER FURNISHED EQUIPMENT
***
11. ASSIGNMENT
This Letter Agreement and the rights and obligations of
the Buyer hereunder will not be assigned or transferred
in any manner without the prior written consent of the
Seller, and any attempted assignment or transfer in
contravention of the provisions of this Paragraph 11 will
be void and of no force or effect. Notwithstanding the
preceding sentence, the terms of Subclauses 19.5 and 19.6
of the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our
understanding, please execute the original and one (1) copy hereof in the
space provided below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
Its: Treasurer
Date: November 24, 1998
LETTER AGREEMENT NO. 3
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: ADDITIONAL AIRCRAFT
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L.
(the "Seller"), have entered into an Airbus A330/A340 Purchase Agreement
dated as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
3 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will
constitute an integral, nonseverable part of said Agreement, that the
provisions of said Agreement are hereby incorporated herein by reference,
and that this Letter Agreement will be governed by the provisions of said
Agreement, except that if the Agreement and this Letter Agreement have
specific provisions which are inconsistent, the specific provisions
contained in this Letter Agreement will govern.
1. SCOPE
***
2. DELIVERIES
Upon the Buyer's written request from time to time, the
Seller will offer the Buyer delivery positions for
Additional Aircraft by month and year, subject to the
Manufacturer's Commercial Constraints and Industrial
Constraints at the time of request.
Delivery positions offered by the Seller for Additional
Aircraft will be held for the Buyer during the five (5)
Working Day period following the Seller's offer. The
Buyer may exercise its option to reserve the delivery
position for each such Additional Aircraft
(i) by written notice to the Seller and by making a
nonrefundable deposit payable to the Seller ***
due as set forth in Subclause 6.2.2.2 of the
Agreement, and
(ii) provided that at no time will the number of
Reconfirmable Aircraft exceed the number of Firm
Aircraft then on order, plus the number of
Aircraft already delivered to the Buyer, ***.
***
3. [INTENTIONALLY LEFT BLANK]
4. ASSIGNMENT
This Letter Agreement and the rights and obligations of
the Buyer hereunder will not be assigned or transferred
in any manner without the prior written consent of the
Seller, and any attempted assignment or transfer in
contravention of the provisions of this Paragraph 4 will
be void and of no force or effect. Notwithstanding the
preceding sentence, the terms of Subclauses 19.5 and 19.6
of the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our
understanding, please execute the original and one (1) copy hereof in the
space provided below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
Its: Treasurer
Date: November 24, 1998
LETTER AGREEMENT NO. 4
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: CONVERSION RIGHTS
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L.
(the "Seller"), have entered into an Airbus A330/A340 Purchase Agreement
dated as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
4 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will
constitute an integral, nonseverable part of said Agreement, that the
provisions of said Agreement are hereby incorporated herein by reference,
and that this Letter Agreement will be governed by the provisions of said
Agreement, except that if the Agreement and this Letter Agreement have
specific provisions which are inconsistent, the specific provisions
contained in this Letter Agreement will govern.
1. CONVERSION RIGHT
1.1 In order to provide the Buyer with additional flexibility
to meet its future fleet mix requirements, the Seller
grants the Buyer aircraft type conversion rights under
the terms and conditions contained in this Paragraph 1
(the "Wide-Body Conversion Right").
***
(iii) The Conversion Right will be subject to the
Manufacturer's Commercial Constraints and
Industrial Constraints at the time the Buyer
elects to exercise its Conversion Right.
***
1.2 The Buyer's exercise of its Conversion Right with respect
to a particular Aircraft will result in an adjustment to
the Predelivery Payment Reference Price and Predelivery
Payments due in respect of the converted Aircraft (a
"Converted Aircraft").
If the Predelivery Payment Reference Price for a
Converted Aircraft is higher than it was for the Aircraft
from which it was converted (the "Original Aircraft"),
then the difference between the Predelivery Payments the
Buyer has paid and what it would have paid had the
Converted Aircraft been an Original Aircraft will be due
within three (3) Working Days of conversion, and
conversion will be effective when the Buyer pays such
difference.
***
2. [INTENTIONALLY LEFT BLANK]
3. ASSIGNMENT
This Letter Agreement and the rights and obligations of
the Buyer hereunder will not be assigned or transferred
in any manner without the prior written consent of the
Seller, and any attempted assignment or transfer in
contravention of the provisions of this Paragraph 3 will
be void and of no force or effect. Notwithstanding the
preceding sentence, the terms of Subclauses 19.5 and 19.6
of the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our
understanding, please execute the original and one (1) copy hereof in the
space provided below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
Its: Treasurer
Date: November 24, 1998
LETTER AGREEMENT NO. 5
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: PURCHASE INCENTIVES
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L.
(the "Seller"), have entered into an Airbus A330/A340 Purchase Agreement
dated as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
5 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will
constitute an integral, nonseverable part of said Agreement, that the
provisions of said Agreement are hereby incorporated herein by reference,
and that this Letter Agreement will be governed by the provisions of said
Agreement, except that if the Agreement and this Letter Agreement have
specific provisions which are inconsistent, the specific provisions
contained in this Letter Agreement will govern.
1. ***
1.1 ***
1.2 ***
1.3 [INTENTIONALLY LEFT BLANK]
1.4. ***
1.5 ***
1.6 [INTENTIONALLY LEFT BLANK]
1.7 [INTENTIONALLY LEFT BLANK]
1.8 [INTENTIONALLY LEFT BLANK]
2. ***
2.1 ***
2.1.1 ***
2.1.2 ***
2.1.3 ***
2.2 ***
3. PROPULSION SYSTEMS INCENTIVES
Except as otherwise agreed to by the Buyer and the
manufacturer of the Propulsion Systems and notified to
the Seller, the Propulsion Systems Reference Prices for
the engines are subject to escalation to the date of
delivery of the applicable Aircraft by applying the
Propulsion Systems' manufacturers' price revision
formulas (set forth in Exhibit "H-1" and "H-2" to the
Agreement) and to changes imposed by the Propulsion
Systems' manufacturers.
The Buyer will negotiate directly with the Propulsion
Systems' manufacturers engine pricing, credits,
escalation, and other commercial issues. As a result of
such negotiation, the Propulsion Systems' manufacturer's
price revision formula in Exhibit "H-1" and "H-2" to
this Agreement may be revised.
4. ***
5. ASSIGNMENT
This Letter Agreement and the rights and obligations of
the Buyer hereunder will not be assigned or transferred
in any manner without the prior written consent of the
Seller, and any attempted assignment or transfer in
contravention of the provisions of this Paragraph 5 will
be void and of no force or effect. Notwithstanding the
preceding sentence, the terms of Subclauses 19.5 and 19.6
of the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our
understanding, please execute the original and one (1) copy hereof in the
space provided below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
Its: Treasurer
Date: November 24, 1998
APPENDIX 1
AIRFRAME PRICE REVISION FORMULA
FOR ***
l. BASE PRICE
The Base Price of the *** is as quoted in Subparagraph
1.5 of Letter Agreement No. 5 to the Agreement.
2. BASE PERIOD
***
This Base Price is subject to adjustment for changes in
economic conditions as measured by data obtained from the
United States Department of Labor, Bureau of Labor
Statistics, and in accordance with the provisions of
Paragraphs 4 and 5 of this Appendix 1.
ECIb and ICb index values indicated in Paragraph 4 of
this Appendix 1 are based on publications available at
the date of signature of the Agreement and are United
States Department of Labor Bureau of Labor Statistics
computations corresponding to certain base years as
stipulated below in Paragraph 3. Should the Bureau of
Labor Statistics change such base year, it will be
necessary to restate such values in an appropriate
manner. Other changes (such as benchmark revision),
except those related to established errors from the
Bureau of Labor Statistics, will not be taken into
consideration.
3. REFERENCE INDEXES
***
Material Index: "Industrial Commodities Index"
(hereinafter referred to as "ICI-Index"), published
monthly by the United States Department of Labor, Bureau
of Labor Statistics, in "Producer Prices and Price
Indexes" (Table 6: "Producer prices and price indexes for
commodity groupings and individual items"). (Base year
1982 = 100.)
4 - REVISION FORMULA
***
In determining the Revised Base Price at delivery of the
Aircraft, each quotient will be calculated to the nearest
ten thousandth (4 decimals). If the next succeeding place
is five (5) or more, the preceding decimal place will be
raised to the next higher figure. The final factor will
be rounded to the nearest ten thousandth (4 decimals).
After final computation, Pn will be rounded to the next
whole number (0.5 or more rounded to l).
5. GENERAL PROVISIONS
5.1 Substitution of Indexes
In the event that:
(i) the United States Department of Labor
substantially revises its methodology for
calculating any of the indexes referred to here
above, or
(ii) the United States Department of Labor
discontinues, either temporarily or permanently,
any of the indexes referred to here above and
publication thereof, or
(iii) the data samples used to calculate any of the
indexes referred to here above are substantially
changed,
The Seller and the Buyer will agree on a substitute
index.
Such substitute index will reflect as closely as possible
the actual variations in wage rates or in material
prices, as the case may be, used in the calculation of
the original index.
As a result of this selection of a substitute index, the
Seller and the Buyer will agree on appropriate
adjustments to be made to the price revision formula;
such adjustments may include, but will not be limited to,
allowing to combine the successive utilization of the
original index and of the substitute index, and other
methodologies designed to ensure consistency in the
numerators and denominators of the various quotients.
5.2 Final Index Values
The Revised Base Price at the date of Aircraft delivery
will be final and will not be subject to further
adjustments, of any kind, to the applicable indexes as
published at the date of Aircraft delivery.
LETTER AGREEMENT NO. 6
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: SPECIFICATION MATTERS
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L.
(the "Seller"), have entered into an Airbus A330/A340 Purchase Agreement
dated as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
6 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will
constitute an integral, nonseverable part of said Agreement, that the
provisions of said Agreement are hereby incorporated herein by reference,
and that this Letter Agreement will be governed by the provisions of said
Agreement, except that if the Agreement and this Letter Agreement have
specific provisions which are inconsistent, the specific provisions
contained in this Letter Agreement will govern.
1. [INTENTIONALLY LEFT BLANK]
2. ***
2.1 ***
2.2 ***
2.3 ***
3. ***
3.1 ***
3.2 ***
4. ***
4.1 ***
4.2 ***
5. ***
6. ***
7. ***
7.1 ***
7.2 ***
7.3 ***
8. ASSIGNMENT
This Letter Agreement and the rights and obligations of
the Buyer hereunder will not be assigned or transferred
in any manner without the prior written consent of the
Seller, and any attempted assignment or transfer in
contravention of the provisions of this Paragraph 8 will
be void and of no force or effect. Notwithstanding the
preceding sentence, the terms of Subclauses 19.5 and 19.6
of the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our
understanding, please execute the original and one (1) copy hereof in the
space provided below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
Its: Treasurer
Date: November 24, 1998
LETTER AGREEMENT NO. 7
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: PRODUCT SUPPORT
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L.
(the "Seller"), have entered into an Airbus A330/A340 Purchase Agreement
dated as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
7 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will
constitute an integral, nonseverable part of said Agreement, that the
provisions of said Agreement are hereby incorporated herein by reference,
and that this Letter Agreement will be governed by the provisions of said
Agreement, except that if the Agreement and this Letter Agreement have
specific provisions which are inconsistent, the specific provisions
contained in this Letter Agreement will govern.
1. PRODUCT SUPPORT RESPONSIVENESS
1.1 The Seller and the Manufacturer will promptly respond to,
and deal with, any correspondence or request from the
Buyer with respect to product support issues.
1.2 The precise contents of the product support package may
be adjusted over time, by way of exchanges within the
envelope of such package, to better match the Buyer's
product support needs.
2. ***
2.1 ***
2.2 ***
2.3 ***
2.4 ***
2.4.1 ***
2.4.2 ***
2.5 No Fault-Found Policy
The Seller has developed a "No Fault Found Policy"
covering Vendor Parts and Seller Parts, as specified in
the booklet SG-S/921.0067/96. Such policy will not be
changed in a manner adverse to the Buyer.
3. ***
3.1 ***
3.2 ***
4. TECHNICAL PUBLICATIONS
4.1 The Buyer and the Seller agree that an integral portion
of the Technical Publications product support is the
implementation of a functioning "E-Pubs" system by the
Buyer prior to delivery of the first Aircraft.
Accordingly, the Buyer and the Seller will together
devise a plan to (a) make available to the Buyer on such
"E-Pubs" system all Technical Publications now only
available on CD-ROM, (b) the Buyer and the Seller will
commit to implement "E-Pubs" as soon as practicable, and
(c) agree on the allocation of the costs of any necessary
interim implementation.
4.2 Aircraft MSG-3 analysis will be provided to the Buyer as
part of the Technical Publications package.
4.3 The Seller will provide the Buyer an interior and
exterior aircraft placards manual specifying which
placards are required for aircraft dispatch.
4.4 ***
4.5 On the Buyer's request, the Seller will provide the Buyer
certification data for specific material, including
flammability coupons, when such data is available to the
Seller.
4.6 ***
5. TRAINING
5.1 ***
5.2 ***
5.3 ***
5.4.1 ***
5.4.2 ***
5.5 ***
5.6 ***
6. MAINTENANCE PLANNING
***
7. ENTRY-INTO-SERVICE
7.1 ***
7.2 ***
7.3 ***
8. TOOLING
8.1 ***
8.2 ***
8.3 ***
8.4 ***
9. ***
9.1 ***
9.2 ***
9.3 ***
9.4 ***
9.5 ***
10. ASSIGNMENT
This Letter Agreement and the rights and obligations of
the Buyer hereunder will not be assigned or transferred
in any manner without the prior written consent of the
Seller, and any attempted assignment or transfer in
contravention of the provisions of this Paragraph 10 will
be void and of no force or effect. Notwithstanding the
preceding sentence, the terms of Subclauses 19.5 and 19.6
of the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding,
please execute the original and one (1) copy hereof in the space provided
below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
Its: Treasurer
Date: November 24, 1998
A330-200 (PW)
PW 4168A
LETTER AGREEMENT NO. 8A
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: A330-200 PERFORMANCE GUARANTEES
Dear Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L.
(the "Seller"), have entered into an Airbus A330/A340 Purchase Agreement
dated as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
8A (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will
constitute an integral, nonseverable part of said Agreement, that the
provisions of said Agreement are hereby incorporated herein by reference,
and that this Letter Agreement will be governed by the provisions of said
Agreement, except that if the Agreement and this Letter Agreement have
specific provisions which are inconsistent, the specific provisions
contained in this Letter Agreement will govern.
The Seller, in its capacity as "Buyer" under its
arrangement with the Manufacturer, has negotiated and obtained the
following performance and weight guarantees (the "Guarantees") from the
Manufacturer, in its capacity as "Seller" with respect to the A330-200
Aircraft, subject to the terms, conditions, limitations and restrictions
all as hereinafter set out. The Seller hereby assigns to the Buyer and the
Buyer hereby accepts, as to each A330-200 Aircraft delivered to the Buyer
under the Agreement, all of the rights and obligations of the Seller with
respect to such A330-200 Aircraft in its capacity as "Buyer" as aforesaid
under the said Guarantees and the Seller subrogates the Buyer into all such
rights and obligations in respect of such A330-200 Aircraft. The Seller
hereby warrants to the Buyer that it has all the requisite authority to
make the foregoing assignment and effect the foregoing subrogation to and
in favor of the Buyer and that it will not enter into any amendment of the
provisions so assigned or subrogated without the prior written consent of
the Buyer.
Capitalized terms used in the following quoted provisions and
not otherwise defined herein will have the meanings assigned thereto in the
Agreement except that the term "Seller" refers to the Manufacturer and the
term "Buyer" refers to the Seller (as defined in the Agreement).
QUOTE
PREAMBLE
The guarantees defined below (the "Guarantees") are applicable
to the A330-200 Aircraft as described in the Technical
Specification G.000.02000 Issue 3 dated 15th October 1996 as
amended by Specification Change Notice for the fitting of Pratt
and Whitney PW 4168A propulsion systems (the "Specification")
without taking into account any further changes
thereto as provided in the Agreement.
Notwithstanding the foregoing the Seller reserves the right to
increase the Design Weights above the weights shown in the
Specification in order to satisfy the Guarantees.
1 MISSION GUARANTEE
1.1 The A330-200 Aircraft will be capable of carrying a fixed
zero fuel weight of 340,000 lb over a guaranteed still air stage
distance of not less than *** nautical miles when operated under
the conditions defined below:
1.1.1 The departure airport conditions are such as to allow the
required take-off weight to be used without restriction.
The destination airport conditions are such as to allow the
required landing weight to be used without restriction.
1.1.2 An allowance of 1,640 lb of fuel is included for take-off
and climb to 1,500 ft pressure altitude with acceleration to
climb speed at a temperature of 77 (degree) F.
1.1.3 Climb from 1,500 ft pressure altitude up to cruise
altitude using maximum climb thrust and cruise at a fixed Mach
number of 0.82 at pressure altitudes of 35,000 ft and 39,000 ft
and descent to 1,500 ft pressure altitude are conducted in
ISA+10 degreeC conditions. Climb and descent speeds below
10,000 ft will be 250 knots CAS.
1.1.4 An allowance of 410 lb of fuel is included for approach and
landing at the destination airport.
1.1.5 Stage distance is defined as the distance covered during
climb, cruise and descent as described in Subparagraph 1.1.3
above.
1.1.6 At the end of approach and landing 22,460 lb of fuel will remain
in the tanks. This represents the estimated fuel required for:
1) En-route reserves - 10% of flight time
2) Missed approach
3) Diversion in ISA+10 degreeC conditions over a still
air distance of 150 nautical miles starting and
ending at 1,500 ft pressure altitude
4) Holding for 30 minutes at 1,500 ft pressure altitude
in ISA+10 degreeC conditions.
2 MANUFACTURER'S WEIGHT EMPTY
2.1 The Seller guarantees a Buyer's Manufacturer's Weight Empty of
***
2.2 For the purposes of this Paragraph 2 the Buyer's Manufacturer's
Weight Empty is the Manufacturer's Weight Empty defined in
Section 13-10.00.00 of the Specification and is subject to
adjustment as defined in Subparagraph 6.2.
3 NOISE
3.1 External
3.1.1 The Seller guarantees that the A330-200 Aircraft will be
certified in accordance with FAR Part 36 Noise Standards, issue
1978, including Amendment 36-15 Stage 3. The applicable noise
limits are as defined in paragraphs 36.201 and c36.5 (3).
3.2 Internal
3.2.1 Cockpit noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.82
in still air under ISA conditions, the guaranteed A-Weighted
Sound Pressure Level (SPL) will not exceed *** and
the Speech Interference Level (SIL) will not exceed ***.
3.2.2 Cabin noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.82
in still air under ISA conditions, the guaranteed A-Weighted
Sound Pressure Level (SPL) will not exceed *** and
the Speech Interference Level (SIL) will not exceed ***.
3.2.3 On the ground and under the conditions defined in
Subparagraph 4.9 below the noise levels in the passenger
compartment with passenger doors open or closed the A-weighted
Sound Pressure Level (SPL) will not exceed *** and the Speech
Interference Level (SIL) will not exceed ***.
4 GUARANTEE CONDITIONS
4.1 The performance and noise certification requirements for the
A330-200 Aircraft, except where otherwise noted, will be as
stated in Section 02 of the Specification.
4.2 For the determination of FAR take-off and landing
performance a hard level dry runway surface with no runway
strength limitations, no obstacles, zero wind, atmosphere
according to ISA, except as otherwise noted and the use of
speedbrakes, flaps, landing gear and engines in the conditions
liable to provide the best results will be assumed.
4.2.1 When establishing take-off and second segment performance
no air will be bled from the engines for cabin air conditioning
or anti-icing.
4.3 The en-route one engine inoperative climb performance will be
established with the amount of engine air bleed associated with
the maximum cabin altitude as specified in Section 21-30.32 of
the Specification and an average ventilation rate not less than
the amount defined in the Specification but no air will be bled
from the engines for anti-icing.
4.4 Climb, cruise and descent performance associated with the
Guarantees will include allowances for normal electrical load
and for normal engine air bleed and power extraction associated
with maximum cabin differential pressure as defined in Section
21-30.31 of the Specification. Cabin air conditioning management
during performance demonstration as described in Subparagraph
5.3 below may be such as to optimize the A330-200 Aircraft
performance while meeting the minimum air conditioning
requirements defined above. Unless otherwise stated no air will
be bled from the engines for anti-icing.
4.5 The engines will be operated using not more than the engine
manufacturer's maximum recommended outputs for take-off, maximum
go-round, maximum continuous, maximum climb and cruise for
normal operation unless otherwise stated.
4.6 Where applicable the Guarantees assume the use of an approved
fuel having a density of 6.7 lb/US gallon and a lower heating
value of 18,590 BTU/lb.
4.7 Speech interference level (SIL) is defined as the arithmetic
average of the sound pressure levels in the 1,000, 2,000, and
4,000 Hz octave bands A-weighted sound level (dBA) is as defined
in the American National Standard Specification ANSI.4-1971.
4.8 The sound levels guaranteed in Subparagraph 3.2: i) will be
measured at the positions defined in Section 03-83.10 of the
Specification ii) refer to an A330-200 Aircraft with standard
acoustic insulation and an interior completely furnished. The
effect on noise of Buyer furnished equipment other than
passenger seats will be the responsibility of the Buyer.
4.9 For the purposes of the sound levels guaranteed in Subparagraph
3.2.3 the APU and air conditioning system will be operating.
