UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year end December 31, 1998
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
US Airways, Inc. Employee Savings Plan
(Full title of the plan)
US Airways Group, Inc.
(Issuer of securities held pursuant to the plan noted above)
2345 Crystal Drive, Arlington, VA 22227
(Address of principal executive offices)
Commission file number: 1-8444
US Airways, Inc.
Employee Savings Plan
Financial Statements
and Supplemental Schedules
December 31, 1998 and 1997
(With Independent Auditors'
Report Thereon)
US Airways, Inc.
Employee Savings Plan
Table of Contents
-----------------
Page
----
Independent Auditors' Report 1
Financial Statements
Statements of Net Assets Available for Plan
Benefits as of December 31, 1998 and 1997 2
Statements of Changes in Net Assets Available
for Plan Benefits for the years ended
December 31, 1998 and 1997 3
Notes to Financial Statements 4 - 16
Supplemental Schedule I - Item 27a
Schedule of Assets Held for Investment Purposes
as of December 31, 1998 17 - 18
Supplemental Schedule II - Item 27d
Schedule of Reportable Transactions for the year
ended December 31, 1998 19
Signature 20
Exhibit 23
Consent of Independent Auditors 21
Independent Auditors' Report
The Plan Administrator and Participants
US Airways, Inc. Employee Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the US Airways, Inc. Employee Savings Plan (the Plan), as of
December 31, 1998 and 1997, and the related statements of changes in net
assets available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan
as of December 31, 1998 and 1997, and the changes in net assets available for
plan benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental schedules of assets held for
investment purposes as of December 31, 1998 and reportable transactions for
the year ended December 31, 1998 are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of
the Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation
to the basic financial statements taken as a whole.
Washington, D.C. KPMG
June 11, 1999
US Airways, Inc.
Employee Savings Plan
Statements of Net Assets Available for Plan Benefits
----------------------------------------------------
December 31,
--------------------
1998 1997
---- ----
Assets
Investments:
At fair value:
Shares of registered investment
companies:
Fidelity Magellan Fund $ 234,965,965 $ 161,041,085
Fidelity Equity Income Fund 97,477,842 84,790,998
Fidelity Spartan U.S. Equity
Index Portfolio 73,632,385 48,158,122
Fidelity Intermediate Bond Fund - 19,712,629
Capital Growth Mix Portfolio 25,746,367 18,243,306
MAS Domestic Fixed Income
Portfolio Institutional 23,296,525 -
Neuberger & Berman Guardian
Trust 10,105,711 10,197,742
Moderation Mix Portfolio 9,473,942 6,848,490
Income Mix Portfolio 1,428,687 947,772
T. Rowe Price Small Cap
Stock Fund 1,100,513 -
Putnam International Growth
A Fund 527,497 -
US Airways Common Stock Fund 59,441,382 64,168,628
Fidelity Retirement Government
Money Market Portfolio 30,731,942 22,235,950
Participant loans 23,907,163 17,977,523
----------- -----------
591,835,921 454,322,245
At contract value:
Fixed Income Fund 24,265,211 21,720,295
----------- -----------
Total investments 616,101,132 476,042,540
Receivables:
Participant Contributions 1,708,145 1,904,834
Employer contributions 31,994,880 23,252,633
----------- -----------
Total receivables 33,703,025 25,157,467
----------- -----------
Total assets 649,804,157 501,200,007
----------- -----------
Liabilities
Accrued expenses 27,203 27,879
----------- -----------
Total liabilities 27,203 27,879
----------- -----------
Net assets available for plan benefits $ 649,776,954 $ 501,172,128
=========== ===========
See accompanying Notes to Financial Statements.
2
US Airways, Inc.
