FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported)
January 20, 1999
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)
Item 5. Other Events
On January 20, 1999, US Airways Group, Inc. (US Airways Group
or the "Company") and US Airways, Inc. (US Airways) issued a news
release disclosing the results of operations for both companies
for the three months and year ended December 31, 1998, and
selected operating and financial statistics for US Airways for the
same periods (see Exhibit 99 to this report).
Rakesh Gangwal, Chief Executive Officer and President of both
US Airways Group and US Airways, Lawrence M. Nagin, Executive Vice
President, Corporate Affairs and General Counsel of both
companies, Thomas A. Mutryn, Senior Vice President of Finance and
Chief Financial Officer of both companies and N. Bruce Ashby,
Senior Vice President of Planning for US Airways, spoke with
industry analysts on a conference call following the news release.
During the call, additional information related to the
Company's purchases of its common stock was provided. In 1998, the
Company purchased 17.9 million shares for approximately $1.1
billion, including 4.1 million shares for approximately $209.7
million in the fourth quarter. After completing three common stock
purchase programs earlier in the year, the Company announced a
fourth program for the purchase of $500 million of common stock on
November 23, 1998. As of December 31, 1998, the Company had
purchased $178.4 million shares under this program.
Also disclosed during the call, US Airways' capacity
(available seat miles or 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%. In addition, it was
stated on the call that there is a real possibility that US
Airways' unit revenue (revenue per ASM) for 1999 will decline more
than its unit cost (cost per ASM), and that earnings estimates
should be considered in that regard. In addition to the delivery
of six A319 aircraft in 1998, US Airways expects to take delivery
of 33 Airbus aircraft in 1999, including 22 A319 and 11 A320s. The
Company plans to retire 24 older aircraft during 1999.
Certain of the information discussed on the conference call
should be considered "forward-looking information" which is
subject to a number of risks and uncertainties. The preparation of
forward-looking information requires the use of estimates of
future revenues, expenses, activity levels and economic and market
conditions, many of which are outside of the Company's control.
Specific factors that could cause actual results to differ
materially from those set forth in the forward-looking information
include: economic conditions, labor costs, aviation fuel costs,
competitive pressures on pricing-particularly from lower-cost
competitors, weather conditions, government legislation, consumer
perceptions of the Company's products, demand for air
transportation in the markets in which the Company operates and
other risks and uncertainties listed from time to time in the
Company's reports to the United States Securities and Exchange
Commission. 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.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Designation Description
- ----------- -----------
99 News release dated January 20, 1999 of US Airways
Group, Inc. and US Airways, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned hereunto duly authorized.
US Airways Group, Inc. (REGISTRANT)
Date: January 21, 1999 By: /s/ Thomas A. Mutryn
---------------------------------
Thomas A. Mutryn
Senior Vice President, Finance
Chief Financial Officer
US Airways, Inc. (REGISTRANT)
Date: January 21, 1999 By: /s/ Thomas A. Mutryn
---------------------------------
Thomas A. Mutryn
Senior Vice President, Finance
Chief Financial Officer
Exhibit 99
US AIRWAYS GROUP 1998 NET INCOME IS $538 MILLION
ARLINGTON, Va. January 20, 1999 - US Airways Group, Inc.
today reported net income of $538 million and operating income of
$1.0 billion for 1998 on revenues of $8.7 billion. On a per share
basis, the profit for the year was $5.60.
Excluding nonrecurring and unusual items, net income was
down 15.8 percent, while the 1998 operating profit increased 20.9
percent over comparable results for 1997. Revenues were up by 2.0
percent. Profit per common share was down by 9.5 percent from
1997, reflecting the company's changed tax status.
With US Airways' return to profitability, the company's
effective tax rate in 1998 was 40.3% compared to 15.8% in 1997.