Sound level measurements may be made at the prevailing ambient
temperature with the air conditioning packs controlled to
approximate air conditioning machinery rotational speed
appropriate to an ambient temperature of 25(degree)C.
5 GUARANTEE COMPLIANCE
5.1 Compliance with the Guarantees will be demonstrated using
operating procedures and limitations in accordance with those
defined by the certifying Airworthiness Authority and by the
Seller unless otherwise stated.
5.2 Compliance with the take-off, second segment, en-route one
engine inoperative and landing elements of the Guarantees will
be demonstrated with reference to the approved Flight Manual.
5.3 Compliance with those parts of the Guarantees defined in
Paragraph 1 above not covered by the requirements of the
certifying Airworthiness Authority will be demonstrated by
calculation based on data obtained during flight tests conducted
on one (or more, at the Seller's discretion) A330 aircraft of
the same aerodynamic configuration as the A330-200 Aircraft and
incorporated in the In-Flight Performance Program and data bases
(the "IFP") appropriate to the A330-200 Aircraft.
5.4 Compliance with the Manufacturer's Weight Empty guarantee
defined in Paragraph 2 will be demonstrated with reference to a
weight compliance report.
5.5 Compliance with the noise guarantees defined in Subparagraph 3.2
will be demonstrated with reference to noise surveys conducted
on one (or more, at the Seller's discretion) A330 aircraft of an
acoustically similar standard as those A330-200 Aircraft.
5.6 Data derived from tests and noise surveys will be adjusted as
required using conventional methods of correction, interpolation
or extrapolation in accordance with established aeronautical
practices to show compliance with the Guarantees.
5.7 Compliance with the Guarantees is not contingent on engine
performance defined in the engine manufacturer's specification.
5.8 The Seller undertakes to furnish the Buyer with a report or
reports demonstrating compliance with the Guarantees at, or as
soon as possible after, the delivery of each of the A330-200
Aircraft.
6 ADJUSTMENT OF GUARANTEES
6.1 In the event of any change to any law, governmental regulation
or requirement or interpretation thereof ("rule change") by any
governmental agency made subsequent to the date of the Agreement
and such rule change affects the A330-200 Aircraft configuration
or performance or both required to obtain certification the
Guarantees will be appropriately modified to reflect the effect
of any such change.
6.2 The Guarantees apply to the A330-200 Aircraft as described in
the Preamble to this Letter Agreement and may be adjusted in the
event of :
a) Any further configuration change which is the subject
of a SCN
b) Variation in actual weights of items defined in Section
13-10 of the Specification
c) Changes required to obtain certification which cause
changes to the performance or weight of the A330-200
Aircraft
7. EXCLUSIVE GUARANTEES
The Guarantees are exclusive and are provided in lieu of any and
all other performance and weight guarantees of any nature which
may be stated, referenced or incorporated in the Specification
or any other document.
8. UNDERTAKING; REMEDIES
***
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Letter Agreement in favor of the Buyer in respect of
the Seller's rights against and obligations to the Manufacturer
under the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer
and Seller recognize and agree that, except as otherwise
expressly provided in Paragraph 8 of this Letter Agreement, all
the provisions of Clause 12 of the Agreement, including without
limitation the Exclusivity of Warranties and General Limitations
of Liability and Duplicate Remedies therein contained, will
apply to the foregoing performance guarantees.
If the foregoing correctly sets forth our understanding,
please execute the original and one (1) copy hereof in the space provided
below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
LETTER AGREEMENT NO. 8B
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: A330-300 PERFORMANCE GUARANTEES
Dear Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L.
(the "Seller"), have entered into an Airbus A330/A340 Purchase Agreement
dated as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
8B (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will
constitute an integral, nonseverable part of said Agreement, that the
provisions of said Agreement are hereby incorporated herein by reference,
and that this Letter Agreement will be governed by the provisions of said
Agreement, except that if the Agreement and this Letter Agreement have
specific provisions which are inconsistent, the specific provisions
contained in this Letter Agreement will govern.
The Seller, in its capacity as "Buyer" under its
arrangement with the Manufacturer, has negotiated and obtained the
following performance and weight guarantees (the "Guarantees") from the
Manufacturer, in its capacity as "Seller" with respect to the A330-300
Aircraft, subject to the terms, conditions, limitations and restrictions
all as hereinafter set out. The Seller hereby assigns to the Buyer and the
Buyer hereby accepts, as to each A330-300 Aircraft delivered to the Buyer
under the Agreement, all of the rights and obligations of the Seller with
respect to such A330-300 Aircraft in its capacity as "Buyer" as aforesaid
under the said Guarantees and the Seller subrogates the Buyer into all such
rights and obligations in respect of such A330-300 Aircraft. The Seller
hereby warrants to the Buyer that it has all the requisite authority to
make the foregoing assignment and effect the foregoing subrogation to and
in favor of the Buyer and that it will not enter into any amendment of the
provisions so assigned or subrogated without the prior written consent of
the Buyer.
Capitalized terms used in the following quoted provisions and
not otherwise defined herein will have the meanings assigned thereto in the
Agreement except that the term "Seller" refers to the Manufacturer and the
term "Buyer" refers to the Seller (as defined in the Agreement).
QUOTE
PREAMBLE
The guarantees defined below (the "Guarantees") are applicable
to the A330-300 Aircraft as described in the Technical
Specification G.000.03000 Issue 6 dated 15th October 1996 as
amended by Specification Change Notices for:
i) the fitting of Pratt and Whitney PW4168A propulsion
systems
ii) the increase in the Design Weights to:
Maximum Take-Off Weight : 507,060 lb (230,000 kg)
Maximum Landing Weight : 407,855 lb (185,000 kg)
Maximum Zero Fuel Weight : 381,400 lb (173,000 kg)
(the "Specification") without taking into account any further
changes thereto as provided in the Agreement.
Notwithstanding the foregoing the Seller reserves the right to
increase the Design Weights above the weights shown in the
Specification in order to satisfy the Guarantees.
2. GUARANTEED PERFORMANCE
2.1 Take-off
2.1.1 When operated under the following conditions and with Air
Conditioning 'ON':
Pressure altitude : 21 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 10,499 ft
Take-off distance available : 10,499 ft
Accelerate-stop distance available : 10,499 ft
Slope : 0.1% uphill
Wind : Zero
Obstacles (height and distance : 23 ft/1,054 ft
from end of TOR) : 167 ft/14,000 ft
: 530 ft/42,472 ft
Runway surface : Dry
the maximum permissible weight at the start of ground run
will be not less than the guarantee value.
Nominal: 507,060 lb Guarantee: ***
2.1.2 When operated under the following conditions and with Air
Conditioning 'ON':
Pressure altitude : 21 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 10,499 ft
Take-off distance available : 10,499 ft
Accelerate-stop distance available : 10,499 ft
Slope : 0.1% downhill
Wind : Zero
Obstacles (height and distance : 13 ft/1,070 ft
from end of TOR) : 178 ft/9,500 ft
Runway surface : Dry
the maximum permissible weight at the start of ground run
will be not less than the guarantee value.
Nominal: 507,060 lb Guarantee: ***
2.1.3 When operated under the following conditions and with Air
Conditioning 'ON':
Pressure altitude : 1,024 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 10,502 ft
Take-off distance available : 10,502 ft
Accelerate-stop distance available : 10,502 ft
Slope : 0.3% uphill
Wind : Zero
Obstacles (height and distance : 14 ft/783 ft
from end of TOR) : 20 ft/1,159 ft
: 56 ft/2,090 ft
Runway surface : Dry
the maximum permissible weight at the start of ground run
will be not less than the guarantee value.
Nominal: 486,500 lb Guarantee: ***
2.1.4 When operated under the following conditions and with Air
Conditioning 'ON':
Pressure altitude : 1,416 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 10,827 ft
Take-off distance available : 10,827 ft
Accelerate-stop distance available : 10,827 ft
Slope : Zero
Wind : Zero
Obstacle (height and distance : 459 ft/11,512 ft
from end of TOR)
Runway surface : Dry
the maximum permissible weight at the start of ground run
will be not less than the guarantee value.
Nominal: 444,900 lb Guarantee: ***
2.1.5 When operated under the following conditions and with Air
Conditioning 'ON':
Pressure altitude : 5,341 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 12,000 ft
Take-off distance available : 12,000 ft
Accelerate-stop distance available : 12,000 ft
Slope : 0.5% downhill
Wind : Zero
Obstacles : None
Runway surface : Dry
the maximum permissible weight at the start of ground run
will be not less than the guarantee value.
Nominal: 463,100 lb Guarantee: ***
2.1.6 When operated under the following conditions and with Air
Conditioning 'ON':
Pressure altitude : 196 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 10,679 ft
Take-off distance available : 10,679 ft
Accelerate-stop distance available : 10,679 ft
Slope : 0.1% uphill
Wind : Zero
Obstacles (height and distance : 202 ft/8,727 ft
from end of TOR) : 246 ft/11,106 ft
Runway surface : Dry
the maximum permissible weight at the start of ground run
will be not less than the guarantee value.
Nominal: 498,300 lb Guarantee: ***
2.2 Second Segment Climb
The A330-300 Aircraft will meet FAR regulations for one
engine inoperative climb after take-off, undercarriage
retracted, at a weight corresponding to the stated weight
at the start of ground run at the altitude and
temperature and in the configuration of flap angle and
safety speed required to comply with the performance
guaranteed in Subparagraph 2.1.
2.3 En-route One Engine Inoperative
The A330-300 Aircraft will meet FAR regulations minimum
en-route climb gradient one engine inoperative and the
other operating at the maximum continuous thrust with air
conditioning on and anti-icing off at an A330-300
Aircraft gross weight of 450,000 lb in the cruise
configuration in ISA+10(degree)C conditions at a pressure
altitude of not less than the guarantee value.
Nominal: 18,450 ft Guarantee: ***
2.4 Landing Field Length
2.4.1 FAR certified wet landing field length at an A330-300
Aircraft gross weight of 407,855 lb at sea level pressure
altitude will be not greater than the guarantee value.
Nominal: 6,725 ft Guarantee: ***
2.4.2 FAR certified wet landing field length at an A330-300
Aircraft gross weight of 407,855 lb at a pressure
altitude of 5,431 ft will be not greater than the
guarantee value.
Nominal: 7,620 ft Guarantee: ***
2.5 Approach Climb
2.5.1 The A330-300 Aircraft will meet FAR regulations approach
climb gradient one engine inoperative and the other
operating at the maximum go-round thrust with air
conditioning on and anti-icing off at sea level pressure
altitude at an A330-300 Aircraft gross weight of 407,855
lb at a temperature of not less than the guarantee
value.
Nominal: 44(degree)C Guarantee: ***
2.5.2 The A330-300 Aircraft will meet FAR regulations approach
climb gradient one engine inoperative and the other
operating at the maximum go-round thrust with air
conditioning on and anti-icing off at a pressure altitude
of 5,431 feet at an A330-300 Aircraft gross weight of
407,855 lb at a temperature of not less than the
guarantee value.
Nominal: 33(degree)C Guarantee: ***
2.6 Specific Range
The nautical miles per pound of fuel at an A330-300
Aircraft gross weight of 460,000 lb at a pressure
altitude of 35,000 ft in ISA+10(degree)C conditions at a
true Mach number of 0.82 will be not less than the
guarantee value
Nominal: 0.03485 nm/lb Guarantee: ***
3 MISSION GUARANTEES
3.1 The A330-300 Aircraft will be capable of carrying a
payload of not less than the guarantee value over a still
air stage distance of 3,653 nautical miles
(representative of PHL to FCO with a 28 knots tailwind)
when operated under the conditions defined below:
Nominal: 101,450 lb Guarantee: ***
3.1.1 The departure airport conditions are defined in
Subparagraph 2.1.2 above.
The destination airport conditions are as follows:
Pressure altitude : 14 ft
Landing distance available : 12,795 ft
Wind : Zero
Runway surface : Wet
Air conditioning : On
3.1.2 Allowances of 695 lb of fuel and 10 minutes are included for
taxi at the departure airport
3.1.3 Allowances of 1,670 lb of fuel and 3 minutes are included
for take-off and climb to 1,500 ft above the departure
airport with acceleration to climb speed at a temperature
of 84(degree)F.
3.1.4 Climb from 1,500 ft above the departure airport up to
cruise altitude using maximum climb thrust and cruise at
a fixed Mach number of 0.82 at pressure altitudes of
33,000 ft and 37,000 ft and descent to 1,500 ft above the
destination airport are conducted in ISA+10(degree)C
conditions. Climb and descent speeds below 10,000 ft will
be 250 knots CAS.
3.1.5 Allowances of 420 lb of fuel and 4 minutes are included
for approach and landing at the destination airport.
3.1.6 Allowances of 290 lb of fuel and 5 minutes are included for
taxi at the destination airport.
3.1.7 Stage distance is defined as the distance covered during
climb, cruise and descent as described in Subparagraph
3.1.4 above.
3.1.8 At the end of approach and landing 20,950 lb of fuel will
remain in the tanks. This represents the estimated fuel
required for:
1) En-route reserves - 10% of flight time
2) Missed approach
3) Diversion in ISA+10(degree)C conditions
over a still air distance of 150 nautical
miles starting at 1,500 ft above the
destination airport and ending at 1,500 ft
pressure altitude
4) Holding for 30 minutes at 1,500 ft pressure
altitude in ISA+10(degree)C conditions.
3.2 In carrying a fixed payload of *** over a still
air stage distance of 3,653 nautical miles
(representative of PHL to FCO with a 28 knots tailwind)
when operated under the conditions defined in
Subparagraph 3.1 above the block fuel burnt will be not
more than the guarantee value
Nominal: 106,900 lb Guarantee: ***
and the block time will not be more than the guarantee value
Nominal: 8 hours 5 minutes Guarantee: ***
Block fuel is defined as the fuel used during taxi,
take-off, climb, cruise, descent, and approach and
landing as described above in Subparagraphs 3.1.2 through
3.1.6 inclusive.
Block time is defined as the time for taxi, take-off,
climb, cruise, descent, and approach and landing as
described above in Subparagraphs 3.1.2 through 3.1.6
inclusive.
3.3 The A330-300 Aircraft will be capable of carrying a
payload of not less than the guarantee value over a still
air stage distance of 4,561 nautical miles
(representative of FCO to PHL with a 75 knots headwind)
when operated under the conditions defined below:
Nominal: 78,500 lb Guarantee: ***
3.3.1 The departure airport conditions are as follows:
Pressure altitude : 14 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 12,795 ft
Take-off distance available : 12,795 ft
Accelerate-stop distance available : 12,795 ft
Slope : Zero
Wind : Zero
Obstacles (height and distance : 17 ft/1,313 ft
from end of TOR) : 55 ft/3,479 ft
Runway surface : Dry
Air conditioning : On
The destination airport conditions are as follows:
Pressure altitude : 21 ft
Landing distance available : 10,499 ft
Wind : Zero
Runway surface : Wet
Air conditioning : On
3.3.2 Allowances of 695 lb of fuel and 10 minutes are included
for taxi at the departure airport
3.3.3 Allowances of 1,670 lb of fuel and 3 minutes are included
for take-off and climb to 1,500 ft above the departure
airport with acceleration to climb speed at a temperature
of 84(degree)F.
3.3.4 Climb from 1,500 ft above the departure airport up to
cruise altitude using maximum climb thrust and cruise at
a fixed Mach number of 0.82 at pressure altitudes of
35,000 ft and 39,000 ft and descent to 1,500 ft above the
destination airport are conducted in ISA+10(degree)C
conditions. Climb and descent speeds below 10,000 ft will
be 250 knots CAS.
3.3.5 Allowances of 420 lb of fuel and 4 minutes are included
for approach and landing at the destination airport.
3.3.6 Allowances of 290 lb of fuel and 5 minutes are included for
taxi at the destination airport.
3.3.7 Stage distance is defined as the distance covered during
climb, cruise and descent as described in Subparagraph
3.3.4 above.
3.3.8 At the end of approach and landing 21,970 lb of fuel will
remain in the tanks. This represents the estimated fuel
required for:
1) En-route reserves - 10% of flight time
2) Missed approach
3) Diversion in ISA+10(degree)C conditions over a
still air distance of 150 nautical miles
starting at 1,500 ft above the destination
airport and ending at 1,500 ft pressure
altitude
4) Holding for 30 minutes at 1,500 ft pressure
altitude in ISA+10(degree)C conditions.
3.4 In carrying a fixed payload of *** over a still
air stage distance of 4,561 nautical miles
(representative of FCO to PHL with a 75 knots tailwind)
when operated under the conditions defined in
Subparagraph 3.3 above the block fuel burnt will be not
more than the guarantee value
Nominal: 128,300 lb Guarantee: ***
and the block time will not be more than the guarantee value
Nominal: 9 hours 58 minutes Guarantee: ***
Block fuel is defined as the fuel used during taxi,
take-off, climb, cruise, descent, and approach and
landing as described above in Subparagraphs 3.3.2 through
3.3.6 inclusive.
Block time is defined as the time for taxi, take-off,
climb, cruise, descent, and approach and landing as
described above in Subparagraphs 3.3.2 through 3.3.6
inclusive.
3.5 The A330-300 Aircraft will be capable of carrying a
payload of not less than the guarantee value over a still
air stage distance of 3,291 nautical miles
(representative of CLT to LGW with a 29 knots tailwind)
when operated under the conditions defined below:
Nominal: 104,150 lb Guarantee: ***
3.5.1 The departure airport conditions are as follows:
Pressure altitude : 749 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 10,000 ft
Take-off distance available : 10,000 ft
Accelerate-stop distance available : 10,000 ft
Slope : 0.5% downhill
Wind : Zero
Obstacles : None
Runway surface : Dry
Air conditioning : On
The destination airport conditions are as follows:
Pressure altitude : 196 ft
Landing distance available : 9,075 ft
Wind : Zero
Runway surface : Wet
Air conditioning : On
3.5.2 Allowances of 695 lb of fuel and 10 minutes are included
for taxi at the departure airport
3.5.3 Allowances of 1,680 lb of fuel and 3 minutes are included
for take-off and climb to 1,500 ft above the departure
airport with acceleration to climb speed at a temperature
of 84(degree)F.
3.5.4 Climb from 1,500 ft above the departure airport up to
cruise altitude using maximum climb thrust and cruise at
a fixed Mach number of 0.82 at pressure altitudes of
33,000 ft and 37,000 ft and descent to 1,500 ft above the
destination airport are conducted in ISA+10(degree)C
conditions. Climb and descent speeds below 10,000 ft will
be 250 knots CAS.
3.5.5 Allowances of 420 lb of fuel and 4 minutes are included
for approach and landing at the destination airport.
3.5.6 Allowances of 290 lb of fuel and 5 minutes are included
for taxi at the destination airport.
3.5.7 Stage distance is defined as the distance covered during
climb, cruise and descent as described in Subparagraph
3.5.4 above.
3.5.8 At the end of approach and landing 21,360 lb of fuel will
remain in the tanks. This represents the estimated fuel
required for:
1) En-route reserves - 10% of flight time
2) Missed approach
3) Diversion in ISA+10(degree)C conditions over a
still air distance of 150 nautical miles
starting at 1,500 ft above the destination
airport and ending at 1,500 ft pressure
altitude
4) Holding for 30 minutes at 1,500 ft pressure
altitude in ISA+10(degree)C conditions.
3.6 In carrying a fixed payload of *** over a still
air stage distance of 3,291 nautical miles
(representative of CLT to LGW with a 29 knots tailwind)
when operated under the conditions defined in
Subparagraph 3.5 above the block fuel burnt will be not
more than the guarantee value
Nominal: 97,250 lb Guarantee: ***
and the block time will not be more than the guarantee value
Nominal: 7 hours 20 minutes Guarantee: ***
Block fuel is defined as the fuel used during taxi,
take-off, climb, cruise, descent, and approach and
landing as described above in Subparagraphs 3.5.2 through
3.5.6 inclusive.
Block time is defined as the time for taxi, take-off,
climb, cruise, descent, and approach and landing as
described above in Subparagraphs 3.5.2 through 3.5.6
inclusive.
3.7 The A330-300 Aircraft will be capable of carrying a
payload of not less than the guarantee value over a still
air stage distance of 4,104 nautical miles
(representative of LGW to CLT with a 75 knots headwind)
when operated under the conditions defined below:
Nominal: 90,050 lb Guarantee: ***
3.7.1 The departure airport conditions are as follows:
Pressure altitude : 196 ft
Ambient temperature : 84(degree)F
Take-off run available ("TOR") : 10,364 ft
Take-off distance available : 10,364 ft
Accelerate-stop distance available : 10,364 ft
Slope : Zero
Wind : Zero
Obstacles (height and distance : 2 ft/515 ft
from end of TOR) : 35 ft/1,841 ft
: 61 ft/3,514 ft
Runway surface : Dry
Air conditioning : On
The destination airport conditions are as follows:
Pressure altitude : 749 ft
Landing distance available : 10,000 ft
Wind : Zero
Runway surface : Wet
Air conditioning : On
3.7.2 Allowances of 695 lb of fuel and 10 minutes are included
for taxi at the departure airport
3.7.3 Allowances of 1,680 lb of fuel and 3 minutes are included
for take-off and climb to 1,500 ft above the departure
airport with acceleration to climb speed at a temperature
of 84(degree)F.
3.7.4 Climb from 1,500 ft above the departure airport up to
cruise altitude using maximum climb thrust and cruise at
a fixed Mach number of 0.82 at pressure altitudes of
35,000 ft and 39,000 ft and descent to 1,500 ft above the
destination airport are conducted in ISA+10(degree)C
conditions. Climb and descent speeds below 10,000 ft will
be 250 knots CAS.