Employee Savings Plan
Statements of Changes in Net Assets Available for Plan Benefits
---------------------------------------------------------------
Years ended December 31,
1998 1997
---- ----
Additions to net assets attributable to:
Net appreciation in fair value
of investments $ 59,028,762 $ 85,917,672
Investment income 23,074,877 20,187,558
Interest income on participant
loans 1,812,876 1,252,231
Participant contributions 45,158,894 44,563,080
Employer contributions 43,682,580 35,093,613
Rollover contributions 349,777 493,145
----------- -----------
Total additions 173,107,766 187,507,299
Deductions from net assets attributable to:
Benefits paid to participants 24,384,025 10,359,375
Administrative expenses 119,050 94,594
----------- -----------
Total deductions 24,503,075 10,453,969
----------- -----------
Net increase 148,604,691 177,053,330
Net assets available for plan benefits:
Beginning of year 501,172,128 324,116,319
Transfer from US Airways, Inc.
401(k) Savings Plan 135 2,007
Transfer from US Airways, Inc.
Employee Pension Plan - 472
----------- -----------
End of year $ 649,776,954 $ 501,172,128
=========== ===========
See accompanying Notes to Financial Statements.
3
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
1. Description of Plan
The following description of the US Airways, Inc. Employee Savings Plan
(the Plan), provides only general information. Participants should refer
to the Plan document for a more complete description of the Plan's
provisions.
(a) General
The Plan is a defined contribution plan intended to be a qualified cash
or deferred compensation arrangement under Section 401(k) of the Internal
Revenue Code (IRC), as amended, and to qualify under Section 401(a) of
the IRC. The Plan was established on January 1, 1993 for certain
employees of US Airways, Inc. (US Airways or the Company). All non-
contract employees and certain other employees who are covered by a
collective bargaining agreement which provides for their participation in
the Plan, who are at least 18 years of age, have completed 90 days of
service and who are not covered by another 401(k) plan sponsored by US
Airways, except for those individuals not covered by the United States
income tax laws, are eligible to participate in the Plan. The Plan is
subject to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA), as amended.
US Airways, the plan administrator, is responsible for the content and
issuance of the Plan's financial statements. US Airways Group, Inc.
(Group) is the issuer of certain common stock securities held pursuant to
the Plan.
(b) Contributions
Eligible US Airways employees electing to participate in the Plan make
contributions to the Plan via payroll deductions. Each year Plan
participants may contribute up to 13 percent of pre-tax annual
compensation, as defined in the Plan, unless the participant is
classified as a highly compensated employee, as defined by the IRC. The
contribution percentage may not exceed a certain percentage of pre-tax
annual compensation, as determined by the plan administrator, if the
participant is a highly compensated employee. The amount of contribution
that may be made by a participant to the Plan shall be a whole percentage
of a participant's compensation. Individual participant contributions
for 1998 and 1997 could not exceed the statutory limit of $10,000 per
year. The Company matches 50% of a participant's contribution each pay
4
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
period up to a maximum of two percent of the participant's compensation.
If US Airways' parent company, US Airways Group, Inc., achieves certain
pre-tax margin levels, the Company also makes an annual profit sharing
contribution to the Plan on behalf of each participant. In March 1999
and 1998, the Company made profit sharing contributions in the amounts of
$31.5 million and $22.7 million, respectively, to participant accounts
related to the 1998 and 1997 plan years. These contributions are
included in the Employer contribution receivable in the December 31, 1998
and 1997 statement of net assets available for plan benefits.
(c) Vesting
Participants are immediately vested in their contributions, plus actual
earnings thereon. The Company's matching and profit sharing
contributions, plus actual earnings thereon, become 100 percent vested
after two years of continuous service.
(d) Investment Options
The Company selects the number and type of investment options available.
Fidelity Institutional Retirement Services Company, the Plan's
Recordkeeper, is responsible for maintaining an account balance for each
participant. Fidelity Management Trust Company is the Plan Trustee.
Each participant instructs the Recordkeeper how to allocate their
participant and Company contributions. Participants may invest their
contributions in any combination among the investment options available
in increments of five percent. If a participant fails to instruct the
Recordkeeper on how to allocate the contributions, then their
contributions will be invested in a cash equivalent fund, such as the
Fidelity Retirement Government Money Market Portfolio.
The Recordkeeper values account balances daily. Each account balance is
based on the value of the underlying investments in each account.