For 1998, the operating margin, excluding nonrecurring and
unusual items, was 11.6 percent, a 1.8 percentage point increase
over the prior year, while the net margin of 6.2 percent was 1.3
percentage points lower, again excluding nonrecurring and unusual
items and reflecting the changed tax status. The pre-tax margin
increased 1.6 percentage points.
"At the beginning of 1998, we stated that this will be the
most important year in the history of the company. During this
year a comprehensive, fundamental platform for improved market
position was established, and the professionalism and team spirit
of our employees are reflected in these results and other
accomplishments of 1998," said US Airways President and CEO
Rakesh Gangwal.
"US Airways' journey to excellence made considerable
progress in 1998, progress that is reflected in the results we
report today. Our employees, and our shareholders, can take pride
in the vast improvements that already have occurred, and others
that are in the offing for 1999," US Airways Chairman Stephen M.
Wolf said.
Among the year's accomplishments were:
* The establishment and substantial growth of MetroJet, US
Airways' low-cost competitive response.
-more-
US AIRWAYS GROUP 1998 NET INCOME IS $538 MILLION
Page Two
January 20, 1999
* The successful introduction of Airbus A320-family
aircraft into the fleet.
* The transition to computer technologies of The SABRE
Group, the largest such computer transition in aviation
history and one of the largest accomplished by any
company.
* The addition of new transatlantic routes between
Philadelphia and both London and Amsterdam and between
Pittsburgh and Paris.
* The introduction of regional jet service.
* The establishment of a marketing relationship with
American Airlines.
* The retirement of $434 million in higher-cost debt and
redemption of $358 million in preferred stock which had
been converted to common stock, saving $56 million in
interest and dividend payments for 1999 and leading to
upgrades from ratings agencies.
* The repurchasing of 17.9 million shares of stock. A
fourth stock buyback program was initiated during the
fourth quarter of the year.
For the fourth quarter, US Airways Group's operating income
was $178 million and net income was $104 million, or $1.18 per
diluted share. Adjusted for $125 million in unusual charges and a
tax credit of $467 million in the fourth quarter of 1997,
operating income for 1998 fell 8.7 percent and net income 24.6
percent, reflecting the company's changed tax status.
Unit costs for the year were unchanged. After adjusting for
lower fuel costs in 1998, unit costs were up 2.6 percent. For the
fourth quarter, unit costs were down by 3.6 percent over the
fourth quarter of 1997, or 1.1 percent after adjusting for lower
fuel costs. Fourth quarter unit cost results reflect, in part,
the growing impact of the airline's lower-cost MetroJet
operation.
-more-
US AIRWAYS GROUP 1998 NET INCOME IS $538 MILLION
Page Three
January 20, 1999
Traffic patterns for 1998 reflect the airline's return to
growth in the fourth quarter after several years of shrinkage.
For full-year 1998, available seat miles declined 2.8 percent and
revenue passenger miles 0.9 percent as compared to 1997, while
the load factor increased 1.4 percentage points to a company-
record 72.7 percent. Passenger unit revenue for the year was
12.38 cents per available seat mile, an increase of 1.5 percent
as compared to 1997. The number of revenue passengers declined
1.1 percent to 58.0 million. The cost of aviation fuel per
gallon, excluding taxes, was 45.95 cents, down 25.0 percent.
For the fourth quarter, available seat miles increased 2.9
percent over the fourth quarter of 1997 while revenue passenger
miles increased 2.0 percent. The passenger load factor of 69.1
percent was down by 0.6 percentage points. Passenger unit revenue
for the quarter was 11.68 cents, a decrease of 5.5 percent as
compared to the fourth quarter of 1997. The number of revenue
passengers in the quarter increased 0.2 percent to 14.2 million.
The cost of aviation fuel per gallon, excluding taxes, was 43.23
cents, down 26.8 percent from the fourth quarter of 1997.