3.7.5 Allowances of 420 lb of fuel and 4 minutes are included
for approach and landing at the destination airport.
3.7.6 Allowances of 290 lb of fuel and 5 minutes are included
for taxi at the destination airport.
3.7.7 Stage distance is defined as the distance covered during
climb, cruise and descent as described in Subparagraph
3.7.4 above.
3.7.8 At the end of approach and landing 21,360 lb of fuel will
remain in the tanks. This represents the estimated fuel
required for:
1) En-route reserves - 10% of flight time
2) Missed approach
3) Diversion in ISA+10(degree)C conditions over a
still air distance of 150 nautical miles
starting at 1,500 ft above the destination
airport and ending at 1,500 ft pressure
altitude
4) Holding for 30 minutes at 1,500 ft pressure
altitude in ISA+10(degree)C conditions.
3.8 In carrying a fixed payload of *** over a still
air stage distance of 4,104 nautical miles
(representative of LGW to CLT with a 74 knots headwind)
when operated under the conditions defined in
Subparagraph 3.7 above the block fuel burnt will be not
more than the guarantee value
Nominal: 117,500 lb Guarantee: ***
and the block time will not be more than the guarantee value
Nominal: 9 hours 1 minute Guarantee: ***
Block fuel is defined as the fuel used during taxi,
take-off, climb, cruise, descent, and approach and
landing as described above in Subparagraphs 3.7.2 through
3.7.6 inclusive.
Block time is defined as the time for taxi, take-off,
climb, cruise, descent, and approach and landing as
described above in Subparagraphs 3.7.2 through 3.7.6
inclusive.
4. MISSION GUARANTEES (ETOPS Reserves)
4.1 For the purposes of the guarantees defined below in
Subparagraphs 4.2 through 4.5 inclusive the Critical
Point (the "CP") is defined as the point at a still air
distance of 1,158 nautical miles and 180 minutes from the
destination airport. After the CP the aircraft will be
operated under the conditions defined below (the "ETOPS
diversion"):
a) At the CP there is a simultaneous loss of one engine
and cabin pressurization becomes inoperative
b) Descent from the CP and the associated cruise
altitude to 10,000 ft pressure altitude at Mmo/Vmo
in ISA+10(degree)C conditions.
c) Cruise at Vmo at a pressure altitude of 10,000 ft in
ISA+10(degree)C conditions
d) Descent from 10,000 ft pressure altitude to 1,500 ft
above the destination airport at 250 kts CAS in
ISA+10(degree)C conditions.
e) Hold for 15 minutes at 1,500 ft above the destination
airport at Green Dot speed in ISA+10(degree)C
conditions
f) Missed approach and go-round at the destination
airport in ISA+10(degree)C conditions
g) Approach and land at the destination airport.
4.2 The A330-300 Aircraft will be capable of carrying a
payload of not less than the guarantee value over a still
air stage distance of 3,653 nautical miles
(representative of PHL to FCO with a 28 knots tailwind
and including the 1,158 nautical miles from the CP to the
destination airport) when operated under the conditions
defined below:
Nominal: 95,850 lb Guarantee: ***
4.2.1 The departure airport conditions are defined in
Subparagraph 2.1.2 above.
The destination airport conditions are defined in
Subparagraph 3.1.2 above.
4.2.2 An allowances of 1,670 lb of fuel is included for take-off
and climb to 1,500 ft above the departure airport with
acceleration to climb speed at a temperature of 84(degree)F.
4.2.3 Climb from 1,500 ft above the departure airport up to
cruise altitude using maximum climb thrust and cruise at
a fixed Mach number of 0.82 at pressure altitudes of
33,000 ft and 37,000 ft to the CP are conducted in
ISA+10(degree)C conditions. Climb speed below 10,000 ft
will be 250 knots CAS.
4.2.4 Stage distance is defined as the distance covered during
climb and cruise to the CP plus the distance from the CP
to the destination airport descent as described in
Subparagraphs 4.1 and 4.2.3 above.
4.2.5 At the CP 54,550 lb of fuel will remain in the tanks.
This represents the estimated fuel required for:
1) Fuel for the ETOPS diversion as described in
Subparagraph 4.1 above
2) A 15% increase in the fuel required for the
ETOPS diversion to account for wind errors,
ice accretion, anti-icing on, APU operating,
weather avoidance and degraded aircraft
performance.
4.3 The A330-300 Aircraft will be capable of carrying a
payload of not less than the guarantee value over a still
air stage distance of 4,561 nautical miles
(representative of FCO to PHL with a 75 knots headwind
and including the 1,158 nautical miles from the CP to the
destination airport) when operated under the conditions
defined below:
Nominal: 73,150 lb Guarantee: ***
4.3.1 The departure and destination airport conditions are
defined in paragraph 3.3.1 above.
4.3.2 An allowances of 1,670 lb of fuel is included for
take-off and climb to 1,500 ft above the departure
airport with acceleration to climb speed at a temperature
of 84(degree)F.
4.3.3 Climb from 1,500 ft above the departure airport up to
cruise altitude using maximum climb thrust and cruise at
a fixed Mach number of 0.82 at pressure altitudes of
35,000 ft and 39,000 ft to the CP are conducted in
ISA+10(degree)C conditions. Climb speed below 10,000 ft
will be 250 knots CAS.
4.3.4 Stage distance is defined as the distance covered during
climb and cruise to the CP plus the distance from the CP
to the destination airport descent as described in
Subparagraphs 4.1 and 4.3.3 above.
4.3.5 At the CP 53,650 lb of fuel will remain in the tanks.
This represents the estimated fuel required for:
1) Fuel for the ETOPS diversion as described in
Subparagraph 4.1 above
2) A 15% increase in the fuel required for the
ETOPS diversion to account for wind errors,
ice accretion, anti-icing on, APU operating,
weather avoidance and degraded aircraft
performance.
4.4 The A330-300 Aircraft will be capable of carrying a
payload of not less than the guarantee value over a still
air stage distance of 3,291 nautical miles
(representative of CLT to LGW with a 29 knots tailwind
and including the 1,158 nautical miles from the CP to the
destination airport) when operated under the conditions
defined below:
Nominal: 104,150 lb Guarantee: ***
4.4.1 The departure and destination airport conditions are
defined in Subparagraph 3.5.1 above.
4.4.2 An allowances of 1,680 lb of fuel is included for
take-off and climb to 1,500 ft above the departure
airport with acceleration to climb speed at a temperature
of 84(degree)F.
4.4.3 Climb from 1,500 ft above the departure airport up to
cruise altitude using maximum climb thrust and cruise at
a fixed Mach number of 0.82 at pressure altitudes of
33,000 ft and 37,000 ft to the CP are conducted in
ISA+10(degree)C conditions. Climb speed below 10,000 ft
will be 250 knots CAS.
4.4.4 Stage distance is defined as the distance covered during
climb and cruise to the CP plus the distance from the CP
to the destination airport descent as described in
Subparagraphs 4.1 and 4.4.3 above.
4.4.5 At the CP 54,900 lb of fuel will remain in the tanks.
This represents the estimated fuel required for:
1) Fuel for the ETOPS diversion as described in
Subparagraph 4.1 above
2) A 15% increase in the fuel required for the
ETOPS diversion to account for wind errors,
ice accretion, anti-icing on, APU operating,
weather avoidance and degraded aircraft
performance.
4.5 The A330-300 Aircraft will be capable of carrying a
payload of not less than the guarantee value over a still
air stage distance of 4,104 nautical miles
(representative of LGW to CLT with a 74 knots headwind
and including the 1,158 nautical miles from the CP to the
destination airport) when operated under the conditions
defined below:
Nominal: 84,350 lb Guarantee: ***
4.5.1 The departure and destination airport conditions are
defined in Subparagraph 3.7.1 above.
4.5.2 An allowances of 1,680 lb of fuel is included for
take-off and climb to 1,500 ft above the departure
airport with acceleration to climb speed at a temperature
of 84(degree)F.
4.5.3 Climb from 1,500 ft above the departure airport up to
cruise altitude using maximum climb thrust and cruise at
a fixed Mach number of 0.82 at pressure altitudes of
35,000 ft and 39,000 ft to the CP are conducted in
ISA+10(degree)C conditions. Climb speed below 10,000 ft
will be 250 knots CAS.
4.5.4 Stage distance is defined as the distance covered during
climb and cruise to the CP plus the distance from the CP
to the destination airport descent as described in
Subparagraphs 4.1 and 4.5.3 above.
4.5.5 At the CP 54,100 lb of fuel will remain in the tanks.
This represents the estimated fuel required for:
1) Fuel for the ETOPS diversion as described in
paragraph 4.1 above
2) A 15% increase in the fuel required for the
ETOPS diversion to account for wind errors,
ice accretion, anti-icing on, APU operating,
weather avoidance and degraded aircraft
performance.
4.6 The mission payload guarantees and the mission fuel burn
guarantees defined above in Subparagraphs 3.1 through 3.8
inclusive and Subparagraphs 4.2 through 4.5 inclusive are
based on the Buyer's Manufacturer's Weight Empty as
defined in Subparagraph 5.2 below plus a fixed allowance
of 36,625 lb for Customer Changes and Operators Items.
5 MANUFACTURER'S WEIGHT EMPTY AND USABLE LOAD
5.1 The Seller guarantees a Buyer's Manufacturer's Weight
Empty of ***.
5.2 For the purposes of this Paragraph 5 and of Subparagraph
4.6 above the Buyer's Manufacturer's Weight Empty is the
Manufacturer's Weight Empty defined in Section
13-10.00.00 of the Specification amended by the
Specification Changes defined in the Preamble to this
Letter Agreement and is subject to adjustment as defined
in Subparagraph 9.2.
For information only an analysis of the Buyer's
Manufacturer's Weight Empty, Customer Changes, Operators
Items and Operating Weight Empty is shown in
Appendix A to this Letter Agreement.
6 NOISE
6.1 External
6.1.1 The Seller guarantees that the A330-300 Aircraft will be
certified in accordance with FAR Part 36 Noise Standards,
issue 1978, including Amendment 36-15 Stage 3. The
applicable noise limits are as defined in paragraphs
36.201 and c36.5 (3).
6.2 Internal
6.2.1 Cockpit noise
At a pressure altitude of 35,000 ft and a Mach number of
M=0.82 in still air under ISA conditions, the guaranteed
A-Weighted Sound Pressure Level (SPL) will not exceed ***
and the Speech Interference Level (SIL) will not exceed
***.
6.2.2 Cabin noise
At a pressure altitude of 35,000 ft and a Mach number of
M=0.82 in still air under ISA conditions, the guaranteed
A-Weighted Sound Pressure Level (SPL) will not exceed ***
and the Speech Interference Level (SIL) will not exceed
***.
6.2.3 On the ground and under the conditions defined in
Subparagraph 7.9 below the noise levels in the passenger
compartment with passenger doors open or closed the
A-weighted Sound Pressure Level (SPL) will not exceed ***
and the Speech Interference Level (SIL) will not exceed
***.
7 GUARANTEE CONDITIONS
7.1 The performance and noise certification requirements
for the A330-300 Aircraft, except where otherwise noted,
will be as stated in Section 02 of the Specification.
7.2 For the determination of FAR take-off and landing
performance a hard level dry runway surface with no
runway strength limitations, no obstacles, zero wind,
atmosphere according to ISA, except as otherwise noted
and the use of speedbrakes, flaps, landing gear and
engines in the conditions liable to provide the best
results will be assumed.
7.2.1 When establishing take-off and second segment performance
no air will be bled from the engines for cabin air
conditioning or anti-icing, except as otherwise noted.
7.3 When establishing the approach climb performance cabin
air conditioning will be operative with an average
ventilation rate not less than the amount defined in the
Specification but no air will be bled from the engines
for anti-icing.
7.4 The en-route one engine inoperative climb performance
will be established with the amount of engine air bleed
associated with the maximum cabin altitude as specified
in Section 21-30.32 of the Specification and an average
ventilation rate not less than the amount defined in the
Specification but no air will be bled from the engines
for anti-icing.
7.5 Climb, cruise and descent performance associated with the
Guarantees will include allowances for normal electrical
load and for normal engine air bleed and power extraction
associated with maximum cabin differential pressure as
defined in Section 21-30.31 of the Specification. Cabin
air conditioning management during performance
demonstration as described in Subparagraph 8.3 below may
be such as to optimize the A330-300 Aircraft performance
while meeting the minimum air conditioning requirements
defined above. Unless otherwise stated no air will be
bled from the engines for anti-icing.
7.6 The engines will be operated using not more than the
engine manufacturer's maximum recommended outputs for
take-off, maximum go-round, maximum continuous, maximum
climb and cruise for normal operation unless otherwise
stated.
7.7 Where applicable the Guarantees assume the use of an
approved fuel having a density of 6.7 lb/US gallon and a
lower heating value of 18,590 BTU/lb.
7.8 Speech interference level (SIL) is defined as the
arithmetic average of the sound pressure levels in the
1,000, 2,000, and 4,000 Hz octave bands A-weighted sound
level (dBA) is as defined in the American National
Standard Specification ANSI.4-1971
7.9 The sound levels guaranteed in Subparagraph 6.2:
i) will be measured at the positions defined in
Section 03-83.10 of the Specification
ii) refer to an A330-300 Aircraft with standard
acoustic insulation and an interior
completely furnished. The effect on noise of
Buyer furnished equipment other than
passenger seats will be the responsibility of
the Buyer.
7.10 For the purposes of the sound levels guaranteed in
Subparagraph 6.2.3 the APU and air conditioning system
will be operating.
Sound level measurements may be made at the prevailing
ambient temperature with the air conditioning packs
controlled to approximate air conditioning machinery
rotational speed appropriate to an ambient temperature of
25(degree)C.
8 GUARANTEE COMPLIANCE
8.1 Compliance with the Guarantees will be demonstrated using
operating procedures and limitations in accordance with
those defined by the certifying Airworthiness Authority
and by the Seller unless otherwise stated.
8.2 Compliance with the take-off, second segment, approach
climb, en-route one engine inoperative and landing
elements of the Guarantees will be demonstrated with
reference to the approved FAA Flight Manual.
8.3 Compliance with those parts of the Guarantees defined in
Paragraphs 2, 3 and 4 above not covered by the
requirements of the certifying Airworthiness Authority
will be demonstrated by calculation based on data
obtained during flight tests conducted on one (or more,
at the Seller's discretion) A330 aircraft of the same
aerodynamic configuration as the A330-300 Aircraft and
incorporated in the In-Flight Performance Program and
data bases ("the IFP") appropriate to the A330-300
Aircraft.
8.4 Compliance with the Manufacturer's Weight Empty guarantee
defined in Paragraph 5 will be demonstrated with
reference to a weight compliance report.
8.5 Compliance with the mission guarantees defined in
Paragraphs 3 and 4 will be demonstrated with reference to
the weight compliance report described in Subparagraph
8.4.
8.6 Compliance with the noise guarantees defined in
Subparagraph 6.2 will be demonstrated with reference to
noise surveys conducted on one (or more, at the Seller's
discretion) A330 aircraft of an acoustically similar
standard as the A330-300 Aircraft.
8.7 Data derived from tests and noise surveys will be
adjusted as required using conventional methods of
correction, interpolation or extrapolation in accordance
with established aeronautical practices to show
compliance with the Guarantees.
8.8 Compliance with the Guarantees is not contingent on
engine performance defined in the engine manufacturer's
specification.
8.9 The Seller undertakes to furnish the Buyer with a report
or reports demonstrating compliance with the Guarantees
at, or as soon as possible after, the delivery of each of
the A330-300 Aircraft.
9 ADJUSTMENT OF GUARANTEES
9.1 In the event of any change to any law, governmental
regulation or requirement or interpretation thereof
("rule change") by any governmental agency made
subsequent to the date of the Agreement and such rule
change affects the A330-300 Aircraft configuration or
performance or both required to obtain certification the
Guarantees will be appropriately modified to reflect the
effect of any such change.
9.2 The Guarantees apply to the A330-300 Aircraft as
described in the Preamble to this Letter Agreement and
may be adjusted in the event of :
a) Any further configuration change which is the
subject of a SCN
b) Variation in actual weights of items defined
in Section 13-10 of the Specification
c) Changes required to obtain certification which
cause changes to the performance or weight of
the A330-300 Aircraft
10 EXCLUSIVE GUARANTEES
The Guarantees are exclusive and are provided in lieu of
any and all other performance and weight guarantees of
any nature which may be stated, referenced or
incorporated in the Specification or any other document.
11 UNDERTAKING; REMEDIES
***
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Letter Agreement in favor of the Buyer in respect of
the Seller's rights against and obligations to the Manufacturer
under the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer
and Seller recognize and agree that, except as otherwise
expressly provided in Paragraph 8 of this Letter Agreement, all
the provisions of Clause 12 of the Agreement, including without
limitation the Exclusivity of Warranties and General Limitations
of Liability and Duplicate Remedies therein contained, will
apply to the foregoing performance guarantees.
If the foregoing correctly sets forth our understanding,
please execute the original and one (1) copy hereof in the space provided
below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
-------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
<TABLE>
<CAPTION>
APPENDIX 1 TO LETTER AGREEMENT NO. 8B
1 Manufacturer's Weight Empty and Operating Weight Empty
At the time of this Agreement the Buyer's Manufacturer's Weight
Empty and the Operating Weight Empty for the purposes of
Subparagraph 4.6 and Paragraph 5 of this Letter Agreement
are defined as follows:
<S> <C>
Manufacturer's Weight Empty as defined in the Specification
Reference G.000.03000 Issue 6: 236,860 lb
Specification Change for the fitting of PW4168A engines: 0 lb
Specification Change for the increase in Design Weights: 3,750 lb
----------------
Buyer's Manufacturer's Weight Empty according to the Preamble of
this Letter Agreement and for the purposes of Subparagraph 4.6
and Paragraph 5 of this Letter Agreement: 240,610 lb
Specification changes as defined in Subparagraph 2.1 of
this Appendix A: 5,159 lb
Operators Items as defined in Subparagraph 2.2 of
this Appendix A: 31,463 lb
----------------
Operating Weight Empty of the A330-300 Aircraft for the purposes
of Subparagraphs 3.1 through 3.8, inclusive, of this Letter Agreement: 277,232 lb
*Note As of the date hereof the Operating Weight Empty has not been
completely defined. The payloads and fuel burns guaranteed in
Paragraph 3 are based on the estimated Operating Weight Empty as
shown above. This Operating Weight Empty is based on a three class
layout (6F/36B/224Y) to drawing number AI.330-25.4014A.
2 Specification Changes and Operators Items
2.1 Weight of Specification Changes
As of the date of this draft the complete list of the Buyer's
Specification Changes is unknown. It is estimated that the weight
of such Specification Changes is :
Cabin changes: 1,550 lb
Allowance for Specification Changes 3,609 lb
----------------
Total 5,159 lb
3.1 Weights of Operators Items
Oil for engines and APU: 278 lb
Unusable fuel: 732 lb
Water for galleys and toilets: 1,543 lb
Waste tank pre-charge: 79 lb
Aircraft documents and tool kits: 101 lb
Passenger seats and life jackets: 12,359 lb
Galley structure and fixed equipment: 3,743 lb
Catering and service equipment: 6,993 lb
Emergency equipment: 1,554 lb
Containers 1,650 lb
Crew and bags: 2,429 lb
---------------
Total Operators Items 31,463 lb
</TABLE>
LETTER AGREEMENT NO. 8C
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: A340-200 PERFORMANCE GUARANTEES
Dear Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A330/A340 Purchase Agreement dated
as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
8C (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
The Seller, in its capacity as "Buyer" under its arrangement with
the Manufacturer, has negotiated and obtained the following performance and
weight guarantees (the "Guarantees") from the Manufacturer, in its capacity
as "Seller" with respect to the A340-200 Aircraft, subject to the terms,
conditions, limitations and restrictions all as hereinafter set out. The
Seller hereby assigns to the Buyer and the Buyer hereby accepts, as to each
A340-200 Aircraft delivered to the Buyer under the Agreement, all of the
rights and obligations of the Seller with respect to such A340-200 Aircraft
in its capacity as "Buyer" as aforesaid under the said Guarantees and the
Seller subrogates the Buyer into all such rights and obligations in respect
of such A340-200 Aircraft. The Seller hereby warrants to the Buyer that it
has all the requisite authority to make the foregoing assignment and effect
the foregoing subrogation to and in favor of the Buyer and that it will not
enter into any amendment of the provisions so assigned or subrogated
without the prior written consent of the Buyer.
Capitalized terms used in the following quoted provisions and not
otherwise defined herein will have the meanings assigned thereto in the
Agreement except that the term "Seller" refers to the Manufacturer and the
term "Buyer" refers to the Seller (as defined in the Agreement).
QUOTE
PREAMBLE
The guarantees defined below (the "Guarantees") are applicable
to the A340-200 Aircraft as described in the Technical
Specification F.000.02000 Issue 6 dated 15th January 1997 (the
"Specification") without taking into account any further changes
thereto as provided in the Agreement.
Notwithstanding the foregoing the Seller reserves the right to
increase the Design Weights above the weights shown in the
Specification in order to satisfy the Guarantees.
1 MISSION GUARANTEE
1.1 The A340-200 Aircraft will be capable of carrying a fixed zero
fuel weight of 350,000 lb over a guaranteed still air stage
distance of not less than *** nautical miles when operated under
the conditions defined below:
1.1.1 The departure airport conditions are such as to allow the required
take-off weight to be used without restriction.
The destination airport conditions are such as to allow the
required landing weight to be used without restriction.