Generally, participants may elect to change how future contributions are
allocated or may transfer current account balances among investment
options.
As of December 31, 1998, the Company offered thirteen investment options
in the form of ten individual investment options and three diversified
portfolio mixes, which are pre-selected combinations of mutual funds.
The thirteen options available to participants are as follows:
5
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
Fidelity Magellan Fund - The fund primarily invests in common stocks and
securities of both well-known and lesser known companies with potentially
above-average growth potential. Securities may be of foreign, domestic
and multinational companies.
US Airways Common Stock Fund - A fund comprised primarily of US Airways
Group, Inc. (Group) common stock purchased on the open market or directly
from Group at market prices. A small percentage of the fund is invested
in short-term liquid investments. Company contributions cannot be
invested in this fund, in accordance with the Plan document. In addition,
officers of the Company are not permitted to invest their contributions in
this Fund. Effective November 28, 1997 participants who exchange out of
this fund to other investment options cannot exchange into the fund for a
period of 30 calendar days.
Fidelity Equity Income Fund - The fund seeks reasonable income by
investing primarily in common and preferred stocks. The fund also invests
in bonds and convertible securities.
Fidelity Spartan U.S. Equity Index Portfolio - The portfolio seeks growth
and income by matching the composition and total return of the Standard &
Poor's Daily Stock Price Index of 500 common stocks.
Capital Growth Mix Portfolio - A diversified portfolio mix comprised of
80% equity securities and 20% fixed income securities. The equity
securities are invested 20% in the Fidelity Equity Income Fund,
approximately 15% in the Fidelity OTC Portfolio, approximately 30% in the
Fidelity Magellan Fund and approximately 15% in the Fidelity Overseas
Fund. The fixed income securities are invested in the Fidelity
Intermediate Bond Fund.
Fidelity Retirement Government Money Market Portfolio - Investments are
made in obligations issued or guaranteed as to principal and interest by
the U.S. government, its agencies or instrumentalities.
MAS Domestic Fixed Income Portfolio Institutional - The portfolio seeks to
provide above-average total returns from both income and price
appreciation by investing in U.S. government securities, and other U.S.
investment-grade fixed income securities. The Portfolio's average
duration is generally between five and seven years.
6
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
Neuberger & Berman Guardian Trust - The fund primarily invests in stocks
of established, high-quality companies considered to be undervalued.
Moderation Mix Portfolio - A diversified portfolio mix comprised of 60%
equity securities and 40% fixed income securities. The equity securities
are invested approximately 20% in the Fidelity Equity Income Fund,
approximately 20% in the Fidelity Spartan U.S. Equity Index Portfolio, 15%
in the Fidelity Magellan Fund and approximately 5% in the Fidelity
Overseas Fund. The fixed income securities are invested approximately 15%
in the Fidelity Short-Term Bond Fund and approximately 25% in the Fidelity
Intermediate Bond Fund.
Income Mix Portfolio - A diversified portfolio mix comprised of 20% equity
securities and 80% fixed income securities. The equity securities are
invested 10% in the Fidelity Equity Income Fund and 10% in the Fidelity
Spartan U.S. Equity Index Portfolio. The fixed income securities are
invested approximately 15% in the Fidelity Retirement Government Money
Market Portfolio, approximately 35% in the Fidelity Short-Term Bond Fund
and approximately 30% in the Fidelity Intermediate Bond Fund.
T. Rowe Price Small Cap Stock Fund - The fund seeks to provide long-term
capital growth by investing primarily in stocks of small and medium sized
companies that are believed to offer superior earnings or appear to be
undervalued. Small cap stocks are those with a market capitalization of
$1 billion or less at the time of investment. The fund also invests in
foreign securities.
Putnam International Growth A Fund - The fund seeks capital appreciation
over the long term by investing primarily in stocks of all-sized companies
located outside the United States that have the potential for growth.
Investments include stocks of companies that appear to be undervalued as
well as inexpensive stocks of well-developed companies.