In 1998, there was only one nonrecurring item, a $3 million
rent expense credit related to US Airways' nonoperating BAe-146
aircraft dispositions in the third quarter. In 1997, there were a
number of items, however. In the fourth quarter, there were
charges totaling $125 million comprised of $115 million for a
pilot early retirement program and $10 million for a lease write-
down. In addition, there was a $467 million credit for tax
benefits the company expected to realize in the future. For the
first nine months of 1997, there were charges totaling $120
million associated with various asset write-downs, $7 million for
employee severance and a pre-tax gain of $180 million associated
with the sales of US Airways' stake in Apollo Travel Services and
a portion of US Airways' interest in Galileo.
-30-
NUMBER: 3567
US Airways Group, Inc. NEWS RELEASE
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in millions, except per share amounts)
Three Months Ended December 31,
1998(Note 1) 1997 % Change
------ ------ --------
Operating Revenues
Passenger transportation $1,902 $1,886 0.8
Cargo and freight 43 46 (6.5)
Other 176 153 15.0
----- -----
Total Operating Revenues 2,121 2,085 1.7
Operating Expenses
Personnel costs 793 757 4.8
Early retirement program -- 115 (100.0)
Aviation fuel 148 188 (21.3)
Commissions 125 134 (6.7)
Aircraft rent 111 115 (3.5)
Other rent and landing fees 109 105 3.8
Aircraft maintenance 110 123 (10.6)
Depreciation and amortization 82 74 10.8
Other 465 404 15.1
----- -----
Total Operating Expenses 1,943 2,015 (3.6)
----- -----
Operating Income 178 70 154.3
Other Income (Expense)
Interest income 24 33 (27.3)
Interest expense (49) (63) (22.2)
Interest capitalized 11 4 175.0
Equity in earnings of
affiliates -- -- --
Gains on sales of
interests in affiliates -- -- --
Other, net 10 (1) (1,100.0)
----- -----
Other Income (Expense), Net (4) (27) (85.2)
----- -----
Income Before Taxes 174 43 304.7
Provision (Credit) for
Income Taxes 70 (436) (116.1)
----- -----
Net Income 104 479 (78.3)
Preferred Dividend Requirement -- (8) (100.0)
----- -----
Earnings Applicable to
Common Stockholders $ 104 $ 471 (77.9)
===== =====
Earnings per Common Share
Basic $ 1.20 $ 5.16 (76.7)
Diluted $ 1.18 $ 4.66 (74.7)
Shares Used for Computation (000)
Basic 86,430 91,356
Diluted 87,987 102,979
Note 1. Results for 1998 include the results of Shuttle, Inc.,
which was acquired on December 30, 1997.
US Airways Group, Inc. NEWS RELEASE
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in millions, except per share amounts)
Twelve Months Ended December 31,
1998(Note 1) 1997 % Change
------ ------ --------
Operating Revenues
Passenger transportation $7,826 $7,712 1.5
Cargo and freight 168 181 (7.2)
Other 694 621 11.8
----- -----
Total Operating Revenues 8,688 8,514 2.0
Operating Expenses
Personnel costs 3,101 3,064 1.2
Early retirement program -- 115 (100.0)
Aviation fuel 623 805 (22.6)
Commissions 519 595 (12.8)
Aircraft rent 440 475 (7.4)
Other rent and landing fees 417 420 (0.7)
Aircraft maintenance 448 451 (0.7)
Depreciation and amortization 318 401 (20.7)
Other 1,808 1,604 12.7
----- -----
Total Operating Expenses 7,674 7,930 (3.2)
----- -----
Operating Income 1,014 584 73.6
Other Income (Expense)
Interest income 111 108 2.8
Interest expense (223) (256) (12.9)
Interest capitalized 3 13 (76.9)
Equity in earnings of
affiliates 1 30 (96.7)
Gains on sales of
interests in affiliates -- 180 (100.0)
Other, net (4) 13 (130.8)
----- -----
Other Income (Expense), Net (112) 88 (227.3)
----- -----
Income Before Taxes 902 672 34.2
Provision (Credit) for
Income Taxes 364 (353) (203.1)
----- -----
Net Income 538 1,025 (47.5)
Preferred Dividend Requirement (6) (64) (90.6)
----- -----
Earnings Applicable to
Common Stockholders $ 532 $ 961 (44.6)
===== =====
Earnings per Common Share
Basic $ 5.75 $12.32 (53.3)
Diluted $ 5.60 $ 9.87 (43.3)
Shares Used for Computation (000)
Basic 92,413 78,054
Diluted 96,211 103,180
Note 1. Results for 1998 include the results of Shuttle, Inc.,
which was acquired on December 30, 1997.