1.1.2 An allowance of 2,570 lb of fuel is included for take-off and
climb to 1,500 ft pressure altitude with acceleration to climb
speed at a temperature of 77(degree)F.
1.1.3 Climb from 1,500 ft pressure altitude up to cruise altitude using
maximum climb thrust and cruise at a fixed Mach number of 0.82 at
pressure altitudes of 35,000 ft and 39,000 ft and descent to 1,500
ft pressure altitude are conducted in ISA+10(degree)C conditions.
Climb and descent speeds below 10,000 ft will be 250 knots CAS.
1.1.4 An allowance of 490 lb of fuel is included for approach and
landing at the destination airport.
1.1.5 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 1.1.3 above.
1.1.6 At the end of approach and landing 28,330 lb of fuel will remain
in the tanks. This represents the estimated fuel required for:
1) En-route reserves - 10% of flight time
2) Missed approach
3) Diversion in ISA+10(degree)C conditions over a still
air distance of 150 nautical miles starting and
ending at 1,500 ft pressure altitude
4) Holding for 30 minutes at 1,500 ft pressure altitude
in ISA+10(degree)C conditions.
2 MANUFACTURER'S WEIGHT EMPTY
2.1 The Seller guarantees a Buyer's Manufacturer's Weight Empty of ***
2.2 For the purposes of this Paragraph 2 the Buyer's
Manufacturer's Weight Empty is the Manufacturer's Weight Empty
defined in Section 13-10.00.00 of the Specification and is
subject to adjustment as defined in Subparagraph 6.2.
3 NOISE
3.1 External
3.1.1 The Seller guarantees that the A340-200 Aircraft will be
certified in accordance with FAR Part 36 Noise Standards, issue
1978, including Amendment 36-15 Stage 3. The applicable noise
limits are as defined in paragraphs 36.201 and c36.5 (3).
3.2 Internal
3.2.1 Cockpit noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.82
in still air under ISA conditions, the guaranteed A-Weighted
Sound Pressure Level (SPL) will not exceed *** and the Speech
Interference Level (SIL) will not exceed ***.
3.2.2 Cabin noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.82
in still air under ISA conditions, the guaranteed A-Weighted
Sound Pressure Level (SPL) will not exceed *** and the Speech
Interference Level (SIL) will not exceed ***.
3.2.3 On the ground and under the conditions defined in
Subparagraph 4.9 below the noise levels in the passenger
compartment with passenger doors open or closed the A-weighted
Sound Pressure Level (SPL) will not exceed *** and the Speech
Interference Level (SIL) will not exceed ***.
4 GUARANTEE CONDITIONS
4.1 The performance and noise certification requirements for the
A340-200 Aircraft, except where otherwise noted, will be as
stated in Section 02 of the Specification.
4.2 For the determination of FAR take-off and landing
performance a hard level dry runway surface with no runway
strength limitations, no obstacles, zero wind, atmosphere
according to ISA, except as otherwise noted and the use of
speedbrakes, flaps, landing gear and engines in the conditions
liable to provide the best results will be assumed.
4.2.1 When establishing take-off and second segment performance
no air will be bled from the engines for cabin air conditioning
or anti-icing.
4.3 The en-route one engine inoperative climb performance will be
established with the amount of engine air bleed associated with
the maximum cabin altitude as specified in Section 21-30.32 of
the Specification and an average ventilation rate not less than
the amount defined in the Specification but no air will be bled
from the engines for anti-icing.
4.4 Climb, cruise and descent performance associated with the
Guarantees will include allowances for normal electrical load
and for normal engine air bleed and power extraction associated
with maximum cabin differential pressure as defined in Section
21-30.31 of the Specification. Cabin air conditioning management
during performance demonstration as described in Subparagraph
5.3 below may be such as to optimize the A340-200 Aircraft
performance while meeting the minimum air conditioning
requirements defined above. Unless otherwise stated no air will
be bled from the engines for anti-icing.
4.5 The engines will be operated using not more than the engine
manufacturer's maximum recommended outputs for take-off, maximum
go-round, maximum continuous, maximum climb and cruise for
normal operation unless otherwise stated.
4.6 Where applicable the Guarantees assume the use of an
approved fuel having a density of 6.7 lb/US gallon and a lower
heating value of 18,590 BTU/lb.
4.7 Speech interference level (SIL) is defined as the arithmetic
average of the sound pressure levels in the 1,000, 2,000, and
4,000 Hz octave bands A-weighted sound level (dBA) is as defined
in the American National Standard Specification ANSI.4-1971.
4.8 The sound levels guaranteed in Subparagraph 3.2:
i) will be measured at the positions defined in Section
03-83.10 of the Specification
ii) refer to an A340-200 Aircraft with standard acoustic
insulation and an interior completely furnished. The
effect on noise of Buyer furnished equipment other than
passenger seats will be the responsibility of the Buyer.
4.9 For the purposes of the sound levels guaranteed in
Subparagraph 3.2.3 the APU and air conditioning system will be
operating. Sound level measurements may be made at the
prevailing ambient temperature with the air conditioning packs
controlled to approximate air conditioning machinery rotational
speed appropriate to an ambient temperature of 25(degree)C.
5 GUARANTEE COMPLIANCE
5.1 Compliance with the Guarantees will be demonstrated using
operating procedures and limitations in accordance with those
defined by the certifying Airworthiness Authority and by the
Seller unless otherwise stated.
5.2 Compliance with the take-off, second segment, en-route one
engine inoperative and landing elements of the Guarantees will
be demonstrated with reference to the approved Flight Manual.
5.3 Compliance with those parts of the Guarantees defined in
Paragraph 1 above not covered by the requirements of the
certifying Airworthiness Authority will be demonstrated by
calculation based on data obtained during flight tests conducted
on one (or more, at the Seller's discretion) A340 aircraft of
the same aerodynamic configuration as the A340-200 Aircraft and
incorporated in the In-Flight Performance Program and data bases
("the IFP") appropriate to the A340-200 Aircraft.
5.4 Compliance with the Manufacturer's Weight Empty guarantee
defined in Paragraph 2 will be demonstrated with reference to a
weight compliance report.
5.5 Compliance with the noise guarantees defined in Subparagraph
3.2 will be demonstrated with reference to noise surveys
conducted on one (or more, at the Seller's discretion) A340
aircraft of an acoustically similar standard as the A340-200
Aircraft.
5.6 Data derived from tests and noise surveys will be adjusted
as required using conventional methods of correction,
interpolation or extrapolation in accordance with established
aeronautical practices to show compliance with the Guarantees.
5.7 Compliance with the Guarantees is not contingent on engine
performance defined in the engine manufacturer's specification.
5.8 The Seller undertakes to furnish the Buyer with a report or
reports demonstrating compliance with the Guarantees at, or as
soon as possible after, the delivery of each of the A340-200
Aircraft.
6 ADJUSTMENT OF GUARANTEES
6.1 In the event of any change to any law, governmental
regulation or requirement or interpretation thereof ("rule
change") by any governmental agency made subsequent to the date
of the Agreement and such rule change affects the A340-200
Aircraft configuration or performance or both required to obtain
certification the Guarantees will be appropriately modified to
reflect the effect of any such change.
6.2 The Guarantees apply to the A340-200 Aircraft as described
in the Preamble to this Letter Agreement and may be adjusted in
the event of :
a) Any further configuration change which is the subject
of a SCN
b) Variation in actual weights of items defined in Section
13-10 of the Specification
c) Changes required to obtain certification which cause
changes to the performance or weight of the A340-200
Aircraft
7. EXCLUSIVE GUARANTEES
The Guarantees are exclusive and are provided in lieu of any and
all other performance and weight guarantees of any nature which
may be stated, referenced or incorporated in the Specification or
any other document.
8. UNDERTAKING; REMEDIES
***
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this letter Agreement in favor of the Buyer in respect of
the Seller's rights against and obligations to the Manufacturer
under the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer and
Seller recognize and agree that, except as otherwise expressly
provided in Paragraph 8 of this Letter Agreement, all the
provisions of Clause 12 of the Agreement, including without
limitation the Exclusivity of Warranties and General Limitations
of Liability and Duplicate Remedies therein contained, will apply
to the foregoing performance guarantees.
If the foregoing correctly sets forth our understanding,
please execute the original and one (1) copy hereof in the space provided
below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
-------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
LETTER AGREEMENT NO. 8D
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: A340-300 PERFORMANCE GUARANTEES
Dear Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A330/A340 Purchase Agreement dated
as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
8D (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
The Seller, in its capacity as "Buyer" under its arrangement with
the Manufacturer, has negotiated and obtained the following performance and
weight guarantees (the "Guarantees") from the Manufacturer, in its capacity
as "Seller" with respect to the A340-300 Aircraft, subject to the terms,
conditions, limitations and restrictions all as hereinafter set out. The
Seller hereby assigns to the Buyer and the Buyer hereby accepts, as to each
A340-300 Aircraft delivered to the Buyer under the Agreement, all of the
rights and obligations of the Seller with respect to such A340-300 Aircraft
in its capacity as "Buyer" as aforesaid under the said Guarantees and the
Seller subrogates the Buyer into all such rights and obligations in respect
of such A340-300 Aircraft. The Seller hereby warrants to the Buyer that it
has all the requisite authority to make the foregoing assignment and effect
the foregoing subrogation to and in favor of the Buyer and that it will not
enter into any amendment of the provisions so assigned or subrogated
without the prior written consent of the Buyer.
Capitalized terms used in the following quoted provisions and not
otherwise defined herein will have the meanings assigned thereto in the
Agreement except that the term "Seller" refers to the Manufacturer and the
term "Buyer" refers to the Seller (as defined in the Agreement).
QUOTE
PREAMBLE
The guarantees defined below (the "Guarantees") are applicable
to the A340-300 Aircraft as described in the Technical
Specification F.000.03000 Issue 6 dated 15th January 1997 ("the
Specification") as amended by a Specification Change Notice for
the increase in the Design Maximum Take-Off Weight to 606,270 lb
(275,000 kg) without taking into account any further changes
thereto as provided in the Agreement.
Notwithstanding the foregoing the Seller reserves the right to
increase the Design Weights above the weights shown in the
Specification in order to satisfy the Guarantees.
1 MISSION GUARANTEE
1.1 The A340-300 Aircraft will be capable of carrying a fixed
zero fuel weight of 370,000 lb over a guaranteed still air stage
distance of not less than *** nautical miles when operated under
the conditions defined below:
1.1.1 The departure airport conditions are such as to allow the
required take-off weight to be used without restriction. The
destination airport conditions are such as to allow the required
landing weight to be used without restriction.
1.1.2 An allowance of 2,570 lb of fuel is included for take-off
and climb to 1,500 ft pressure altitude with acceleration to
climb speed at a temperature of 77(degree)F.
1.1.3 Climb from 1,500 ft pressure altitude up to cruise
altitude using maximum climb thrust and cruise at a fixed Mach
number of 0.82 at pressure altitudes of 35,000 ft and 39,000 ft
and descent to 1,500 ft pressure altitude are conducted in
ISA+10(degree)C conditions. Climb and descent speeds below 10,000 ft
will
be 250 knots CAS.
1.1.4 An allowance of 490 lb of fuel is included for approach and
landing at the destination airport.
1.1.5 Stage distance is defined as the distance covered during climb,
cruise and descent as described in Subparagraph 1.1.3 above.
1.1.6 At the end of approach and landing 27,810 lb of fuel will remain
in the tanks. This represents the estimated fuel required for:
1) En-route reserves - 10% of flight time
2) Missed approach
3) Diversion in ISA+10(degree)C conditions over a
still air distance of 150 nautical miles starting
and ending at 1,500 ft pressure altitude
4) Holding for 30 minutes at 1,500 ft pressure
altitude in ISA+10(degree)C conditions.
2 MANUFACTURER'S WEIGHT EMPTY
2.1 The Seller guarantees a Buyer's Manufacturer's Weight Empty of ***
2.2 For the purposes of this Paragraph 2 the Buyer's
Manufacturer's Weight Empty is the Manufacturer's Weight Empty
defined in Section 13-10.00.00 of the Specification and is
subject to adjustment as defined in Subparagraph 6.2.
3 NOISE
3.1 External
3.1.1 The Seller guarantees that the A340-300 Aircraft will be
certified in accordance with FAR Part 36 Noise Standards, issue
1978, including Amendment 36-15 Stage 3. The applicable noise
limits are as defined in paragraphs 36.201 and c36.5 (3).
3.2 Internal
3.2.1 Cockpit noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.82 in
still air under ISA conditions, the guaranteed A-Weighted Sound
Pressure Level (SPL) will not exceed *** and the Speech
Interference Level (SIL) will not exceed ***.
3.2.2 Cabin noise
At a pressure altitude of 35,000 ft and a Mach number of M=0.82 in
still air under ISA conditions, the guaranteed A-Weighted Sound
Pressure Level (SPL) will not exceed *** and the Speech
Interference Level (SIL) will not exceed ***.
3.2.3 On the ground and under the conditions defined in Subparagraph 4.9
below the noise levels in the passenger compartment with passenger
doors open or closed the A-weighted Sound Pressure Level (SPL)
will not exceed *** and the Speech Interference Level (SIL) will
not exceed ***.
4 GUARANTEE CONDITIONS
4.1 The performance and noise certification requirements for the
A340-300 Aircraft, except where otherwise noted, will be as stated
in Section 02 of the Specification.
4.2 For the determination of FAR take-off and landing performance a
hard level dry runway surface with no runway strength limitations,
no obstacles, zero wind, atmosphere according to ISA, except as
otherwise noted and the use of speedbrakes, flaps, landing gear
and engines in the conditions liable to provide the best results
will be assumed.
4.2.1 When establishing take-off and second segment performance no air
will be bled from the engines for cabin air conditioning or
anti-icing.
4.3 The en-route one engine inoperative climb performance will be
established with the amount of engine air bleed associated with
the maximum cabin altitude as specified in Section 21-30.32 of
the Specification and an average ventilation rate not less than
the amount defined in the Specification but no air will be bled
from the engines for anti-icing.
4.4 Climb, cruise and descent performance associated with the
Guarantees will include allowances for normal electrical load and
for normal engine air bleed and power extraction associated with
maximum cabin differential pressure as defined in Section 21-30.31
of the Specification. Cabin air conditioning management during
performance demonstration as described in Subparagraph 5.3 below
may be such as to optimize the A340-300 Aircraft performance while
meeting the minimum air conditioning requirements defined above.
Unless otherwise stated no air will be bled from the engines for
anti-icing.
4.5 The engines will be operated using not more than the engine
manufacturer's maximum recommended outputs for take-off, maximum
go-round, maximum continuous, maximum climb and cruise for normal
operation unless otherwise stated.
4.6 Where applicable the Guarantees assume the use of an approved fuel
having a density of 6.7 lb/US gallon and a lower heating value of
18,590 BTU/lb.
4.7 Speech interference level (SIL) is defined as the arithmetic
average of the sound pressure levels in the 1,000, 2,000, and
4,000 Hz octave bands A-weighted sound level (dBA) is as defined
in the American National Standard Specification ANSI.4-1971.
4.8 The sound levels guaranteed in Subparagraph 3.2:
i) will be measured at the positions defined in Section
03-83.10 of the Specification
ii) refer to an A340-300 Aircraft with standard acoustic
insulation and an interior completely furnished. The
effect on noise of Buyer furnished equipment other than
passenger seats will be the responsibility of the
Buyer.
4.9 For the purposes of the sound levels guaranteed in Subparagraph
3.2.3 the APU and air conditioning system will be operating. Sound
level measurements may be made at the prevailing ambient
temperature with the air conditioning packs controlled to
approximate air conditioning machinery rotational speed
appropriate to an ambient temperature of 25(degree)C.
5 GUARANTEE COMPLIANCE
5.1 Compliance with the Guarantees will be demonstrated using
operating procedures and limitations in accordance with those
defined by the certifying Airworthiness Authority and by the
Seller unless otherwise stated.
5.2 Compliance with the take-off, second segment, en-route one engine
inoperative and landing elements of the Guarantees will be
demonstrated with reference to the approved Flight Manual.
5.3 Compliance with those parts of the Guarantees defined in Paragraph
1 above not covered by the requirements of the certifying
Airworthiness Authority will be demonstrated by calculation based
on data obtained during flight tests conducted on one (or more, at
the Seller's discretion) A340 aircraft of the same aerodynamic
configuration as the A340-300 Aircraft and incorporated in the
In-Flight Performance Program and data bases ("the IFP")
appropriate to the A340-300 Aircraft.
5.4 Compliance with the Manufacturer's Weight Empty guarantee defined
in Paragraph 2 will be demonstrated with reference to a weight
compliance report.
5.5 Compliance with the noise guarantees defined in Subparagraph 3.2
will be demonstrated with reference to noise surveys conducted on
one (or more, at the Seller's discretion) A340 aircraft of an
acoustically similar standard as the A340-300 Aircraft.
5.6 Data derived from tests and noise surveys will be adjusted as
required using conventional methods of correction, interpolation
or extrapolation in accordance with established aeronautical
practices to show compliance with the Guarantees.
5.7 Compliance with the Guarantees is not contingent on engine
performance defined in the engine manufacturer's specification.
5.8 The Seller undertakes to furnish the Buyer with a report or
reports demonstrating compliance with the Guarantees at, or as
soon as possible after, the delivery of each of the A340-300
Aircraft.
6 ADJUSTMENT OF GUARANTEES
6.1 In the event of any change to any law, governmental regulation or
requirement or interpretation thereof ("rule change") by any
governmental agency made subsequent to the date of the Agreement
and such rule change affects the A340-300 Aircraft configuration
or performance or both required to obtain certification the
Guarantees will be appropriately modified to reflect the effect of
any such change.
6.2 The Guarantees apply to the A340-300 Aircraft as described in the
Preamble to this Letter Agreement and may be adjusted in the event
of :
a) Any further configuration change which is the subject
of a SCN
b) Variation in actual weights of items defined in
Section 13-10 of the Specification
c) Changes required to obtain certification which cause
changes to the performance or weight of the A340-300
Aircraft
3 EXCLUSIVE GUARANTEES
The Guarantees are exclusive and are provided in lieu of any and
all other performance and weight guarantees of any nature which
may be stated, referenced or incorporated in the Specification or
any other document.
3 UNDERTAKING; REMEDIES
***
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this letter Agreement in favor of the Buyer in respect of
the Seller's rights against and obligations to the Manufacturer
under the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer and
Seller recognize and agree that, except as otherwise expressly
provided in Paragraph 8 of this Letter Agreement, all the
provisions of Clause 12 of the Agreement, including without
limitation the Exclusivity of Warranties and General Limitations
of Liability and Duplicate Remedies therein contained, will apply
to the foregoing performance guarantees.
If the foregoing correctly sets forth our understanding,
please execute the original and one (1) copy hereof in the space provided
below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
-------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
LETTER AGREEMENT NO. 9
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: ***
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A330/A340 Purchase Agreement dated
as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
9 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
The Seller, under its arrangement with the Manufacturer, has
negotiated and obtained the following *** from the Manufacturer with
respect to the Aircraft, subject to the terms, conditions, limitations and
restrictions all as hereinafter set out. The Seller hereby warrants the
performance by the Manufacturer of the Manufacturer's obligations and
hereby assigns to the Buyer, and the Buyer hereby accepts, all of the
rights and obligations of the Seller as aforesaid under the said *** and
the Seller subrogates the Buyer into all such rights and obligations in
respect of the Aircraft. The Seller hereby warrants to the Buyer that the
Seller has all requisite authority to make the foregoing assignment and
effect the foregoing subrogation to and in favor of the Buyer and that the
Seller will not enter into any amendment of the provisions so assigned or
subrogated without the prior written consent of the Buyer. Capitalized
terms used in the following quoted provisions and not otherwise defined
therein will have the meanings assigned thereto in the Agreement, except
that the term "Seller" refers to the Manufacturer and the term "Buyer"
refers to the Seller.
QUOTE
1. ***
1.1 ***
1.2 ***
1.3 ***
2. ***
3. ***
4. ***
4.1 ***
4.2 ***
4.3 ***
5 ***
5.1 ***
5.2 ***
6. ***
7. ***
7.1 ***
7.2 ***
7.3 ***
8. ***
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Letter Agreement in favor of the Buyer in respect of the
Seller's rights against and obligations to the Manufacturer under
the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer and
the Seller recognize and agree that the Exclusivity of Warranties
and General Limitations of Liability provisions contained in Clause
12 of the Agreement will apply to the foregoing ***
ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner without
the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
paragraph will be void and of no force or effect. Notwithstanding
the preceding sentence, the terms of Subclauses 19.5 and 19.6 of
the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding, please
execute the original and one (1) copy hereof in the space provided below
and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
-------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
APPENDIX 1
***
APPENDIX 2
***
LETTER AGREEMENT NO. 10
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: ***
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A330/A340 Purchase Agreement dated
as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
10 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
The Seller, under its arrangement with the Manufacturer, has
negotiated and obtained the following *** from the Manufacturer with
respect to the Aircraft, subject to the terms, conditions, limitations and
restrictions all as hereinafter set out. The Seller hereby warrants the
performance by the Manufacturer of the Manufacturer's obligations and
hereby assigns to the Buyer, and the Buyer hereby accepts, all of the
rights and obligations of the Seller as aforesaid under the said *** and
the Seller subrogates the Buyer into all such rights and obligations in
respect of the Aircraft. The Seller hereby warrants to the Buyer that the
Seller has all requisite authority to make the foregoing assignment and
effect the foregoing subrogation to and in favor of the Buyer and that the
Seller will not enter into any amendment of the provisions so assigned or
subrogated without the prior written consent of the Buyer. Capitalized
terms used in the following quoted provisions and not otherwise defined
therein will have the meanings assigned thereto in the Agreement, except
that the term "Seller" refers to the Manufacturer and the term "Buyer"
refers to the Seller.