Fixed Income Fund - The fund buys high-quality investment contracts, a
type of investment product offered to retirement and savings plans by
insurance companies, banks, and other financial institutions. Money
transferred out of the Fixed Income Fund cannot be invested in the
Fidelity Retirement Government Money Market Portfolio, the Fidelity
Intermediate Bond Fund or the Income Mix Portfolio for a period of 90 days
because these funds are considered competitive by the insurance industry.
7
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
(e) Participant Withdrawals
All participants can borrow from their account, but may have only one
loan outstanding at any given point in time. Participants may borrow
from their accounts a minimum of $1,000 up to a maximum amount equal to
the lesser of $50,000 (reduced by the highest outstanding loan balance
from the Plan or any other plan maintained by the Company during the
preceding twelve month period) or 50 percent of their vested separate
account balance as of the date of the loan. Loan transactions are
treated as transfers between the investment funds and the participant
loans receivable. Loan terms cannot exceed five years, except for loans
obtained for the purchase of a primary residence. The loans are secured
by the balance in the participant's account and bear interest at a rate
commensurate with local prevailing market rates for loans made under
similar circumstances. Principal and interest are paid ratably through
payroll deductions.
Upon approval by the plan administrator, a participant may withdraw his
or her contributions from the account if it is determined that the
withdrawal is necessary to meet an immediate and heavy financial need of
the participant under the deemed hardship standards set forth in the
Plan.
(f) Payment of Benefits
Upon termination of service due to death, disability, retirement or other
termination of employment, distributions to a participant or beneficiary
is made as soon as reasonably practicable. If the participant's account
balance is less than $5,000, a lump sum distribution is automatic upon
separation. If the participant's account balance is greater than $5,000,
the distribution can be deferred or provided in cash as a lump sum.
(g) Forfeited Accounts
Forfeited nonvested accounts are used by the Company to reduce future
employer contributions. During 1997, employer contributions were reduced
by $19,072 from forfeited nonvested accounts. During 1998, forfeited
nonvested accounts totaled $58,623 which will be used to offset future
employer contributions.
8
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
(h) Administrative Expenses
Certain administrative expenses of the Plan are paid by US Airways.
2. Summary of Accounting Policies
(a) Basis of Accounting
The financial statements of the Plan are prepared under the accrual
method of accounting.
(b) Investment Valuation and Income Recognition
The assets of the US Airways Common Stock Fund, Capital Growth Mix
Portfolio, Moderation Mix Portfolio, Income Mix Portfolio, and Fixed
Income Fund are commingled with certain assets of other defined
contribution plans sponsored by US Airways. The Plan's Recordkeeper
separately identifies the assets of each plan participant who has an
interest in the commingled funds.
Fair values for assets were determined by quoted market values, when
available. The Plan presents in its statement of changes in net assets
the net appreciation (depreciation) in the fair value of its investments,
which consists of the realized gains or losses and unrealized
appreciation (depreciation) on those investments. The Plan's investments
in guaranteed investment contracts (GICs) are stated at contract value
(See Note 4). Purchases and sales of investments are recorded on a
trade-date basis. Interest and dividend income are recorded on the
accrual basis.
The value of a participant's investment in the US Airways Common Stock
Fund is represented by units credited to the participant's account. The
unit values were determined by the trustee. The units and unit values
(rounded to the nearest whole unit and cent) of the US Airways Common
Stock Fund as of the close of each quarter during 1998 and 1997 were as
follows:
1998 Number of Units Unit Value
- ----------- --------------- ----------
March 31 682,036 $ 106.88
June 30 731,108 114.27
September 30 777,140 73.68
December 31 786,262 75.60
(table continued on next page)
9
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
1997 Number of Units Unit Value
- ----------- --------------- ----------
March 31 585,078 $ 38.44
June 30 583,149 52.69
September 30 664,790 61.08
December 31 708,341 90.59
(c) Payment of Benefits
Benefits are recorded as deductions when paid.
(d) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results may differ from those
estimates.
(this space intentionally left blank)
10
<TABLE>
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
3. Investment Activity
The following table represents the investment funds' and participant loans' activities for the years ended
December 31, 1998 and 1997:
<CAPTION>
Fidelity
Retirement Fidelity Fidelity Fidelity
Fixed Government Fidelity Intermediate Equity Spartan U.S.