US Airways, Inc. NEWS RELEASE
(A Wholly-Owned Subsidiary of US Airways Group, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions)
Three Months Ended December 31,
1998 1997 % Change
--------- --------- --------
Operating Revenues
Passenger transportation $ 1,690 $ 1,735 (2.6)
US Airways Express
transportation revenues 191 152 25.7
Cargo and freight 43 45 (4.4)
Other 163 155 5.2
--------- ---------
Total Operating Revenues 2,087 2,087 --
Operating Expenses
Personnel costs 735 714 2.9
Early retirement program -- 115 (100.0)
Aviation fuel 137 177 (22.6)
Commissions 113 125 (9.6)
Aircraft rent 95 101 (5.9)
Other rent and landing fees 100 100 --
Aircraft maintenance 87 108 (19.4)
Depreciation and amortization 75 70 7.1
US Airways Express capacity
purchases 147 121 21.5
Other 427 388 10.1
--------- ---------
Total Operating Expenses 1,916 2,019 (5.1)
--------- ---------
Operating Income 171 68 151.5
Other Income (Expense)
Interest income 52 35 48.6
Interest expense (49) (63) (22.2)
Interest capitalized 6 3 100.0
Equity in earnings of
affiliates -- -- --
Gains on sales of interests
in affiliates -- -- --
Other, net 10 (1) (1,100.0)
--------- ---------
Other Income (Expense), Net 19 (26) (173.1)
--------- ---------
Income Before Taxes 190 42 352.4
Provision (Credit) for
Income Taxes 76 (478) (115.9)
--------- ---------
Net Income $ 114 $ 520 (78.1)
========= =========
US Airways, Inc. NEWS RELEASE
(A Wholly-Owned Subsidiary of US Airways Group, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions)
Twelve Months Ended December 31,
1998 1997 % Change
--------- --------- --------
Operating Revenues
Passenger transportation $ 7,021 $ 7,112 (1.3)
US Airways Express
transportation revenues 711 605 17.5
Cargo and freight 164 177 (7.3)
Other 660 607 8.7
--------- ---------
Total Operating Revenues 8,556 8,501 0.6
Operating Expenses
Personnel costs 2,888 2,897 (0.3)
Early retirement program -- 115 (100.0)
Aviation fuel 575 761 (24.4)
Commissions 474 554 (14.4)
Aircraft rent 381 416 (8.4)
Other rent and landing fees 381 402 (5.2)
Aircraft maintenance 357 387 (7.8)
Depreciation and amortization 290 385 (24.7)
US Airways Express capacity
purchases 550 486 13.2
Other 1,670 1,512 10.4
--------- ---------
Total Operating Expenses 7,566 7,915 (4.4)
--------- ---------
Operating Income 990 586 68.9
Other Income (Expense)
Interest income 182 112 62.5
Interest expense (224) (260) (13.8)
Interest capitalized (10) 12 (183.3)
Equity in earnings of
affiliates 1 30 (96.7)
Gains on sales of interests
in affiliates -- 180 (100.0)
Other, net (3) 13 (123.1)
--------- ---------
Other Income (Expense), Net (54) 87 (162.1)
--------- ---------
Income Before Taxes 936 673 39.1
Provision (Credit) for
Income Taxes 377 (379) (199.5)
--------- ---------
Net Income $ 559 $ 1,052 (46.9)
========= =========
US Airways, Inc. NEWS RELEASE
(A Wholly-Owned Subsidiary of US Airways Group, Inc.)