QUOTE
1. ***
1.1 ***
1.2 ***
1.2.1 ***
1.2.2 ***
1.3 ***
1.4 ***
2. ***
2.1 ***
2.2 ***
2.3 ***
2.4 ***
2.5 ***
2.6 ***
2.6.1 ***
2.6.2 ***
2.7 ***
3. ***
4. ***
4.1 ***
4.1.1 ***
4.1.2 ***
4.2 ***
5. ***
5.1 ***
5.2 ***
6. ***
7. ***
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Letter Agreement in favor of the Buyer in respect of
the Seller's rights against and obligations to the Manufacturer
under the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer and
the Seller recognize and agree that the Exclusivity of Warranties
and General Limitations of Liability provisions contained in
Clause 12 of the Agreement will apply to the foregoing ***.
ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner
without the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
paragraph will be void and of no force or effect. Notwithstanding
the preceding sentence, the terms of Subclauses 19.5 and 19.6 of
the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding, please
execute the original and one (1) copy hereof in the space provided below and
return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
-------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
APPENDIX 1
***
APPENDIX 2
***
LETTER AGREEMENT NO. 11
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: PREDELIVERY PAYMENTS
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A330/A340 Purchase Agreement dated
as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
11 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
1. ***
2. ***
3. ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner without
the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
Paragraph 3 will be void and of no force or effect. Notwithstanding
the preceding sentence, the terms of Subclauses 19.5 and 19.6 of
the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
-------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
Table 1
Predelivery Payment Reference Prices for All A330-200 Aircraft
***
Predelivery Payment Reference Prices for All A330-300 Aircraft
***
Predelivery Payment Reference Prices for All A340-200 Aircraft
***
Predelivery Payment Reference Prices for All A340-300 Aircraft
***
LETTER AGREEMENT NO. 12
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: ***
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A330/A340 Purchase Agreement dated
as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
12 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
The Seller, in its capacity as "Buyer" under its arrangement with
the Manufacturer, has negotiated and obtained the following *** from the
Manufacturer, in its capacity as "Seller" with respect to the
Aircraft, subject to the terms, conditions, limitations and restrictions
all as hereinafter set out. The Seller hereby guarantees to the Buyer the
performance by the Manufacturer of the Manufacturer's obligations and
assigns to the Buyer and the Buyer hereby accepts, as to each Aircraft
delivered to the Buyer under the Agreement, all of the rights and
obligations of the Seller with respect to such Aircraft in the Seller's
capacity as "Buyer" as aforesaid under the said *** and the Seller
subrogates the Buyer into all such rights and obligations in respect of
such Aircraft. The Seller hereby warrants to the Buyer that it has all the
requisite authority to make the foregoing assignment and effect the
foregoing subrogation to and in favor of the Buyer and that it will not
enter into any amendment of the provisions so assigned or subrogated
without the prior written consent of the Buyer.
Capitalized terms used in the following quoted provisions and not
otherwise defined herein will have the meanings assigned thereto in the
Agreement except that the term "Seller" refers to the Manufacturer and the
term "Buyer" refers to the Seller (as defined in the Agreement).
QUOTE
1 ***
1.1 ***
1.2 ***
1.3 ***
1.4 ***
2 ***
2.1 ***
2.2 ***
2.3 ***
2.4 ***
2.5 ***
3 ***
3.1 ***
3.1.1 ***
3.2 ***
4 ***
4.1 ***
4.2 ***
4.3 ***
4.4 ***
4.5 ***
4.6.1 ***
4.6.2 ***
4.6.3 ***
5 ***
5.1 ***
5.2 ***
5.2.1 ***
5.3 ***
5.3.1 ***
5.3.2 ***
6 ***
6.1 ***
6.2 ***
6.3 ***
6.4 ***
7 ***
7.1 ***
7.2 ***
8 ***
8.1 ***
8.2 ***
8.3 ***
8.4 ***
9 ***
9.1 ***
9.2 ***
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Letter Agreement in favor of the Buyer in respect of
the Seller's rights against and obligations to the Manufacturer
under the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer and
Seller recognize and agree that, except as otherwise expressly
provided in Paragraph 7 of this Letter Agreement, all the
provisions of Clause 12 of the Agreement, including without
limitation the Exclusivity of Warranties and General Limitations
of Liability and Duplicate Remedies therein contained, will apply
to the foregoing ***.
ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner
without the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
paragraph will be void and of no force or effect. Notwithstanding
the preceding sentence, the terms of Subclauses 19.5 and 19.6 of
the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding,
please execute the original and one (1) copy hereof in the space provided
below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
-------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
APPENDIX A
***
LETTER AGREEMENT NO. 13
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: TECHNICAL DISPATCH RELIABILITY GUARANTEE
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L. (the
"Seller"), have entered into an Airbus A330/A340 Purchase Agreement dated
as of even date herewith (the "Agreement"), which covers, among other
things, the sale by the Seller and the purchase by the Buyer of certain
Aircraft, under the terms and conditions set forth in said Agreement. The
Buyer and the Seller have agreed to set forth in this Letter Agreement No.
13 (the "Letter Agreement") certain additional terms and conditions
regarding the sale of the Aircraft. Capitalized terms used herein and not
otherwise defined in this Letter Agreement will have the meanings assigned
thereto in the Agreement. The terms "herein," "hereof" and "hereunder" and
words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions which
are inconsistent, the specific provisions contained in this Letter
Agreement will govern.
The Seller, under its arrangement with the Manufacturer, has
negotiated and obtained the following Technical Dispatch Reliability
Guarantee from the Manufacturer with respect to the Aircraft, subject to
the terms, conditions, limitations and restrictions all as hereinafter set
out. The Seller hereby guarantees to the Buyer the performance by the
Manufacturer of its obligations under this Technical Dispatch Reliability
Guarantee and hereby assigns to the Buyer, and the Buyer hereby accepts,
all of the rights and obligations of the Seller as aforesaid under the said
Technical Dispatch Reliability Guarantee, and the Seller subrogates the
Buyer into all such rights and obligations in respect of the Aircraft. The
Seller hereby warrants to the Buyer that it has all requisite authority to
make the foregoing assignment and effect the foregoing subrogation to and
in favor of the Buyer and that it will not enter into any amendment of the
provisions so assigned or subrogated without the prior written consent of
the Buyer. Capitalized terms used in the following quoted provisions and
not otherwise defined therein will have the meanings assigned thereto in
the Agreement, except that the term "Seller" refers to the Manufacturer and
the term "Buyer" refers to the Seller.
QUOTE
1. SCOPE, COMMENCEMENT, DURATION
This dispatch reliability guarantee (the "Guarantee") extends to
the Aircraft fleet, will commence with delivery of the first
Aircraft and will remain in force for a period of *** years (the
"Term"), ***.
2. DEFINITION
2.1 Revenue Flight
A "Revenue Flight" is a flight as stipulated in the Buyer's time
table, and any scheduled charter flight of the Aircraft.
2.2 Aircraft Inherent Malfunction
An "Aircraft Inherent Malfunction" is a condition whereby
maintenance action is necessary to reestablish serviceability of
the Aircraft.
2.3 Dispatched
An Aircraft will be deemed to have been "Dispatched" when it
leaves the gate for a Revenue Flight.
2.4 Chargeable Delay
A "Chargeable Delay" will be deemed to have occurred when, by more
than fifteen (15) minutes and for reasons other than those defined
under "Excluded Delay," a primary Aircraft Inherent Malfunction
causes a Revenue Flight to depart later than the scheduled
departure time.
2.5 Excluded Delay
Any delay which is not a Chargeable Delay is an "Excluded Delay."
Excluded Delays are specifically excluded from this Guarantee,
even if consequently the Aircraft is subject to a delay. These
Excluded Delays include delays in scheduled departure due to:
- SERVICING - NO CORRECTIVE MAINTENANCE PERFORMED
Struts
Oil
Hydraulic fluid
Lubrication
All servicing activities that do not require the mechanic
to physically adjust or replace or defer structural
repair and replace hardware/software
Fueling related
Deicing
Water and waste
Sanitizing / flushing
Moisture condensation
Printer paper replacement
Routine cleaning
Tire pressure servicing
- PRECAUTIONARY MAINTENANCE - NO CORRECTIVE MAINTENANCE
PERFORMED
Hydraulic leaks - within limits
Fuel leak - within limits
Manual closing or cycling passenger/crew/cargo door
Decals/paint/appearance items
Passenger amenity lamps
Tires - worn past limits
Brakes - worn past limits
Resetting circuit breakers - no corrective maintenance
performed according to FAA-approved FCOM
- SCHEDULED MAINTENANCE ACTIVITIES
COMPLETION OF SCHEDULED / PLANNED WORK CONTENT OF SCHEDULED:
Maintenance checks
Maintenance set-ups
- PARTS DELAYS AND CANCELLATIONS
- EXTERNAL FORCE DAMAGE : AIRCRAFT DAMAGE/LIGHTNING STRIKES,
ETC.
- KNOWN PERSONNEL ERROR
- SECONDARY DELAY / CANCELLATION :
A previous delay(s) or cancellation(s) of subsequent
scheduled flights on the same day caused by the same
problem that caused the primary delay(s) or
cancellation(s).
- Delays caused by systems or components being designated
as "Go if" in the Minimum-Equipment List (MEL) as
approved by the Buyer's airworthiness authorities for the
Buyer's operation of the Aircraft.
- Delays attributable to the Propulsion Systems.
2.6 Cancellation
A "Cancellation" occurs when a Revenue Flight does not take place.
The cancellation of any or all of the flight legs of a multi-leg
flight constitutes only one (1) Cancellation. One (1) Cancellation
is counted as one (1) event.
2.7 Achieved Dispatch Reliability
"Achieved Dispatch Reliability" is the actual Dispatch Reliability
obtained by the Aircraft fleet in regular revenue service and
adjusted to the clauses of this Guarantee.
Achieved Dispatch Reliability, expressed as a percent, will be
computed every three months ("the Computation Period") and will be
compared to the Guaranteed Dispatch Reliability level (as defined
in Paragraph 3) at the end of each Computation Period.
Total number of Revenue Flights
without Chargeable Delays or
Achieved Cancellations during the
Dispatch = Computation Period X 100
Reliability -------------------------------
Total number of Scheduled Revenue
Flights during the Computation Period
3. GUARANTEE
The Seller guarantees the "Guaranteed Dispatch Reliability," set
forth below in Subparagraph 3.1 and 3.2.
3.1 First *** of Guarantee
The Seller guarantees that, from the first three-month Computation
Period following delivery of the first Aircraft and for Aircraft
in commercial service, an Aircraft available for dispatch will, on
average, have a *** percent probability of being dispatched
without a Chargeable Delay. This probability will be maintained
until the end of the *** year of operation of the Aircraft fleet
following delivery of the first Aircraft.
3.2 *** Years of Guarantee
The Seller guarantees that, from the first three-month Computation
Period after the beginning of the *** year of operation of the
Aircraft fleet in commercial service until the end of the ***
year, an Aircraft available for dispatch will, on average, have a
*** percent probability of being Dispatched without a Chargeable
Delay.
3.3 Remaining Years of Guarantee
*** from the first three-month Computation Period after the
beginning of the *** year of operation of the Aircraft fleet in
commercial service, until the end of the Term, the Seller will
guarantee that an Aircraft available for dispatch will, on
average, have a *** probability of being Dispatched without a
Chargeable Delay. ***
4. BUYER'S AND SELLER'S OBLIGATION
4.1 Buyer's and Seller's Obligations
The Buyer's and Seller's specialists will mutually agree on the
details of a Chargeable Delay reporting procedure not later than
three (3) months before delivery of the first Aircraft.
4.2 Buyer's Obligations
a) The Buyer will regularly submit Chargeable Delay data on
a monthly basis not later than twenty (20) days after the
end of the reporting month. Such data must contain
detailed information on delays and Cancellations to allow
the Seller to assess the nature of system or component
malfunctions.
b) The Buyer will notify the Seller at any time that the
Achieved Dispatch Reliability is below the Guaranteed
Dispatch Reliability Level. After such notice, the Seller
will promptly take corrective actions. Upon request, all
reasonably necessary additional detailed operational and
engineering information will be provided by the Buyer in
order to allow the Seller to determine the necessary
action.
c) The Buyer will incorporate in and apply to the Aircraft
the procedures and modifications recommended by the
Seller to the extent necessary in order to improve the
Achieved Dispatch Reliability. Said modifications will be
incorporated and such procedures will be applied as soon
as is reasonably possible, consistent with the Buyer's
maintenance program, following receipt of instructions
and parts (if applicable) by the Buyer, provided that:
i) the effect of such a procedure or modification is
substantiated to the Buyer's satisfaction,
ii) application of such a procedure or modification is
economical and practical as determined by the
Buyer's customary analysis practice, and
iii) ***
In the event of a disagreement between the Seller and the
Buyer as to the effectiveness of procedures or
modifications proposed by the Seller to increase the
achieved level, the Buyer will demonstrate to the Seller
that pursuant to its analysis, such a modification or
procedure is not effective.
Notwithstanding the Buyer's obligations above, the Buyer
may, at its option, decline to install such modification
or decline to follow such revised procedures as are
referred to above. If the Buyer so declines, the Seller
may adjust the Guaranteed Dispatch Reliability Level
downwards by an amount consistent with the
improvement in the Achieved Dispatch Reliability Level,
based on reasonable substantiation to the Buyer and on
other operators' experience, if any, that of the
reliability benefits of such modification or such revised
procedures are expected to cause.
d) Furthermore, the Buyer agrees to set its Aircraft fleet
technical dispatch reliability goals as shown in the
Buyer's regular reliability report (or equivalent) at a
level equal to or greater than the Guaranteed Dispatch
Reliability Level, so that both the Buyer's and Seller's
technical staff can aggressively pursue attainment of the
Guaranteed Dispatch Reliability Level.
4.3 Seller's Obligations
During the Term, the Seller will provide technical and operational
analyses of delays and cancellations and will develop corrections
intended to reduce delays and, in the event that the Achieved
Dispatch Reliability is below the Guaranteed Dispatch Reliability
Level the Seller will, not later than six (6) months where
practicable after notification by the Buyer and at no charge to
the Buyer :
a) provide modified Manufacturer's items, either hardware of
software, to improve Achieved Dispatch Reliability,
b) make recommendations concerning the Aircraft operation and
maintenance programs, publications, and policies to improve
Achieved Dispatch Reliability,
c) assist the Buyer to cause Vendors action to improve the
Achieved Dispatch Reliability.
5. ADJUSTMENT
Any design, certification, regulatory, organizational structure or
Aircraft operation changes outside the Seller's control that may
have an effect upon the operation and dispatch characteristics of
the Aircraft will be cause for reevaluation or adjustment of this
Guaranteed Dispatch Reliability Level by mutual agreement between
the Buyer and the Seller.
6. ACHIEVED DISPATCH RELIABILITY REVIEW MEETINGS
An Achieved Dispatch Reliability review meeting between the
Seller's and the Buyer's representatives will be scheduled at the
end of each six (6) month period of Aircraft operation, or at some
other period to be mutually agreed. Representatives of the Buyer
and the Seller will participate in the meeting and will:
a) review current Achieved Dispatch Reliability,
b) eliminate unsupported or non-Aircraft-inherent delay
claims from delay records to compute Achieved Dispatch
Reliability,
c) consider corrective action, if required,
d) review the Buyer's incorporation of modifications as stated
in Subparagraph 4.2 of this Letter Agreement and
requirements, if any, for reduction of the Guaranteed
Dispatch Reliability Level,
e) review possible design, certification, regulatory,
organizational structure or Aircraft operation changes
and requirements, if any, necessitating adjustment of the
Guaranteed Dispatch Reliability Level.
7. LIABILITY LIMITATION
The Seller's liability for failure to meet the Dispatch
Reliability Guarantee values will be governed solely by the terms
of this Dispatch Reliability Guarantee.
UNQUOTE
In consideration of the assignment and subrogation by the Seller
under this Letter Agreement in favor of the Buyer in respect of
the Seller's rights against and obligations to the Manufacturer
under the provisions quoted above, the Buyer hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained. The Buyer and
Seller recognize and agree that, except as otherwise expressly
provided in Paragraph 7 of this Letter Agreement, all the
provisions of Clause 12 of the Agreement, including without
limitation the Exclusivity of Warranties and General Limitations
of Liability and Duplicate Remedies therein contained, will apply
to the foregoing Technical Dispatch Reliability Guarantee.
ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner
without the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
paragraph will be void and of no force or effect. Notwithstanding
the preceding sentence, the terms of Subclauses 19.5 and 19.6 of
the Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding, please
execute the original and one (1) copy hereof in the space provided below
and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
-------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
LETTER AGREEMENT NO. 14
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: SPARES SUPPORT
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L.
(the "Seller"), have entered into an Airbus A330/A340 Purchase
Agreement dated as of even date herewith (the "Agreement"), which
covers, among other things, the sale by the Seller and the purchase
by the Buyer of certain Aircraft, under the terms and conditions set
forth in said Agreement. The Buyer and the Seller have agreed to set
forth in this Letter Agreement No. 14 (the "Letter Agreement")
certain additional terms and conditions regarding the sale of the
Aircraft. Capitalized terms used herein and not otherwise defined in
this Letter Agreement will have the meanings assigned thereto in the
Agreement. The terms "herein," "hereof" and "hereunder" and words of
similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will
constitute an integral, nonseverable part of said Agreement, that
the provisions of said Agreement are hereby incorporated herein by
reference, and that this Letter Agreement will be governed by the
provisions of said Agreement, except that if the Agreement and this
Letter Agreement have specific provisions which are inconsistent,
the specific provisions contained in this Letter Agreement will
govern.
1. ***
2. ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner without
the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
Paragraph 2 will be void and of no force or effect. Notwithstanding
the preceding sentence, the terms of Subclauses 19.5 and 19.6 of the
Agreement will apply to this Letter Agreement.
If the foregoing correctly sets forth our understanding,
please execute the original and one (1) copy hereof in the space
provided below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
-------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
LETTER AGREEMENT NO. 15
As of November 24, 1998
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Re: CERTIFICATION
Ladies and Gentlemen:
US Airways Group, Inc. (the "Buyer"), and AVSA, S.A.R.L.
(the "Seller"), have entered into an Airbus A330/A340 Purchase
Agreement dated as of even date herewith (the "Agreement"), which
covers, among other things, the sale by the Seller and the purchase
by the Buyer of certain Aircraft, under the terms and conditions set
forth in said Agreement. The Buyer and the Seller have agreed to set
forth in this Letter Agreement No. 15 (the "Letter Agreement")
certain additional terms and conditions regarding the sale of the
Aircraft. Capitalized terms used herein and not otherwise defined in
this Letter Agreement will have the meanings assigned thereto in the
Agreement. The terms "herein," "hereof" and "hereunder" and words of
similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will
constitute an integral, nonseverable part of said Agreement, that
the provisions of said Agreement are hereby incorporated herein by
reference, and that this Letter Agreement will be governed by the
provisions of said Agreement, except that if the Agreement and this
Letter Agreement have specific provisions which are inconsistent,
the specific provisions contained in this Letter Agreement will
govern.
1. STANDARD AIRWORTHINESS CERTIFICATE
Pursuant to Subclause 2.3 of the Agreement, the Seller is required
to deliver each Aircraft with the Certificate of Airworthiness for
Export issued by the DGAC for the Aircraft, and in a condition
enabling the Buyer (or an eligible person under then applicable
law) to immediately obtain at the time of delivery a US Standard
Airworthiness Certificate issued by the DGAC, as the
representative of the FAA, pursuant to Part 21 of the US Federal
Aviation Regulations, and ***.
***
2. ***
Pursuant to Subclause 2.3 of the Agreement, the Seller is required
to deliver the Aircraft in a condition enabling the Buyer to
obtain at time of delivery of the first A330 Aircraft and first
A340 Aircraft ***.
***
3. ASSIGNMENT
This Letter Agreement and the rights and obligations of the Buyer
hereunder will not be assigned or transferred in any manner
without the prior written consent of the Seller, and any attempted
assignment or transfer in contravention of the provisions of this
Paragraph 2 will be void and of no force or effect.
Notwithstanding the preceding sentence, the terms of Subclauses
19.5 and 19.6 of the Agreement will apply to this Letter
Agreement.
If the foregoing correctly sets forth our understanding, please
execute the original and one (1) copy hereof in the space provided
below and return a copy to the Seller.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ Michele Lascaux
-------------------
Its: Director Contracts
Date: November 24, 1998
Accepted and Agreed
US Airways Group, Inc.
By: /s/ Thomas A. Fink
------------------
Its: Treasurer
Date: November 24, 1998
Exhibit 10.13 PRIVATE
FIRST AMENDMENT TO THE
USAIR GROUP, INC. NONEMPLOYEE
DIRECTOR DEFERRED STOCK UNIT PLAN
WHEREAS, US Airways Group, Inc. (formerly known as USAir Group,
Inc. and referred to herein as the "Company") maintains the USAir Group,
Inc. Nonemployee Director Deferred Stock Unit Plan (the "Plan"); and
WHEREAS, Section 7 of the Plan provides that the Board of
Directors of the Company (the "Board") may amend the Plan from time to
time, subject to the limitations therein, and
WHEREAS, the Company desires to amend the Plan as provided
herein.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. The name of the Plan is hereby changed to the "US Airways Group,
Inc. Nonemployee Director Deferred Stock Unit Plan", and all references in
the Plan to "USAir Group, Inc." are hereby changed to "US Airways Group,
Inc."