Income Money Market Magellan Bond Income Equity Index
Fund 1) Portfolio 1) Fund 1) Fund 1) Fund 1) Portfolio 1)
---------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $20,064,169* $19,048,082* $121,586,246* $18,242,617* $56,562,899* $27,479,868*
Investment income 1,294,848 1,132,554 10,273,683 1,214,058 4,514,591 1,002,792
Net appreciation (depreciation) in
fair value (38,836) 32,000 22,620,342 179,489 14,301,319 9,803,411
Interest income on participant loans - - - - - -
Contributions 2,786,838 5,227,097 22,589,568 3,346,181 10,513,108 6,486,548
Net exchanges between investment funds (1,524,595) (2,359,840) (12,258,152) (2,819,789) 707,053 4,453,076
Administrative expenses (20,259) (3,082) (33,919) (466) (2,384) (452)
Benefits paid to participants (838,855) (859,763) (3,734,751) (448,573) (1,796,604) (1,066,380)
Transfers from (to) other plans (3,015) 18,902 (1,932) (888) (8,984) (741)
---------- ---------- ----------- ---------- ---------- ----------
Net Change in Investment Funds 1,656,126 3,187,868 39,454,839 1,470,012 28,228,099 20,678,254
---------- ---------- ----------- ---------- ---------- ----------
Balance at December 31, 1997 $21,720,295 $22,235,950 $161,041,085* $19,712,629 $84,790,998* $48,158,122*
Investment income 1,385,995 1,449,778 10,679,980 1,213,706 5,455,252 1,353,064
Net appreciation (depreciation) in
fair value (12,880) 30,529 46,083,001 206,305 4,970,712 13,792,165
Interest income on participant loans - - - - - -
Contributions 2,966,216 9,302,550 28,512,286 3,532,987 13,099,635 9,419,826
Net exchanges between investment funds (217,940) 127,470 (3,323,395) (23,854,695) (6,558,184) 3,510,206
Administrative expenses (23,642) (4,276) (42,596) (593) (3,181) (671)
Benefits paid to participants (1,546,233) (2,609,011) (7,879,819) (805,683) (4,225,484) (2,588,989)
Transfers from (to) other plans (6,600) 198,952 (104,577) (4,656) (51,906) (11,338)
---------- ---------- ----------- ---------- ---------- ----------
Net Change in Investment Funds 2,544,916 8,495,992 73,924,880 (19,712,629) 12,686,844 25,474,263
---------- ---------- ----------- ---------- ---------- ----------
Balance at December 31, 1998 $24,265,211 $30,731,942 $234,965,965* $ - $97,477,842* $73,632,385*
========== ========== =========== ========== ========== ==========
* Investment balance represents greater than five percent of ending net assets available for plan benefits.