SELECTED AIRLINE OPERATING AND FINANCIAL STATISTICS (Note 1)
(unaudited)
Three Months Ended December 31,
1998 1997 % Change
------- ------- --------
Revenue passengers (thousands)* 14,202 14,178 0.2
Total revenue passenger miles
(millions) 10,012 9,818 2.0
Revenue passenger miles
(millions)* 9,991 9,786 2.1
Total available seat miles
(millions) 14,490 14,082 2.9
Available seat miles(millions)* 14,463 14,040 3.0
Passenger load factor* 69.1% 69.7% (0.6)pts.
Break-even load factor (Note 2) 63.9% 65.3% (1.4)pts.
Yield* 16.91c 17.73c (4.6)
Passenger revenue per available
seat mile* 11.68c 12.36c (5.5)
Revenue per available seat mile
(Note 2) 13.08c 13.74c (4.8)
Cost per available seat mile
(Note 2) 12.20c 12.66c (3.6)
Average passenger journey (miles)* 703 690 1.9
Average stage length (miles)* 603 588 2.6
Revenue aircraft miles (millions)* 107 105 1.9
Cost of aviation fuel per gallon 48.79c 65.16c (25.1)
Cost of aviation fuel per gallon
(excluding fuel taxes) 43.23c 59.08c (26.8)
Gallons of aviation fuel consumed
(millions) 281 272 3.3
Number of aircraft in operating
fleet at period-end 376 376 --
Full-time equivalent employees at
period-end 38,210 38,533 (0.8)
* Scheduled service only (excludes charter service).
c cents
Note 1. Includes US Airways "mainline" operations as well as
the operations of its low-cost product, MetroJet.
Note 2. Financial statistics exclude "nonrecurring items"
and the revenues and expenses generated under
capacity purchase arrangements US Airways has with
certain US Airways Express air carriers.
US Airways, Inc. NEWS RELEASE
(A Wholly-Owned Subsidiary of US Airways Group, Inc.)
SELECTED AIRLINE OPERATING AND FINANCIAL STATISTICS (Note 1)
(unaudited)
Twelve Months Ended December 31,
1998 1997 % Change
------- ------- --------
Revenue passengers (thousands)* 57,990 58,659 (1.1)
Total revenue passenger miles
(millions) 41,370 41,749 (0.9)
Revenue passenger miles
(millions)* 41,253 41,579 (0.8)
Total available seat miles
(millions) 56,861 58,500 (2.8)
Available seat miles(millions)* 56,723 58,294 (2.7)
Passenger load factor* 72.7% 71.3% 1.4 pts.
Break-even load factor (Note 2) 65.7% 66.4% (0.7)pts.
Yield* 17.02c 17.10c (0.5)
Passenger revenue per available
seat mile* 12.38c 12.20c 1.5
Revenue per available seat mile
(Note 2) 13.80c 13.50c 2.2
Cost per available seat mile
(Note 2) 12.34c 12.33c 0.1
Average passenger journey (miles)* 711 709 0.3
Average stage length (miles)* 597 591 1.0
Revenue aircraft miles (millions)* 422 435 (3.0)
Cost of aviation fuel per gallon 51.83c 67.43c (23.1)
Cost of aviation fuel per gallon
(excluding fuel taxes) 45.95c 61.26c (25.0)
Gallons of aviation fuel consumed
(millions) 1,109 1,129 (1.8)
Number of aircraft in operating
fleet at period-end 376 376 --
Full-time equivalent employees at
period-end 38,210 38,533 (0.8)
* Scheduled service only (excludes charter service).
c cents
Note 1. Includes US Airways "mainline" operations as well as
the operations of its low-cost product, MetroJet.
Note 2. Financial statistics exclude "nonrecurring items"
and the revenues and expenses generated under
capacity purchase arrangements US Airways has with
certain US Airways Express air carriers.