2. Section 5(c) of the Plan is hereby amended by adding the
following at the end thereof:
"Each Eligible Director whose termination of
service as a director occurs (i) after such
Eligible Director has been a member of the
Board for at least five (5) years or (ii)
due to his for her death or disability
shall also receive, at the time of the lump
sum payment pursuant to the first sentence
of this Section 5(c) or at the time of each
annual installment pursuant to the second
sentence of this Section 5(c), an
additional amount (the "Tax Liability Pay
ment") such that the net amount of the Tax
Liability Payment retained by the Eligible
Director, after deduction of any federal,
state and local income tax upon the Tax
Liability Payment, shall be equal to the
total federal, state and local income tax
owed by the Eligible Director in respect of
such lump sum payment or installment, as
the case may be. For purposes of deter
mining the amount of each Tax Liability
Payment, the Eligible Director shall be
deemed to pay federal income tax at the
highest marginal rate of federal income
taxation in the calendar year in which such
Tax Liability Payment is to be made and
state and local income taxes at the highest
marginal rate of taxation in the state and
locality of the Eligible Director's
residence on the date on which the Tax
Liability Payment is made, net of the maxi
mum reduction in federal income taxes which
could be obtained from deduction of such
state and local taxes."
This First Amendment shall be effective as of July 22,
1998, the date of its adoption by the Board.
EXHIBIT 10.14
SECOND AMENDMENT TO THE
US AIRWAYS GROUP, INC. NONEMPLOYEE
DIRECTOR DEFERRED STOCK UNIT PLAN
WHEREAS, US Airways Group, Inc. (the "Company")
maintains the US Airways Group, Inc. Nonemployee Director
Deferred Stock Unit Plan (the "Plan"); and
WHEREAS, Section 7 of the Plan provides that
the Board of Directors of the Company (the "Board") may
amend the Plan from time to time, subject to the limita-
tions therein, and
WHEREAS, the Company desires to amend the Plan
as provided herein.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. The first three (3) sentences of Section
5(c) of the Plan are hereby amended in their entirety to
read as follows:
On the February 1st immediately following the
termination of service of an Eligible Director,
the Eligible Director shall receive a lump sum
cash payment equal to the product of (i) the
average of the Fair Market Value of a share of
Stock for the five business days immediately
preceding such February 1st and (ii) the number
of nonforfeitable Deferred Stock Units then
credited to such Eligible Director's account.
Notwithstanding the foregoing, an Eligible
Director may elect to receive the distribution
with respect to his or her account in a number
of annual installments commencing on the
February 1st immediately following the
termination of service of such Eligible
Director, the number of such annual
installments to be elected by the Eligible
Director, but in no event to exceed four. In
the event an Eligible Director makes such an
election, the amount of each such installment
shall be determined based upon the average of
the Fair Market Value of a share of Stock for
the five business days immediately preceding
the date such installment payment is made. Any
election by an Eligible Director to receive
distribution with respect to his or her account
in annual installments and with respect to the
number of such installments may be made or
changed at any time without limitation
provided, however, that any such election (and
any modification or revocation of any such
election) shall not be given effect unless made
at least forty-five days prior to the Eligible
Director's termination of service.
This Second Amendment shall be effective as of March
17, 1999, the date of its adoption by the Board.
Exhibit 10.18
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Agreement dated as of November 18, 1998, between US Airways
Group, Inc., a Delaware corporation, having a place of business
at Crystal Park Four, 2345 Arlington, VA 22227 ("Group"), US
Airways, Inc., a Delaware corporation, having a place of business
at Crystal Park Four, 2345 Crystal Drive, Arlington, VA 22227
(the "Company") and Stephen M. Wolf, residing at P.O. Box 1400,
Middleburg, Virginia, 20118 (the "Executive").
WITNESSETH
WHEREAS, the Company and the Executive have entered into that
certain employment agreement dated January 22, 1996 (the
"Original Agreement"), and the parties hereto desire to amend,
restate and replace the Original Agreement with this Agreement;
WHEREAS, the Executive has assumed duties of a responsible
nature to the benefit of Group and the Company and to the
satisfaction of their respective Boards of Directors (each the
"Board");
WHEREAS, the respective Boards believe it to be in the best
interests of Group and the Company to enter into this Agreement
to assure Executive's continuing services to Group and the
Company including, but not limited to, under circumstances in
which there is a possible, threatened or actual Change of Control
(as defined below);
WHEREAS, the respective Boards believe 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 Group and 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; and
WHEREAS, in order to accomplish all the above objectives, the
respective Boards have authorized the Company and Group to enter
into this Agreement;
NOW, THEREFORE, in consideration of the mutual promises
herein contained, Group, 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 Employment 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
Group or the Company is terminated or the Executive ceases to be
Chairman of Group or 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 Chairman (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 Chairman.
(c) The "Employment Period" shall mean the period
commencing on the Effective Date and ending on the earlier to
occur of (i) the fourth anniversary of such 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 Employment Period shall be automatically
extended so as to terminate on the earlier of (x) four 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 Employment Period
shall not be so extended; and provided, further, that upon the
occurrence of a Change of Control Date, the Employment Period
shall automatically be extended so as to terminate on the earlier
to occur of (1) the fourth anniversary of such date or (2) the
Executive's Normal Retirement Date.
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 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 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. Group and the Company hereby agree
to continue the Executive in their employ, and the Executive
hereby agrees to remain in the employ of Group and the Company,
during the Employment Period under the terms and conditions
provided herein.
4. Terms of Employment
(a) Position and Duties.
(i) During the Employment Period and prior to a Change of
Control Date, (A) if the respective Boards of Group and the
Company determine that the Executive has been performing his
duties in accordance with Section 4(a)(iii) hereof, each shall
re-elect the Executive to the position of Chairman with
substantially similar duties to those performed by the Executive
on the Effective Date, (B) the Executive's services shall be
performed at the Executive's location on the Effective Date, the
Company's headquarters, or a location where a substantial
activity for which the Executive has responsibility is located.
The President and Chief Executive Officer of Group and the
Company will report to the Executive.
(ii) During the Employment Period and on and following a
Change of Control Date, (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 or any office or location less than thirty-five (35)
miles from such location.
(iii) 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
Group and 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 Group or 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 Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to Group or
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 the term hereof at a rate not less than $600,000,
and (y) during each succeeding 12 months of the term hereof 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 of Group or its Human Resources Committee in accordance
with the Incentive Compensation Plan as approved by the Board of
Group or other annual bonus plan hereafter approved by the Board
of Group ("Incentive Plan"). The Executive's target bonus
opportunity under the Incentive Plan each year shall be no less
than 100% of his Base Salary (as in effect on the first day of
the year) and his maximum bonus opportunity each year shall be no
less than 200% of such Base Salary. 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 Executive shall be entitled to participate during the
Employment Period in all incentive, savings and retirement plans,
practices, policies and programs applicable on or after the
Effective Date 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) applicable on
or after the Effective Date to other key employees of the Company
and its subsidiaries, in each case providing benefits which are
the economic equivalent to those in effect on the Effective Date
or as subsequently amended.
(v) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with
the most favorable policies, practices and procedures 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) 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.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an appropriate office
or offices of a size and with furnishings and other appointments,
and to secretarial and other assistance, as provided to other key
employees of the Company and its subsidiaries.
(viii) 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 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 hereunder. In
such event, the Executive's employment with Group and 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 with Group and the Company
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 Group or 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) the failure by Group to elect the Executive to
the position of Chairman or any other action by Group
which results in the diminution of the Executive's
position, authority, duties, or responsibilities,
excluding an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by
Group promptly after receipt of notice thereof given by
Executive;
(iii) (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 Group or 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, or any failure by the
Company to maintain or provide the plans, programs,
policies and practices, or 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;
(iv) Group's or 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;
(v) any purported termination by Group or the
Company of the Executive's employment otherwise than as
expressly permitted by this Agreement; or
(vi) any failure by Group or 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. Anything in this Agreement to
the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the
first anniversary of the Change of Control Date shall be deemed
to be a termination for Good Reason for all purposes of this
Agreement.
(e) Notice of Termination. Any termination of the
Executive's employment hereunder by the Company for Cause or by
the Executive for Good Reason shall be communicated by Notice of
Termination to such 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 hereunder 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 hereunder 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 Group and the Company upon Termination.
(a) Death. If the Executive's employment hereunder 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 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, all Accrued Obligations 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 the Executive in a lump sum
in cash within 30 days of the Date of Termination.
(d) Good Reason; Other Than for Cause, Disability or
Death.
(1) If, during the Employment Period and prior to a
Change of Control, the Company shall terminate the Executive's
employment hereunder other than for Cause, Disability or death
or if the Executive shall terminate his employment hereunder for
Good Reason:
(i) Group or the Company shall pay to the Executive in a
lump sum in cash within 5 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. Base Salary at the rate of the Highest Base
Salary for the period from the Date of Termination until
the end of the Employment Period; and
C. 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) 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 Section 4(b)(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 of
the Company and its subsidiaries and their families.
(2) If, during the Employment Period and on and after a
Change of Control Date, the Company shall terminate the
Executive's employment hereunder other than for Cause,
Disability, or death or if the Executive shall terminate his
employment hereunder for Good Reason:
(i) Group or the Company shall pay to the Executive in a
lump sum in cash within five (5) 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 in an amount equal to the maximum Annual Bonus
in effect on the Effective Date (the highest amount
determined under this clause (x) shall hereinafter be
called 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
E. the Executive shall be entitled to receive a lump-
sum retirement benefit equal to the difference between (a)
the actuarial equivalent of the benefit under the
Retirement Plan and any supplemental and/or excess
retirement plan the Executive would receive if he remained
employed by the Company at the compensation level provided
for in Sections 4(b)(i) and (ii) of this Agreement for the
remainder of the Employment Period and (b) the actuarial
equivalent of this benefit, if any, under the Retirement
Plan and any supplemental and/or excess retirement plan.
(ii) The Company shall, for the remainder of the
Employment Period or such longer period as any plan,
program, practice or policy may provide, 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 of the Company and its subsidiaries and their
families and (except as provided in paragraph (e) below)
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.
(e) Post-Retirement Travel and Health Benefits.
Notwithstanding any other provision of this Agreement, in the
event the Executive's employment hereunder is terminated for any
reason (including death, Disability, with or without Cause by the
Company, and with or without Good Reason by the Executive), the
Company shall provide the Executive with the following benefits
after the Termination Date:
(i) Travel Benefits. For the lifetime of the Executive,
the Company shall continue to provide transportation
benefits under Section 4(b)(vi) as a retired executive
officer or director (whichever is better), which shall
include first class positive space on-line travel for
Executive and his eligible dependents, including spouse, in
accordance with the most favorable terms of the policy in
effect.
(ii) Health Benefits. For the lifetime of the Executive,
the Company shall continue to provide health insurance
benefits on the same basis such benefits are provided to
retired executives of the Company, including coverage for
his eligible dependents, including spouse, in accordance
with the most favorable terms of the health benefit plan in
effect; provided, however, that if the Executive becomes
eligible for health benefits through a subsequent employer,
the provision of such benefits hereunder shall be secondary
to the coverage of such subsequent employer.
(iii) Other Benefits. For the lifetime of the Executive,
any other fringe benefits provided to the Executive as
Chairman to the extent such benefits are provided to any
other retired officers of Group or the Company.
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 their respective 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 or any of their respective 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 their respective 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, defense or other claim, right or action
which Group or 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. Group or the Company agrees to pay, to the
full extent permitted by law, all legal fees and expenses, as
incurred by Group, the Company, the Executive and others, which
the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by Group, 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 to 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 Group and the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by Group, the Company, any individual,
entity or group whose actions result in a Change of Control, or
their respective subsidiaries or affiliates 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, including, but not
limited to, any amounts in respect of (i) options to acquire
shares of Group common stock, (ii) restricted shares of Group
common stock, (iii) the letter agreement entered into as of
January 22, 1996, as amended by letter agreement dated November
18, 1998, between the Executive and the Company with respect to
supplemental retirement benefits, and (iv) the letter agreement
entered into as of January 22, 1996 between the Executive and the
Company with respect to certain employment matters) (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") from Group or the
Company 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 the Company to audit
its financial statements (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and
the Executive within 5 business days of the Date of Termination,
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 upon 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
Group or 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 Group or 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 Group or 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
Group and 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, Group or
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 Group or 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 Group or 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 Group and the Company
all secret or confidential information, knowledge or data
relating to Group and the Company or any of their respective
subsidiaries, and their respective businesses, which shall have
been obtained by the Executive's employment by Group and the
Company or any of their 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 Group and 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 Group and
the Company and those designated by either of them. In no event
shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
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 Group and the Company and their respective
successors and assigns.
(c) Each of Group and the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of its
business and/or assets to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that
Group or the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Group"
and "Company" shall mean each as hereinbefore defined and any
successor to their 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:
Stephen M. Wolf US Airways, Inc.
P.O. Box 1400 2345 Crystal Drive
Middleburg, Virginia 20118 Arlington, Virginia 22227
Attention: General Counsel
If to Group:
US Airways Group, Inc.
2345 Crystal Drive
Arlington, Virginia 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
addressees.
(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) Group and 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 the Original Agreement
between the Company and the Executive and, together with the
letter agreement dated January 22, 1996 as amended by letter
agreement dated November 18, 1998 between the Executive and the
Company with respect to supplemental retirement benefits and the
letter agreement dated January 22, 1996 between the Executive and
the Company relating to certain employment matters, contain the
entire understanding of Group (collectively referred to as the
"Letter Agreements"), the Company and the Executive with respect
to the subject matter hereof.
(h) Group hereby guarantees the payment and performance by
the Company of each and every obligation of the Company under
this Agreement and the Letter Agreements.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its respective Board of
Directors, Group and the Company have caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
EXECUTIVE
/s/ Stephen M. Wolf
-------------------
Stephen M. Wolf
Chairman
US AIRWAYS, INC.
/s/ Michelle V. Bryan
---------------------
Michelle V. Bryan
Vice President, Deputy General
Counsel and Secretary
US AIRWAYS GROUP, INC.
/s/ Michelle V. Bryan
---------------------
Michelle V. Bryan
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.
Incentive Compensation Plan of US Airways Group, Inc.
Long Term Incentive Plan of US Airways Group, Inc.
Individual Supplemental Retirement Agreements in effect with
certain officers of US Airways, Inc.
Restricted Stock Agreements with certain officers
4
Exhibit 10.19
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Agreement dated as of November 18, 1998, between US Airways
Group, Inc., a Delaware corporation, having a place of business
at Crystal Park Four, 2345 Arlington, VA 22227 ("Group"), US
Airways, Inc., a Delaware corporation, having a place of business
at Crystal Park Four, 2345 Crystal Drive, Arlington, VA 22227
(the "Company") and Rakesh Gangwal, residing at 1155 Crest Lane,
McLean, Virginia 22101 (the "Executive").
WITNESSETH
----------
WHEREAS, the Company and the Executive have entered into
that certain employment agreement dated February 19, 1996 (the
"Original Agreement"), and the parties hereto desire to amend,
restate and replace the Original Agreement with this Agreement;
WHEREAS, the Executive has assumed the duties of the
President and Chief Executive Officer of Group and of the
President and Chief Executive Officer of the Company to the
benefit of Group and the Company, and to the satisfaction of
their respective Boards of Directors (each "Board");
WHEREAS, the respective Boards believe it to be in the best
interests of Group and the Company to enter into this Agreement
to assure Executive's continuing services to Group and 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;
WHEREAS, the respective Boards believe it is imperative to
diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending
1
or threatened Change of Control and to encourage the Executive's
full attention and dedication to Group and 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; and
WHEREAS, in order to accomplish all the above objectives,
the respective Boards have authorized the Company and Group 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 Employment 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
Group or the Company is terminated or the Executive ceases to be
President and Chief Executive Officer of Group or 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
President and Chief Executive Officer.
2
(c) The "Employment Period" shall mean the period commencing
on the Effective Date and ending on the earlier to occur of (i)
the third anniversary of such 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 Employment
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 Employment Period shall not be so extended;
and provided, further, that upon the occurrence of a Change of
Control Date, the Employment Period shall automatically be
extended so as to terminate on the earlier to occur of (1) the
third anniversary of such date or (2) the Executive's Normal
Retirement Date.
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 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
3
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 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
4
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,
5
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. Group and the Company hereby agree to
continue the Executive in its employ, and the Executive hereby
agrees to remain in their employ during the Employment Period
under the terms and conditions provided herein.
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period and prior to a Change of
Control Date, (A) if the respective Boards of Group or the
Company determine that the Executive has been performing his
duties in accordance with Section 4(a)(iii) hereof, each shall
re-elect the Executive to the position of President and Chief
Executive Officer with substantially similar duties to those
performed by the Executive on the Effective Date, (B) the
Executive's services shall be performed at the Executive's
location on the Effective Date, the Company's headquarters, or a
location where a substantial activity for which the Executive has
responsibility is located; provided, however, that in the event
of the departure of the Chairman of Group or the Company
incumbent in that position on the Effective Date the Executive's
services shall be performed at the Executive's location on the
Effective Date, unless the Executive agrees in writing to a
different location.
(ii) During the Employment Period and on and following a
Change of Control Date, (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
6
performed at the location where the Executive was employed
immediately preceding the Change of Control Date or any office or
location less than thirty-five (35) miles from such location.
(iii) 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
Group and 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 Group or 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 Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to Group or
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 the term hereof at a rate not less than $675,000, and (y)
during each succeeding 12 months of the term hereof 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
7
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 of Group or its Human Resources Committee in accordance
with the Incentive Compensation Plan as approved by the Board of
Group or other annual bonus plan hereafter approved by the Board
of Group ("Incentive Plan"). The Executive's target percentage
under the Incentive Plan each year shall be no less than 100% of
his Base Salary ("Target Bonus") (as in effect on the first day
of the year) and his maximum bonus opportunity each year shall be
no less than 200% of such Base Salary ("Maximum Bonus"). 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 Executive shall be entitled to participate during the
Employment Period in all incentive, savings and retirement plans,
practices, policies and programs applicable on or after the
Effective Date 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
8
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) applicable on
or after the Effective Date to other key employees of the Company
and its subsidiaries, in each case providing benefits which are
the economic equivalent to those in effect on the Effective Date
or as subsequently amended.
(v) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with
the most favorable policies, practices and procedures 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) 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.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an appropriate office
or offices of a size and with furnishings and other appointments,
and to secretarial and other assistance, as provided to other key
employees of the Company and its subsidiaries.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and
9
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. The Executive's employment
hereunder will terminate upon his death. If 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 hereunder. In
such event, the Executive's employment with Group and 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 with Group and the Company
for "Cause." For purposes of this
10
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 Group or 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) the failure by Group or the Company to elect the
Executive to the position of President and Chief Executive
Officer of Group or any other action by Group which results in
the diminution of the Executive's position, authority, duties, or
responsibilities, excluding an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied
by Group promptly after receipt of notice thereof is given by the
Executive;
11
(iii) (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 Group or 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, or any failure by the Company to
maintain or provide the plans, programs, policies and practices,
or 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;
(iv) Group's or 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;
(v) any purported termination by Group or the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement; or
(vi) any failure by Group or 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. Anything in this Agreement to
the contrary notwithstanding, a termination by the Executive for
any reason during
12
the 30-day period immediately following the first anniversary of
the Change of Control Date shall be deemed to be a termination
for Good Reason for all purposes of this Agreement.
(e) Notice of Termination. Any termination of the
Executive's employment hereunder by the Company for Cause or by
the Executive for Good Reason shall be communicated by Notice of
Termination to such 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 hereunder 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 hereunder 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.
13
6. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment hereunder 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") and any obligations as provided in the
letter agreement entered into as of February 19, 1996, as amended
by the letter agreement dated November 18, 1998, between the
Executive and the Company with respect to supplemental retirement
benefits (the "Retirement Letter Agreement") and the letter
agreement dated February 19, 1996 between the Executive and the
Company with respect to certain employment matters (the
"Employment Letter Agreement") (collectively the Retirement
Letter Agreement and the Employment Letter Agreement are
hereinafter called the "Letter Agreements"). All such Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 5 days
of the Date of Termination, or in such other form as may be
provided for pursuant to such agreements. Anything in this
Agreement to the contrary notwithstanding, the Executive's family
shall be
14
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 hereunder 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
and any obligations as provided in the Letter Agreements. All
such Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 5 days of the Date of Termination, or in such
other form as may be provided for pursuant to such agreements.
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.
15
(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), plus any obligations as provided in the Letter
Agreements. If the Executive terminates 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, all
Accrued Obligations and any obligations provided for in an
agreement, if any, between the Company and the Executive pursuant
to Section 5(a) or as provided in the Letter Agreements. All
such Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 5 days of the Date of Termination, or in such
other form as may be provided for pursuant to such agreements.
(d) Good Reason; Other Than for Cause or Disability.
(1) If, during the Employment Period and prior to a Change
of Control, the Company shall terminate the Executive's
employment hereunder other than for Cause, Disability or death or
if the Executive shall terminate his employment hereunder for
Good Reason:
(i) Group or the Company shall pay to the Executive in a
lump sum in cash within 5 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 three and the Executive's Highest
Base Salary; and
C. 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
16
D. the Executive shall be entitled to receive a
retirement benefit in accordance with the terms of the Retirement
Letter Agreement; and
(ii) The Company shall:
A. for a period of three years after the Date of
Termination, 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 Section
4(b)(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 of the Company and its
subsidiaries and their families; and
B. at the expiration of the three-year period, continue
to provide the Executive with health insurance and on-line travel
privileges in accordance with the terms of the Employment Letter
Agreement.