1) Party in interest. (table continued on next page)
11
</TABLE>
<TABLE>
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
<CAPTION>
US Airways Neuberger
Capital Moderation Common & Berman Income Putnam
Growth Mix Mix Stock Guardian Mix International
Portfolio 1) Portfolio 1) Fund 1) Trust Portfolio 1) Growth A Fund
---------- --------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $11,950,090 $3,863,640 $23,008,375* $ 3,228,231 $ 666,200 $ -
Investment income - - - 755,032 - -
Net appreciation (depreciation) in
fair value 2,622,429 1,038,795 35,237,380 34,838 86,505 -
Interest income on participant loans - - - - - -
Contributions 4,261,001 1,602,417 1,983,393 1,935,901 220,179 -
Net exchanges between investment funds (266,255) 560,117 4,384,874 4,377,763 7,028 -
Administrative expenses (4,556) (1,018) (13,451) (6,740) (353) -
Benefits paid to participants (320,369) (215,461) (430,183) (127,214) (31,787) -
Transfers from (to) other plans 966 - (1,760) (69) - -
---------- --------- ---------- ---------- --------- -----------
Net Change in Investment Funds 6,293,216 2,984,850 41,160,253 6,969,511 281,572 -
---------- --------- ---------- ---------- --------- -----------
Balance at December 31, 1997 $18,243,306 $6,848,490 $64,168,628* $10,197,742 $ 947,772 $ -
Investment income - - - 891,918 - 12,326
Net appreciation (depreciation) in
fair value 4,544,261 1,265,550 (10,694,554) (822,393) 111,574 31,147
Interest income on participant loans - - - - - -
Contributions 5,286,673 1,892,297 3,276,314 2,835,080 257,614 23,670
Net exchanges between investment funds (1,335,193) 124,752 4,192,150 (2,622,146) 228,703 463,296
Administrative expenses (6,194) (1,625) (24,784) (11,784) (380) -
Benefits paid to participants (981,143) (655,522) (1,462,931) (361,750) (116,596) (2,942)
Transfers from (to) other plans (5,343) - (13,441) (956) - -
---------- --------- ---------- ---------- --------- ----------
Net Change in Investment Funds 7,503,061 2,625,452 (4,727,246) (92,031) 480,915 527,497
---------- --------- ---------- ---------- --------- ----------
Balance at December 31, 1998 $25,746,367 $9,473,942 $59,441,382* $10,105,711 $1,428,687 $ 527,497
========== ========= ========== ========== ========= ==========
* Investment balance represents greater than five percent of ending net assets available for plan benefits.
1) Party in interest.
(table continued on next page)
12
</TABLE>
<TABLE>
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
<CAPTION>
MAS T. Rowe
Domestic Fixed Price
Income Portfolio Small Cap Participant
Institutional Stock Fund Loans Other TOTAL
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ - $ - $12,476,007 $ 5,939,895 $324,116,319
Investment income - - - - 20,187,558
Net appreciation (depreciation) in
fair value - - - - 85,917,672
Interest income on participant loans - - 1,252,231 - 1,252,231
Contributions - - - 19,197,607 80,149,838
Net exchanges between investment funds - - 4,738,720 - -
Administrative expenses - - - (7,914) (94,594)
Benefits paid to participants - - (489,435) - (10,359,375)
Transfers from (to) other plans - - - - 2,479
---------- ---------- ----------- ----------- -----------
Net Change in Investment Funds - - 5,501,516 19,189,693 177,055,809
---------- ---------- ----------- ----------- -----------
Balance at December 31, 1997 $ - $ - $17,977,523 $25,129,588 $501,172,128
Investment income 603,917 28,941 - - 23,074,877
Net appreciation (depreciation) in
fair value (553,740) 77,085 - - 59,028,762
Interest income on participant loans - - 1,812,876 - 1,812,876
Contributions 206,040 34,505 - 8,545,558 89,191,251
Net exchanges between investment funds 23,244,992 965,848 5,054,136 - -
Administrative expenses - - - 676 (119,050)
Benefits paid to participants (204,684) (5,866) (937,372) - (24,384,025)
Transfers from (to) other plans - - - - 135
---------- ---------- ----------- ---------- -----------
Net Change in Investment Funds 23,296,525 1,100,513 5,929,640 8,546,234 148,604,826
---------- ---------- ----------- ---------- -----------
Balance at December 31, 1998 $23,296,525 $1,100,513* $23,907,163 $33,675,822 $649,776,954
========== ========== =========== ========== ===========
* Investment balance represents greater than five percent of ending net assets available for plan benefits.
1) Party in interest.
13
</TABLE>
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
4. Investment Contracts with Insurance Companies
The Plan had an interest in a portfolio of GICs with certain insurance
companies of $24,265,211 and $21,720,295 at December 31, 1998 and 1997,
respectively. The GICs are benefit responsive because they provide
reasonable access by Plan participants to invested funds. Therefore, in
accordance with the American Institute of Certified Public Accountant's
Statement of Position 94-4, "Application of Fair Value and Contract Value
Reporting for Defined Contribution Plan Investments," the interest in
these contracts is disclosed in the financial statements at contract
value which equals contributions made, plus accrued interest at the
specified rate, less plan withdrawals and administrative expenses. The
portfolio's contract value at December 31, 1998 and 1997 was $90,475,438
and $85,983,442, respectively. The average portfolio crediting interest
rate was approximately 5.9% and 6.0% at December 31, 1998 and 1997,
respectively. The portfolio average yield was approximately 6.2% and
6.1% for the years ended December 31, 1998 and 1997, respectively.
For GICs with variable rates (approximately 64% of the portfolio, as
measured by contract values), crediting rates are reset either quarterly
or bi-annually. Crediting rates are determined based upon the yields to
maturity of the underlying assets, net of certain origination fees.
No valuation reserves were recognized related to the portfolio as all
insurance companies in the portfolio had received an investment grade
rating from nationally recognized rating agencies as of December 31, 1998
and 1997. The fair value of the portfolio was $90,895,034 and
$85,243,181 at December 31, 1998 and 1997, respectively.
5. Related Party Transactions
Certain Plan investments are shares of mutual funds managed by Fidelity
Management Trust Company. Fidelity Management Trust Company is the
trustee as defined by the Plan and, therefore, these transactions qualify
as party-in-interest.
6. Plan Termination
Although it has not expressed any intent to do so, the Company reserves
the right to terminate the Plan at any time subject to the provisions of
ERISA and applicable collective bargaining agreements. Upon termination
of the Plan, participants will become 100 percent vested in their
accounts. In addition the following actions shall be taken for the
benefit of participants:
14
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
(a) As of the termination date, each investment fund shall be valued.
In determining the net worth of the investment funds there shall be
included as a liability such amounts as shall be necessary to pay
all expenses in connection with the termination of the investment
funds and the liquidation and distribution of the property of the
funds, as well as other expenses, whether or not accrued, and shall
include as an asset all accrued income.
(b) All participant accounts must be disposed of in the forms of payment
available under the Plan, unless the participant's spouse consents
to another form of distribution.
7. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for plan
benefits per the financial statements to the Form 5500:
December 31,
-------------------
1998 1997
---- ----
Net assets available for plan
benefits per the financial
statements $649,776,954 $501,172,128
Amounts allocated to withdrawing
participants (119,498) (229,144)
----------- -----------
Net assets available for plan
benefits per the Form 5500 $649,657,456 $500,942,984
=========== ===========
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500:
Year Ended
December 31, 1998
-----------------
Benefits paid to participants per the
financial statements $24,384,025
Add: Amounts allocated to withdrawing
participants at December 31, 1998 119,498
Less: Amounts allocated to withdrawing
participants at December 31, 1997 (229,144)
----------
Benefits paid to participants per the
Form 5500 $24,274,379
==========
15
US Airways, Inc.
Employee Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for payment
prior to December 31 but not yet paid as of that date.
8. Tax Status
The Internal Revenue Service has determined and informed the Company by a
letter dated July 22, 1995, that the Plan and related trust are designed
in accordance with applicablesections of the IRC. The Plan has been
amended since receiving the determination letter. However, the Plan
administrator and the Plan's legal counsel believe that the Plan is
designed and is currently being operated in compliance with the
applicable requirements of the IRC.
9. Transfers from the US Airways, Inc. 401(k) Savings Plan and the US
Airways, Inc. Employee Pension Plan represent:
(a) corrections of insignificant recordkeeping errors, and
(b) changes in participants' class or craft, thereby changing the
plan for which they are qualified to participate.