(2) If, during the Employment Period and on and after a
Change of Control Date, the Company shall terminate the
Executive's employment hereunder other than for Cause,
Disability, or death or if the Executive shall terminate his
employment hereunder for Good Reason:
(i) Group or the Company shall pay to the Executive in a
lump sum in cash within 5 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 Maximum Bonus in effect on the
Effective Date (the highest amount determined under this clause
(x) shall hereinafter be called 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
17
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
E. the Executive shall be entitled to receive a
retirement benefit in accordance with the terms of the Retirement
Letter Agreement.
(ii) The Company shall:
A. for a period of three years after the Date of
Termination or such longer period as any plan, program, practice
or policy may provide, 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 of the Company and
its subsidiaries 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 three-year period continue
to provide the Executive with health insurance and on-line travel
privileges in accordance with the terms of the Employment Letter
Agreement.
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 their respective 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 or any of their respective 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 their respective subsidiaries at
or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy practice or program.
18
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, defense or other claim, right or action
which Group or 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. Group or the Company agrees to pay, to the
full extent permitted by law, all legal fees and expenses, as
incurred by Group or the Company, the Executive and others, which
the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by Group, 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 to 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 Group, the Company, any individual,
entity or group whose actions result in a Change of Control, or
their respective subsidiaries or affiliates 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, including, but not
limited to, any amounts in respect of (i) options to acquire
shares of Group common stock, (ii) restricted shares of Group
common stock, (iii) the Retirement Letter Agreement, and (iv) the
Employment Letter
19
Agreement) (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")
from Group or the Company 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 the Company to audit
its financial statements (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and
the Executive within 5 business days of the Date of Termination,
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 upon 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
20
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 Group or 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 Group or 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 Group or 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
21
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 Group
and 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 Group or 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 Group
or the Company pursuant to Section 9(c), a
22
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 Group and the Company all
secret or confidential information, knowledge or data relating to
Group and the Company or any of their respective subsidiaries,
and their respective businesses, which shall have been obtained
by the Executive's employment by Group and the Company or any of
their 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 Group and 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 Group and the Company and those designated by
it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this
Agreement.
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.
23
(b) This Agreement shall inure to the benefit of and be
binding upon Group and the Company and their respective
successors and assigns.
(c) Each of Group and the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of its business and/or
assets to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that Group or the Company
would be required to perform it if no such succession had taken
place. As used in this Agreement, "Group" and "Company" shall
mean each as hereinbefore defined and any successor to their
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 If to Group
- ------------------- ----------------- -----------
Rakesh Gangwal US Airways, Inc. US Airways Group, Inc.
1155 Crest Lane 2345 Crystal Drive 2345 Crystal Drive
McLean, VA 22101 Arlington, Virginia Arlington, Virginia
22227 22227
Attention: General Attention: General
Counsel Counsel
24
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
addressees.
(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) Group and 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 the Original Agreement and,
together with the Letter Agreements, contains the entire
understanding of the Company and the Executive with respect to
the subject matter hereof.
(h) Group hereby guarantees the payment and performance by
the Company of each and every obligation of the Company under
this Agreement and the Letter Agreements.
25
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its respective Board of
Directors, Group and the Company have caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
EXECUTIVE
/s/ Rakesh Gangwal
-------------------------------------
Rakesh Gangwal
President and Chief Executive Officer
US AIRWAYS, INC.
/s/ Michelle V. Bryan
-------------------------------------
Michelle V. Bryan
Vice President, Deputy General
Counsel and Secretary
US AIRWAYS GROUP, INC.
/s/ Michelle V. Bryan
-------------------------------------
Michelle V. Bryan
Secretary
26
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.
Long Term Incentive Plan of US Airways Group, Inc.
Incentive Compensation Plan of US Airways Group, Inc.
Individual Supplemental Retirement Agreements in effect with
certain officers of US Airways Group, Inc.
Restricted Stock Agreements with certain senior officers of
US Airways, Inc.
27
11326/1
EXHIBIT 10.24
SEVERANCE AGREEMENT
Agreement dated as of February 1, 1998, between US Airways, Inc., a
Delaware corporation, having a place of business at Crystal Park Four, 2345
Crystal Drive, Arlington, VA 22227 (the "Company") and N. Bruce Ashby
residing at 11326 Bright Pond Lane, Reston, Virginia, 20194 (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");
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 "Employment Period" shall mean the period commencing on the
Effective Date and ending on the earlier to occur of (i) the Executive's
severance of employment for any reason, or (ii) the first day of the month
next following the Executive's 65th birthday ("Normal Retirement Date").
(c) The "Change of Control Date" shall mean the first date during the
Change of Control Period (as defined in Section 1(d)) 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.
(d) 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 such date or (ii) the Executive's 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
2
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" 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
3
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
4
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, during the Employment Period, subject to the
terms and conditions provided herein.
4. Terms of Employment
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period and
prior to a Change of Control Date, (A) if the Board
determines that the Executive has been performing
his duties in accordance with Section 4(a)(iii)
hereof, it shall re-elect the Executive to a
responsible executive position with substantially
5
similar level of duties to the position held by the
Executive on the Effective Date, (B) the
Executive's services shall be performed at the
Executive's location on the Effective 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
on and following a Change of Control Date, (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 or
any office or location less than thirty-five (35)
miles from such location.
(iii) 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
Effective Date, the continued conduct of such
activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the
Effective 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 the term
hereof at a rate not less than his base salary in
effect on the Effective Date of this Agreement, and
(y) during each succeeding 12 months of the term
hereof 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
6
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 on or after the Effective Date
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) applicable on or
after the Effective Date to other key employees of
the Company and its subsidiaries, in each case
providing benefits which are the economic
equivalent to those in effect on the Effective
Date or as subsequently amended.
(v) Expenses. During the Employment
--------
Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the
most favorable policies, practices and procedures
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) Fringe Benefits. During the
---------------
Employment Period, the Executive shall be entitled
to fringe benefits, including but not limited to
pass privileges for
7
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, as those benefits may be amended from time to
time.
(vii) Office and Support Staff. During
-------------------------
the Employment Period, the Executive shall be
entitled to an appropriate office or offices of a
size and with furnishings and other appointments,
and to secretarial and other assistance, as
provided to other key employees of the Company and
its subsidiaries.
(viii) 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, as
such policies, programs and practices may be
amended from time to time.
5. Termination.
-----------
(a) Mutual Agreement. 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 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
8
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) Other Termination. During the Employment Period and
-----------------
prior to a Change of Control, the Company may terminate the Executive's
employment for any reason. During the Change of Control 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)(ii) 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, titles and reporting relationships),
authority, duties or responsibilities as contemplated by
Section 4(a) 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 a 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
9
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 Section 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 a Change of Control Date
shall be conclusive.
(e) Notice of Termination. Any termination by the Company
---------------------
during the Employment Period and prior to a Change of Control shall be
effected by the normal policies and practices of the Company. Any
termination by the Company during the Change of Control Period 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.
10
(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
11
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 Employee in
a lump sum in cash within 30 days of the Date of Termination. Anything in
this Agreement to the contrary notwithstanding, the Employee 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. 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
12
Executive (together with accrued interest thereon).
(d) Resignation; Other than for Good Reason. 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, all Accrued Obligations 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.
(e) Good Reason; Other than for Cause, Disability or Death.
------------------------------------------------------
(1) If, during the Employment Period and prior to a
Change of Control, 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, 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. an amount equal to one times the Executive's
Highest Base Salary; and
C. 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.
(2) If, during the Change of Control 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
13
last full fiscal year ending during the Change
of Control Period or, if higher, the Annual
Bonus paid to the Executive during the last full
fiscal year ending during the Change of Control
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.
(ii) the Company shall provide to the Executive
after the Date of Termination the aggregate of
the following:
A. for the remainder of the Change of Control
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 Section 4(b)(iii)
(with respect to any retirement plans), (iv) and
(v) 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
Change of Control 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 Change of
Control Period and to have retired on the last
day of such period; and
B. at the expiration of the Change of Control
Period, the Company shall continue to provide the Executive
with health insurance and on-line travel
14
privileges on the same basis such benefits were
provided to the Executive on the last day of the
Change of Control 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 or 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
15
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
16
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
17
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 Employee 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
18
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
19
information that is legally required to be disclosed. In the event the
Executive breaches any provision of this Section 10, any payments or other
benefits promised under this Agreement shall be forfeited. Such a
forfeiture shall not limit the Company from seeking any other contractual
or equitable remedies available to it which are appropriate under the
circumstances. The Executive expressly consents to the award of injunctive
relief in the event a violation of this Section 10 is alleged by the
Company.
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
20
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:
------------------- -----------------
N. Bruce Ashby US Airways, Inc.
11326 Bright Pond Lane Crystal Park Four
Reston, VA 20194 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 in this Agreement which connote the masculine
gender are deemed to apply equally to female executives.
(g) This Agreement supersedes any prior employment or severance
agreement between the Company and the Executive, and contains the entire
understanding of the Company and the
21
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.
US AIRWAYS, INC.
/s/ Michelle V. Bryan
---------------------
Michelle V. Bryan
Vice President, Deputy General
Counsel and Secretary
EXECUTIVE
/s/ N. Bruce Ashby
-----------------------
N. Bruce Ashby
22
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.
Incentive Compensation Plan of US Airways Group, Inc.
Individual Supplemental Retirement Agreements in effect with certain
officers
Restricted Stock Agreements with certain senior officers
23
Exhibit 10.27
November 18, 1998
Mr. Stephen M. Wolf
Chairman
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Dear Steve:
Reference is made to the letter agreement dated January
22, 1996 (the "SERP Letter Agreement") between you and US
Airways, Inc. (the "Company") concerning supplemental
retirement benefits to be paid to you upon your retirement
from the Company. This letter, when countersigned by you,
will constitute an amendment to the SERP Letter Agreement.
This amendment has been approved by the Company's Board of
Directors at its meeting on November 18, 1998. The Company
agrees with you as follows:
1. Clause (ii) of paragraph 1(a) of the SERP Letter
Agreement is hereby amended in its entirety to read as
follows:
"(ii) final average earnings under the Retirement
Plan in the amount of the greater of (x)
$1,000,000 or (y) final average earnings
calculated in accordance with the Retirement Plan
based on your actual salary and bonus,"
2. Paragraph 2(d) of the SERP Letter Agreement is
hereby amended in its entirety to read as follows:
"(d) In determining the amount of your
supplemental benefit hereunder, except as
otherwise set forth in paragraph 3 hereunder,
the reduction factors, actuarial assumptions,
definitions, administrative provisions and other
applicable provisions of the Retirement Plan
will control."
3. Paragraph 3 of the SERP Letter Agreement is hereby
amended in its entirety to read as follows:
"3. The amount of supplemental pension benefit
calculated pursuant to paragraph 1 will be payable
in the event of your normal retirement from the
Company at any time following your attainment of age
65. You may elect to receive early retirement
benefits under this agreement at any time after
termination of your employment with the Company and
upon your attainment of age 55. In the event of
your early retirement from the Company on or after
age 60, there will be no reduction under the early
retirement factors set forth in the Retirement Plan
for early commencement of the payment of the
supplemental pension benefit. In the event of your
early retirement from the Company prior to age 60,
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
as if normal retirement age was age 60 and you had
30 years of service for the purposes of such
reduction so that your supplemental pension benefit
would be reduced by one-sixth of one percent for
each of the first twenty-four months and by one-
fourth of one percent for each month thereafter that
benefit commencement precedes your 60th birthday;
provided, however, that in the event of your early
retirement following a Change of Control, as defined
in your Amended and Restated Employment Agreement
dated November 18, 1998, there will be no reduction
in the supplemental pension benefit calculated under
paragraph 1 regardless of your age at such early
retirement."
4. US Airways Group, Inc., the parent of the Company,
hereby agrees that it is jointly and severally obligated for
the payment of the obligations of the Company under the SERP
Letter Agreement as amended hereby.
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.
/s/ MICHELLE V. BRYAN
-------------------------------
Michelle V. Bryan
Vice President, Deputy General
Counsel and Secretary
Agreed:
/s/ Stephen M. Wolf
- ---------------------------
Stephen M. Wolf
US AIRWAYS GROUP, INC.
/s/ Michelle V. Bryan
- ---------------------------
Michelle V. Bryan
Secretary
Exhibit 10.29
November 18, 1998
Mr. Rakesh Gangwal
1155 Crest Lane
McLean, Virginia 22101
Dear Mr. Gangwal:
Reference is made to the letter agreement dated February
19, 1996 (the "Retirement Letter Agreement") between you and
US Airways, Inc. (the "Company") concerning supplemental
retirement benefits to be paid to you upon your retirement
from the Company. This letter, when countersigned by you,
will constitute an amendment to the Retirement Letter
Agreement. This amendment has been approved by the Company's
Board of Directors at its meeting on November 18, 1998. The
Company agrees with you as follows:
1. Clause (ii) of paragraph 1(a) of the Retirement
Letter Agreement is hereby amended in its entirety to read as
follows:
"(ii) final average earnings under the Retirement
Plan in the amount of the greater of (x) your actual
salary and bonus, or (y) your Base Salary in effect
plus an assumed bonus at the Maximum Bonus
opportunity (with "Base Salary" and "Maximum
Bonus" to be defined as set forth in the Amended
and Restated Employment Agreement dated November 18,
1998)"
2. Paragraph 2(d) of the Retirement Letter
Agreement is hereby amended in its entirety to read as
follows:
"(d) In determining the amount of your
supplemental benefit hereunder, except as otherwise
set forth in paragraph 3 hereunder, the reduction
factors, actuarial assumptions, definitions,
administrative provisions and other applicable
provisions of the Retirement Plan will control."
3. Paragraph 3 of the Retirement Letter Agreement is
hereby amended in its entirety to read as follows:
"3. The amount of supplemental pension benefit
calculated pursuant to paragraph 1 will be payable
in the event of your normal retirement from the
Company at any time following your attainment of age
65. You may elect to receive early retirement
benefits under this agreement at any time after
termination of your employment with the Company. In
the event of your early retirement from the Company
on or after age 60, there will be no reduction under
the early retirement reduction factors set forth in
the Retirement Plan for early commencement of the
payment of the supplemental pension benefit. In
the event of your early retirement from the Company
prior to age 60, 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 as if normal retirement age was age
60 and you had 30 years of service for the purposes
of such reduction so that your supplemental pension
benefit would be reduced by one-sixth of one percent
for each of the first twenty-four months and by one-
fourth of one percent for each month thereafter that
benefit commencement precedes your 60th birthday;
provided, however, that in the event of your early
retirement following a Change of Control, as defined
in your Amended and Restated Employment Agreement
dated November 18, 1998, there will be no reduction
for early commencement in the supplemental pension
benefit calculated under paragraph 1 regardless of
your age at such early retirement. Notwithstanding
the foregoing, if your employment terminates prior
to attaining age 55, you may elect to commence your
benefit immediately and elect one of the optional
payment forms set forth in paragraph 4 and such
optional payments will reflect the aforementioned
amendments to paragraphs 1, 2 and 3."
4. US Airways Group, Inc., the parent of the Company,
hereby agrees that it is jointly and severally obligated for
the payment of the obligations of the Company under the
Retirement Letter Agreement as amended hereby.
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.
/s/ Michelle V. Bryan
----------------------
Michelle V. Bryan
Vice President, Deputy General
Counsel and Secretary
Agreed:
/s/ Rakesh Gangwal
- ------------------------
Rakesh Gangwal
US AIRWAYS GROUP, INC.
/s/ Michelle V. Bryan
- ------------------------
Michelle V. Bryan
Secretary
Mr. Rakesh Gangwal
November 18, 1998
Page 3 of 3
Exhibit 10.31
April 29, 1996
Mr. N. Bruce Ashby
11326 Bright Pond Lane
Reston, Virginia 20194
Dear Mr. Asbhy:
This letter, when countersigned by you, will constitute an
agreement between you and USAir, Inc. ("USAir") concerning
supplemental retirement benefits to be paid to you upon your
retirement from USAir. This agreement has been approved by the
Board of Directors at its meeting on May 21, 1996. USAir 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, USAir 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 30% 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 USAir up to
a maximum of 10 years of credited service; provided, however, that
the supplemental pension benefit is subject to the following
limitation. In the event that all pension benefits payable to you
in the aggregate under any pension plan maintained by USAir for
the purpose of providing retirement income, whether tax-qualified
or non-tax-qualified (and including the supplemental pension
benefit provided hereunder), exceed in the aggregate the benefit
which would have been payable to you under the benefit formula set
forth in 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 30% of your base salary,
(iii) no amendments to the Retirement Plan after the date hereof,
and (iv) 30 years of credited service under the Retirement Plan,
then the supplemental pension benefit payable hereunder shall be
reduced, but not below zero, until such aggregate limitation is no
longer exceeded. 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 the pension benefit
payable in the aggregate under any defined
contribution pension plans, the benefit shall only
be included to the extent that it is attributable to
contributions made by USAir (including earnings
attributable to such contributions) and any portion
of the benefit payable under such defined
contribution pension plans attributable to your own
contributions (including earnings attributable to
such contributions) shall be excluded.
(c) In determining the amount of the pension benefit
payable under any defined contribution pension
plans, any benefit payable in the form of a lump
sum, shall be converted to a single life annuity for
purposes of calculating the benefit payable
thereunder.
(d) 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 USAir at age 65. You may elect to receive
early retirement benefits under this agreement at any time after
termination of your employment with USAir and upon your attainment
of age 55. In the event of your early retirement from USAir, 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 USAir;
Page 2
(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 USAir 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 USAir's 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, USAir 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
10 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 severance agreement between you and USAir dated April 29,
1996.
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 USAir 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 USAir is seeking to
provide you with supplemental pension benefits as
determined in paragraph 1 above.
Page 3
If you concur in the foregoing, please indicate your
agreement by signing a copy of this letter in the space provided
below.
US AIR, INC.
/s/ Michelle V. Bryan
-------------------------
Michelle V. Bryan
Vice President, Deputy General
Counsel and Secretary
Agreed:
/s/ N. Bruce Ashby
- ---------------------------
N. Bruce Ashby
Page 4
EXHIBIT 21.1
Subsidiaries of US Airways Group, Inc.
- --------------------------------------
Airways Assurance Limited LLC
Incorporated under the laws of Bermuda.
Allegheny Airlines, Inc. (operates under the trade name
"US Airways Express")
Incorporated under the laws of the State of Delaware.
Material Services Company, Inc.
Incorporated under the laws of the State of Delaware.
Piedmont Airlines, Inc. (operates under the trade name
"US Airways Express")
Incorporated under the laws of the State of Maryland.
PSA Airlines, Inc. (operates under the trade name
"US Airways Express")
Incorporated under the laws of the State of
Pennsylvania.
Shuttle, Inc. (operates under the trade name "US Airways
Shuttle")
Incorporated under the laws of the State of Delaware.
US Airways, Inc.
Incorporated under the laws of the State of Delaware.
US Airways Fuel Corporation
Incorporated under the laws of the State of Delaware.
US Airways Leasing and Sales, Inc.
Incorporated under the laws of the State of Delaware.
EXHIBIT 21.2
Subsidiary of US Airways, Inc.
- ------------------------------
USAM Corp.
Incorporated under the laws of the State of Delaware.
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
US Airways Group, Inc.:
We consent to the incorporation by reference in the registration
statement nos. 2-98828, 33-26762, 33-39896, 33-44835, 33-60618,
33-60620 and 333-62029 on Form S-8 and the registration statement
nos. 33-41821 and 33-50231 on Form S-3 of US Airways Group, Inc.
of our report dated February 24, 1999, relating to the
consolidated balance sheets of US Airways Group, Inc. and
subsidiaries (the "Company") as of December 31, 1998 and 1997,
and the related consolidated statements of operations, cash
flows, and changes in stockholders' equity (deficit) for each of
the years in the three year period ended December 31, 1998 which
appear in the December 31, 1998 Annual Report on Form 10-K of the
Company and US Airways, Inc.
KPMG LLP
Washington, D.C.
March 19, 1999
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
US Airways, Inc.:
We consent to the incorporation by reference in the registration
statement nos. 33-35509, 33-50231-01 and 333-64425 on Form S-3
of US Airways, Inc. of our report dated February 24, 1999
relating to the consolidated balance sheets of US Airways, Inc.
and subsidiary ("US Airways") as of December 31, 1998 and 1997,
and the related consolidated statements of operations, cash
flows, and changes in stockholder's equity (deficit) for each of
the years in the three year period ended December 31, 1998 which
appear in the December 31, 1998 Annual Report on Form 10-K of
US Airways Group, Inc. and US Airways.
KPMG LLP
Washington, D.C.
March 19, 1999
EXHIBIT 24.1
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Stephen M. Wolf,
Director of US Airways Group, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A. Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Stephen M. Wolf
------------------------------
Stephen M. Wolf
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Mathias J. DeVito,
Director of US Airways Group, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A. Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Mathias J. DeVito
------------------------------
Mathias J. DeVito
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Peter M. George,
Director of US Airways Group, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A. Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Peter M. George
------------------------------
Peter M. George
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, George J. W.
Goodman, Director of US Airways Group, Inc., (the "Company"), do
hereby appoint Lawrence M. Nagin and Thomas A. Mutryn, and each
of them (with full power to each of them to act alone), attorney
and agent for me and in my name and on my behalf to sign any
Annual Report on Form 10-K of the Company for the year ended
December 31, 1998 and any amendments or supplements thereto which
shall be filed with the Securities and Exchange Commission under
the Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ George J.W. Goodman
------------------------------
George J.W. Goodman
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, John W. Harris,
Director of US Airways Group, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A. Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ John W. Harris
------------------------------
John W. Harris
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Edward A. Horrigan,
Jr., Director of US Airways Group, Inc., (the "Company"), do
hereby appoint Lawrence M. Nagin and Thomas A. Mutryn, and each
of them (with full power to each of them to act alone), attorney
and agent for me and in my name and on my behalf to sign any
Annual Report on Form 10-K of the Company for the year ended
December 31, 1998 and any amendments or supplements thereto which
shall be filed with the Securities and Exchange Commission under
the Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Edward A. Horrigan, Jr
------------------------------
Edward A. Horrigan, Jr
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Robert L. Johnson,
Director of US Airways Group, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Robert L. Johnson
------------------------------
Robert L. Johnson
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Robert LeBuhn,
Director of US Airways Group, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A. Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Robert LeBuhn
------------------------------
Robert LeBuhn
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, John G. Medlin, Jr.,
Director of US Airways Group, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A. Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ John G. Medlin, Jr.
------------------------------
John G. Medlin, Jr.
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Hanne M. Merriman,
Director of US Airways Group, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A. Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Hanne M. Merriman
------------------------------
Hanne M. Merriman
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Raymond W. Smith,
Director of US Airways Group, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A. Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Raymond W. Smith
------------------------------
Raymond W. Smith
EXHIBIT 24.2
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Stephen M. Wolf,
Director of US Airways, Inc., (the "Company"), do hereby appoint
Lawrence M. Nagin and Thomas A. Mutryn, and each of them (with
full power to each of them to act alone), attorney and agent for
me and in my name and on my behalf to sign any Annual Report on
Form 10-K of the Company for the year ended December 31, 1998 and
any amendments or supplements thereto which shall be filed with
the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Stephen M. Wolf
------------------------------
Stephen M. Wolf
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Mathias J. DeVito,
Director of US Airways, Inc., (the "Company"), do hereby appoint
Lawrence M. Nagin and Thomas A. Mutryn, and each of them (with
full power to each of them to act alone), attorney and agent for
me and in my name and on my behalf to sign any Annual Report on
Form 10-K of the Company for the year ended December 31, 1998 and
any amendments or supplements thereto which shall be filed with
the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Mathias J. DeVito
------------------------------
Mathias J. DeVito
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Peter M. George,
Director of US Airways, Inc., (the "Company"), do hereby appoint
Lawrence M. Nagin and Thomas A. Mutryn, and each of them (with
full power to each of them to act alone), attorney and agent for
me and in my name and on my behalf to sign any Annual Report on
Form 10-K of the Company for the year ended December 31, 1998 and
any amendments or supplements thereto which shall be filed with
the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Peter M. George
------------------------------
Peter M. George
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, George J. W.
Goodman, Director of US Airways, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A. Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ George J.W. Goodman
------------------------------
George J.W. Goodman
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, John W. Harris,
Director of US Airways, Inc., (the "Company"), do hereby appoint
Lawrence M. Nagin and Thomas A. Mutryn, and each of them (with
full power to each of them to act alone), attorney and agent for
me and in my name and on my behalf to sign any Annual Report on
Form 10-K of the Company for the year ended December 31, 1998 and
any amendments or supplements thereto which shall be filed with
the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ John W. Harris
------------------------------
John W. Harris
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Edward A. Horrigan,
Jr., Director of US Airways, Inc., (the "Company"), do hereby
appoint Lawrence M. Nagin and Thomas A. Mutryn, and each of them
(with full power to each of them to act alone), attorney and
agent for me and in my name and on my behalf to sign any Annual
Report on Form 10-K of the Company for the year ended December
31, 1998 and any amendments or supplements thereto which shall be
filed with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Edward A. Horrigan, Jr
------------------------------
Edward A. Horrigan, Jr
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Robert L. Johnson,
Director of US Airways, Inc., (the "Company"), do hereby appoint
Lawrence M. Nagin and Thomas A. Mutryn, and each of them (with
full power to each of them to act alone), attorney and agent for
me and in my name and on my behalf to sign any Annual Report on
Form 10-K of the Company for the year ended December 31, 1998 and
any amendments or supplements thereto which shall be filed with
the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Robert L. Johnson
------------------------------
Robert L. Johnson
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Robert LeBuhn,
Director of US Airways, Inc., (the "Company"), do hereby appoint
Lawrence M. Nagin and Thomas A. Mutryn, and each of them (with
full power to each of them to act alone), attorney and agent for
me and in my name and on my behalf to sign any Annual Report on
Form 10-K of the Company for the year ended December 31, 1998 and
any amendments or supplements thereto which shall be filed with
the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Robert LeBuhn
------------------------------
Robert LeBuhn
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, John G. Medlin, Jr.,
Director of US Airways, Inc., (the "Company"), do hereby appoint
Lawrence M. Nagin and Thomas A. Mutryn, and each of them (with
full power to each of them to act alone), attorney and agent for
me and in my name and on my behalf to sign any Annual Report on
Form 10-K of the Company for the year ended December 31, 1998 and
any amendments or supplements thereto which shall be filed with
the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ John G. Medlin, Jr.
------------------------------
John G. Medlin, Jr.
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Hanne M. Merriman,
Director of US Airways, Inc., (the "Company"), do hereby appoint
Lawrence M. Nagin and Thomas A. Mutryn, and each of them (with
full power to each of them to act alone), attorney and agent for
me and in my name and on my behalf to sign any Annual Report on
Form 10-K of the Company for the year ended December 31, 1998 and
any amendments or supplements thereto which shall be filed with
the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Hanne M. Merriman
------------------------------
Hanne M. Merriman
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Raymond W. Smith,
Director of US Airways, Inc., (the "Company"), do hereby appoint
Lawrence M. Nagin and Thomas A. Mutryn, and each of them (with
full power to each of them to act alone), attorney and agent for
me and in my name and on my behalf to sign any Annual Report on
Form 10-K of the Company for the year ended December 31, 1998 and
any amendments or supplements thereto which shall be filed with
the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, as amended.
I hereby give and grant to said attorneys and agents, and
each of them, full power and authority generally to do and
perform all acts and things necessary to be done in the premises
as fully and effectually in all respects as I could do if
personally present; and I hereby ratify and confirm all that said
attorneys and agents, and each of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 17th day of March, 1999.
/s/ Raymond W. Smith
------------------------------
Raymond W. Smith
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000701345
<NAME> US AIRWAYS GROUP, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 612
<SECURITIES> 598
<RECEIVABLES> 355<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 228
<CURRENT-ASSETS> 2364
<PP&E> 6301
<DEPRECIATION> 2641
<TOTAL-ASSETS> 7870
<CURRENT-LIABILITIES> 2269
<BONDS> 1955
0
0
<COMMON> 101
<OTHER-SE> 492
<TOTAL-LIABILITY-AND-EQUITY> 7870
<SALES> 0
<TOTAL-REVENUES> 8688
<CGS> 0
<TOTAL-COSTS> 7674
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 223
<INCOME-PRETAX> 902
<INCOME-TAX> 364
<INCOME-CONTINUING> 538
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 538
<EPS-PRIMARY> 5.75
<EPS-DILUTED> 5.60
<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> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 604
<SECURITIES> 598
<RECEIVABLES> 520<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 202
<CURRENT-ASSETS> 2389
<PP&E> 5810
<DEPRECIATION> 2528
<TOTAL-ASSETS> 7698
<CURRENT-LIABILITIES> 2155
<BONDS> 1954
0
0
<COMMON> 0
<OTHER-SE> 602
<TOTAL-LIABILITY-AND-EQUITY> 7698
<SALES> 0
<TOTAL-REVENUES> 8556
<CGS> 0
<TOTAL-COSTS> 7566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 224
<INCOME-PRETAX> 936
<INCOME-TAX> 377
<INCOME-CONTINUING> 559
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 559
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>EPS calculations are not relevant because US Airways, Inc. is a wholly-owned
subsidiary of US Airways Group, Inc.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000701345
<NAME> US AIRWAYS GROUP, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 724
<SECURITIES> 721
<RECEIVABLES> 438<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 225
<CURRENT-ASSETS> 2,718
<PP&E> 6,250
<DEPRECIATION> 2,592
<TOTAL-ASSETS> 8,138
<CURRENT-LIABILITIES> 2,464<F2>
<BONDS> 1,971
0
0
<COMMON> 101
<OTHER-SE> 610
<TOTAL-LIABILITY-AND-EQUITY> 8,138
<SALES> 0
<TOTAL-REVENUES> 6,567
<CGS> 0
<TOTAL-COSTS> 5,731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 174
<INCOME-PRETAX> 728
<INCOME-TAX> 294
<INCOME-CONTINUING> 434
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 434
<EPS-PRIMARY> 4.53
<EPS-DILUTED> 4.40
<FN>
<F1>Receivables are presented net of allowances.
<F2>This amount was restated to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000701345
<NAME> US AIRWAYS GROUP, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,125
<SECURITIES> 1,003
<RECEIVABLES> 396<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 225
<CURRENT-ASSETS> 2,946
<PP&E> 6,191
<DEPRECIATION> 2,567
<TOTAL-ASSETS> 8,590
<CURRENT-LIABILITIES> 2,754<F2>
<BONDS> 1,992
0
0
<COMMON> 101
<OTHER-SE> 969
<TOTAL-LIABILITY-AND-EQUITY> 8,590
<SALES> 0
<TOTAL-REVENUES> 4,359
<CGS> 0
<TOTAL-COSTS> 3,793
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123
<INCOME-PRETAX> 490
<INCOME-TAX> 197
<INCOME-CONTINUING> 293
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 293
<EPS-PRIMARY> 2.99
<EPS-DILUTED> 2.89
<FN>
<F1>Receivables are presented net of allowances.
<F2>This amount was restated to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000701345
<NAME> US AIRWAYS GROUP, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,213
<SECURITIES> 868
<RECEIVABLES> 426<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 223
<CURRENT-ASSETS> 2,970
<PP&E> 6,261
<DEPRECIATION> 2,541
<TOTAL-ASSETS> 8,670
<CURRENT-LIABILITIES> 2,677<F2>
<BONDS> 2,031
0
0
<COMMON> 101
<OTHER-SE> 1,142
<TOTAL-LIABILITY-AND-EQUITY> 8,670
<SALES> 0
<TOTAL-REVENUES> 2,063
<CGS> 0
<TOTAL-COSTS> 1,871
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63
<INCOME-PRETAX> 165
<INCOME-TAX> 67
<INCOME-CONTINUING> 98
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98
<EPS-PRIMARY> 0.98
<EPS-DILUTED> 0.96
<FN>
<F1>Receivables are presented net of allowances.
<F2>This amount was restated to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000701345
<NAME> US AIRWAYS GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,094,108
<SECURITIES> 870,205
<RECEIVABLES> 300,162<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 226,023
<CURRENT-ASSETS> 2,777,416
<PP&E> 6,252,318
<DEPRECIATION> 2,527,237
<TOTAL-ASSETS> 8,372,399
<CURRENT-LIABILITIES> 2,206,288<F2>
<BONDS> 2,425,820
358,000
0
<COMMON> 91,482
<OTHER-SE> 633,827
<TOTAL-LIABILITY-AND-EQUITY> 8,372,399
<SALES> 0
<TOTAL-REVENUES> 8,513,824
<CGS> 0
<TOTAL-COSTS> 7,929,555
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 256,055
<INCOME-PRETAX> 672,036
<INCOME-TAX> (352,663)
<INCOME-CONTINUING> 1,024,699<F3>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,024,699<F3>
<EPS-PRIMARY> 12.32
<EPS-DILUTED> 9.87
<FN>
<F1>Receivables are presented net of allowances.
<F2>This amount was restated to conform with current classifications.
<F3>This amount was amended to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000701345
<NAME> US AIRWAYS GROUP, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 868,848 1,135,750 1,224,411
<SECURITIES> 595,408 482,118 857,068
<RECEIVABLES> 450,825<F1> 408,077<F1> 410,984<F1>
<ALLOWANCES> 0<F1> 0<F1> 0<F1>
<INVENTORY> 235,759 238,065 223,458
<CURRENT-ASSETS> 2,307,552 2,404,581 2,837,192
<PP&E> 6,376,859 6,413,105 6,420,380
<DEPRECIATION> 2,517,494 2,599,954 2,719,346
<TOTAL-ASSETS> 7,470,923 7,514,295 7,923,916
<CURRENT-LIABILITIES> 2,372,901<F2> 2,264,137<F2> 2,388,495<F2>
<BONDS> 2,577,997 2,546,146 2,441,084
758,719 358,000 358,000
213,128 213,128 0
<COMMON> 64,567 80,111 91,119
<OTHER-SE> (846,161) (372,473) 171,074
<TOTAL-LIABILITY-AND-EQUITY> 7,470,923 7,514,295 7,923,916
<SALES> 0 0 0
<TOTAL-REVENUES> 2,101,078 4,313,688 6,428,860
<CGS> 0 0 0
<TOTAL-COSTS> 1,925,450 3,822,516 5,914,525
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 64,508 128,685 192,642
<INCOME-PRETAX> 165,374 397,338 629,092
<INCOME-TAX> 12,716 39,094 83,818
<INCOME-CONTINUING> 152,658 358,244 545,274
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 152,658 358,244 545,274
<EPS-PRIMARY> 2.05 4.60 6.66
<EPS-DILUTED> 1.45 3.39 5.21
<FN>
<F1>Receivables are presented net of allowances.
<F2>This amount was restated to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000701345
<NAME> US AIRWAYS GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 950,966
<SECURITIES> 635,839
<RECEIVABLES> 337,025<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 248,774
<CURRENT-ASSETS> 2,310,194
<PP&E> 6,388,325
<DEPRECIATION> 2,470,337
<TOTAL-ASSETS> 7,531,411
<CURRENT-LIABILITIES> 2,533,656<F2>
<BONDS> 2,615,780
758,719
213,128
<COMMON> 64,306
<OTHER-SE> (861,816)
<TOTAL-LIABILITY-AND-EQUITY> 7,531,411
<SALES> 0
<TOTAL-REVENUES> 8,142,413
<CGS> 0
<TOTAL-COSTS> 7,704,920
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 267,122
<INCOME-PRETAX> 275,482
<INCOME-TAX> 12,109
<INCOME-CONTINUING> 263,373
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 263,373
<EPS-PRIMARY> 2.73
<EPS-DILUTED> 2.35
<FN>
<F1>Receivables are presented net of allowances.
<F2>This amount was restated to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 720
<SECURITIES> 721
<RECEIVABLES> 607<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 202
<CURRENT-ASSETS> 2,760
<PP&E> 5,789
<DEPRECIATION> 2,483
<TOTAL-ASSETS> 7,975<F3>
<CURRENT-LIABILITIES> 2,379<F3>
<BONDS> 1,970
0
0
<COMMON> 0
<OTHER-SE> 721<F3>
<TOTAL-LIABILITY-AND-EQUITY> 7,975<F3>
<SALES> 0
<TOTAL-REVENUES> 6,469
<CGS> 0
<TOTAL-COSTS> 5,650
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 174
<INCOME-PRETAX> 745
<INCOME-TAX> 300
<INCOME-CONTINUING> 445
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 445
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>EPS calculations are not relevant because US Airways, Inc. is a wholly-owned
subsidiary of US Airways Group, Inc.
<F3>This amount was restated to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,122
<SECURITIES> 1,003
<RECEIVABLES> 990<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 201
<CURRENT-ASSETS> 3,098<F3>
<PP&E> 5,790
<DEPRECIATION> 2,460
<TOTAL-ASSETS> 8,479<F3>
<CURRENT-LIABILITIES> 2,687<F3>
<BONDS> 1,991
0
0
<COMMON> 0
<OTHER-SE> 1,075<F3>
<TOTAL-LIABILITY-AND-EQUITY> 8,479<F3>
<SALES> 0
<TOTAL-REVENUES> 4,292
<CGS> 0
<TOTAL-COSTS> 3,737
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123
<INCOME-PRETAX> 496
<INCOME-TAX> 200
<INCOME-CONTINUING> 296
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 296
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>EPS calculations are not relevant because US Airways, Inc. is a wholly-owned
subsidiary of US Airways Group, Inc.
<F3>This amount was restated to conform with current classifications.
</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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,211
<SECURITIES> 868
<RECEIVABLES> 616<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 199
<CURRENT-ASSETS> 3,130
<PP&E> 5,876
<DEPRECIATION> 2,438
<TOTAL-ASSETS> 8,574
<CURRENT-LIABILITIES> 2,616<F3>
<BONDS> 2,030
0
0
<COMMON> 0
<OTHER-SE> 1,257
<TOTAL-LIABILITY-AND-EQUITY> 8,574
<SALES> 0
<TOTAL-REVENUES> 2,031
<CGS> 0
<TOTAL-COSTS> 1,842
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63
<INCOME-PRETAX> 169
<INCOME-TAX> 68
<INCOME-CONTINUING> 101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>EPS calculations are not relevant because US Airways, Inc. is a wholly-owned
subsidiary of US Airways Group, Inc.
<F3>This amount was restated to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,091,540
<SECURITIES> 870,205
<RECEIVABLES> 491,052<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 200,494
<CURRENT-ASSETS> 2,934,980
<PP&E> 5,889,277
<DEPRECIATION> 2,428,948
<TOTAL-ASSETS> 8,265,500
<CURRENT-LIABILITIES> 2,131,149<F3>
<BONDS> 2,424,954
0
0
<COMMON> 1
<OTHER-SE> 1,101,766
<TOTAL-LIABILITY-AND-EQUITY> 8,265,500
<SALES> 0
<TOTAL-REVENUES> 8,501,485
<CGS> 0
<TOTAL-COSTS> 7,915,335
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260,029
<INCOME-PRETAX> 673,229
<INCOME-TAX> (378,930)
<INCOME-CONTINUING> 1,052,159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,052,159
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>EPS calculations are not relevant because US Airways, Inc. is a wholly-owned
subsidiary of US Airways Group, Inc.
<F3>This amount was restated to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> SEP-30-1997 JUN-30-1997
<CASH> 1,223,761 1,134,728
<SECURITIES> 857,068 482,118
<RECEIVABLES> 465,224<F1> 456,345<F1>
<ALLOWANCES> 0<F1> 0<F1>
<INVENTORY> 192,191 207,200
<CURRENT-ASSETS> 2,841,685 2,406,615
<PP&E> 6,157,154 6,151,559
<DEPRECIATION> 2,624,118 2,505,043
<TOTAL-ASSETS> 7,849,972 7,435,793
<CURRENT-LIABILITIES> 2,349,381<F3> 2,220,575<F3>
<BONDS> 2,440,193 2,545,231
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 603,743<F4> 260,259
<TOTAL-LIABILITY-AND-EQUITY> 7,849,972 7,435,793
<SALES> 0 0
<TOTAL-REVENUES> 6,414,130 4,298,820
<CGS> 0 0
<TOTAL-COSTS> 5,896,000 3,865,742
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 196,637 132,166
<INCOME-PRETAX> 631,055 396,111
<INCOME-TAX> 98,734 50,696
<INCOME-CONTINUING> 532,321 345,415
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 532,321 345,415
<EPS-PRIMARY> 0<F2> 0<F2>
<EPS-DILUTED> 0<F2> 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.
<F3>This amount was restated to conform with current classifications.
<F4>This amount was amended to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 867,204
<SECURITIES> 595,408
<RECEIVABLES> 456,022<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 201,495
<CURRENT-ASSETS> 2,271,624
<PP&E> 6,124,047
<DEPRECIATION> 2,425,649
<TOTAL-ASSETS> 7,352,344
<CURRENT-LIABILITIES> 2,403,200<F3>
<BONDS> 2,577,058
0
0
<COMMON> 1
<OTHER-SE> 58,473
<TOTAL-LIABILITY-AND-EQUITY> 7,352,344
<SALES> 0
<TOTAL-REVENUES> 2,090,353
<CGS> 0
<TOTAL-COSTS> 1,916,216
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,250
<INCOME-PRETAX> 160,886
<INCOME-TAX> 17,257
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,629
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>EPS calculations are not relevant because US Airways, Inc. is a wholly-owned
subsidiary of US Airways Group, Inc.
<F3>This amount was restated to conform with current classifications.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000714560
<NAME> US AIRWAYS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 950,134
<SECURITIES> 635,839
<RECEIVABLES> 325,478<F1><F3>
<ALLOWANCES> 0<F1>
<INVENTORY> 211,184
<CURRENT-ASSETS> 2,252,015<F3>
<PP&E> 6,137,671
<DEPRECIATION> 2,381,844
<TOTAL-ASSETS> 7,392,533<F3>
<CURRENT-LIABILITIES> 2,671,399<F3>
<BONDS> 2,614,818
0
0
<COMMON> 1
<OTHER-SE> (85,155)
<TOTAL-LIABILITY-AND-EQUITY> 7,392,533<F3>
<SALES> 0
<TOTAL-REVENUES> 7,704,057
<CGS> 0
<TOTAL-COSTS> 7,335,389
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 283,936
<INCOME-PRETAX> 191,043
<INCOME-TAX> 7,811
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183,232
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Receivables are presented net of allowances.
<F2>EPS calculations are not relevant because US Airways, Inc. is a wholly-owned
subsidiary of US Airways Group, Inc.
<F3>This amount was restated to conform with current classifications.
</FN>
</TABLE>