(this space intentionally left blank)
16
<TABLE> Supplemental
Schedule I
US Airways, Inc. Page 1 of 2
Employee Savings Plan
Item 27a - Schedule of Assets Held for Investment Purposes
----------------------------------------------------------
December 31, 1998
<CAPTION>
Identity Description Current
of Issue of Investment Cost Value
-------- ------------- ---- -------
<S> <C> <C> <C>
Fidelity Magellan Fund* Shares in registered $ 164,950,866 $ 234,965,965
investment company
Fidelity Equity Shares in registered 73,216,942 97,477,842
Income Fund* investment company
US Airways Common Stock Fund* Common stock of employer's 47,324,116 59,441,382
parent company, US Airways
Group, Inc., and short-
term investments
Fidelity Spartan U.S. Equity Shares in registered 47,549,236 73,632,385
Index Portfolio* investment company
Fidelity Retirement Shares in money 30,731,942 30,731,942
Government Money market fund
Market Portfolio*
Capital Growth Mix Shares in registered 18,562,228 25,746,367
Portfolio* investment companies
Neuberger & Berman Shares in registered 10,904,307 10,105,711
Guardian Trust investment company
(table continued on next page)
* Party in interest.
17
</TABLE>
<TABLE>
Supplemental Schedule I
US Airways, Inc. Page 2 of 2
Employee Savings Plan
Item 27a - Assets Held for Investment Purposes
----------------------------------------------
(Continued)
December 31, 1998
<CAPTION>
Identity Description Current
of Issue of Investment Cost Value
-------- ------------- ---- -------
<S> <C> <C> <C>
Moderation Mix Portfolio* Shares in registered 7,258,111 9,473,942
investment companies
Income Mix Portfolio* Shares in registered 1,278,735 1,428,687
investment companies
Participant Loans Interest rates range - 23,907,163
from 7% to 9.5%
per annum
Fixed Income Fund* Guaranteed Investment 24,265,211 24,265,211
Contracts, interest rates
range from 5.27% to 8.07%
per annum
Putnam International Shares in registered 495,856 527,497
Growth A Fund investment companies
MAS Domestic Fixed Income US Government securities 23,841,687 23,296,525
Portfolio Institutional and US investment grade
fixed income securities
T. Rowe Price Small Cap Shares in registered 1,032,534 1,100,513
Stock Fund investment companies
----------- -----------
Total Investments $ 451,411,771 $ 616,101,132
=========== ===========
* Party in interest.
See accompanying Independent Auditors' Report.
18
</TABLE>
<TABLE>
Supplemental Schedule II
US Airways, Inc.
Employee Savings Plan
Item 27d - Schedule of Reportable Transactions
----------------------------------------------
Year Ended December 31, 1998
Aggregate transactions during the year ended December 31, 1998, with securities of the same issue,
accounting for greater than five percent of the value of Plan assets at the beginning of the period
were as follows:
<CAPTION>
Total Number of Total Number Realized
Purchases Purchases Sales of Sales Gain(Loss)
--------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Fidelity Magellan Fund* $64,634,020 252 $36,815,087 252 $5,057,684
Fidelity Equity 27,761,016 252 20,045,868 252 3,508,215
Income Fund*
Fidelity Spartan U.S. 29,428,461 252 17,757,959 251 2,610,903
Equity Index Portfolio*
US Airways Common Stock 40,963,435 252 34,974,824 252 8,298,595
Fund*
Fidelity Retirement 29,615,227 256 21,119,235 252 -
Government Money
Market Portfolio*
Fixed Income Fund* 24,771,353 256 22,226,437 249 -
Fidelity Intermediate Bond 8,787,586 236 28,710,241 230 137,218
Fund*
MAS Domestic Fixed Income 24,587,196 51 736,931 27 (8,578)
Portfolio Institutional
* Party in interest.
See accompanying Independent Auditors' Report.
19
</TABLE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
US Airways, Inc.
Employee Savings Plan
By: /s/ Anita P. Beier
----------------------
Anita P. Beier
Controller
US Airways Group, Inc.
June 25, 1999
20
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
US Airways Group, Inc.:
We consent to incorporation by reference in the registration statement (No.
33-44835) on Form S-8 of US Airways Group, Inc. of our report dated June 11,
1999, relating to the statements of net assets available for plan benefits of
the US Airways, Inc. Employee Savings Plan as of December 31, 1998 and 1997,
and the related statements of changes in net assets available for plan
benefits for the years then ended, which report appears in the December 31,
1998 annual report on Form 11-K of the US Airways, Inc. Employee Savings
Plan.
KPMG LLP
Washington, D.C.
June 25, 1999
21
