<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
US AIRWAYS GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
US Airways Group, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 17, 2000
Arlington, Virginia
----------------
April 14, 2000
To the Stockholders of
US Airways Group, Inc.
The 2000 annual meeting of stockholders of US Airways Group, Inc. (the
"Company") will be held at the Marriott Crystal Forum, 1999 Jefferson Davis
Highway, Arlington, Virginia on May 17, 2000 at 9:30 a.m. local time, to
consider and act on the following matters:
1. The election of 12 directors to hold office for one year or until
their successors are elected and qualified (Item No. 1).
2. Ratification of the selection of auditors of the Company for fiscal
year 2000 (Item No. 2).
3. Approval of an amendment of the 1996 Stock Incentive Plan of the
Company to make available for grant an additional 3,000,000 shares
of Common Stock (Item No. 3).
4. Consideration of two stockholder proposals as described in the
accompanying Proxy Statement (Item Nos. 4 and 5).
5. The transaction of such other business as may properly come before
the meeting.
Eligible stockholders of record at the close of business on March 24, 2000
will be entitled to vote at the meeting. A list of stockholders entitled to
vote at the meeting may be examined at the executive offices of the Company at
2345 Crystal Drive, Arlington, Virginia.
By Order of the Board of Directors
Jennifer C. McGarey
Secretary
If you do not expect to attend the meeting in person, please sign and date
the accompanying proxy and return it promptly in the enclosed envelope, which
requires no postage if mailed in the United States.
<PAGE>
US Airways Group, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2000
----------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board of Directors") of US Airways Group, Inc. (the
"Company") of proxies to be voted at the annual meeting of stockholders in
Arlington, Virginia on May 17, 2000. Enclosed with this Proxy Statement is a
notice of the meeting, together with a proxy for your signature if you are
unable to attend. Stockholders who execute proxies may revoke them at any time
before they are voted. Any proxy may be revoked by the person giving it any
time before it is voted by delivering to the Secretary of the Company at 2345
Crystal Drive, Arlington, Virginia 22227, on or before the business day prior
to the meeting or at the meeting itself, a subsequent written notice of
revocation or a subsequent proxy relating to the same shares or by attending
the meeting and voting in person. The approximate date on which this Proxy
Statement and the accompanying form of proxy will first be sent to the
Company's stockholders is April 14, 2000.
Shares of the Company's common stock, par value $1.00 per share ("Common
Stock"), represented by properly executed proxies received prior to or at the
meeting, unless such proxies have been revoked, will be voted in accordance
with the instructions indicated in the proxies. If no instructions are
indicated on a properly executed proxy of the Company, the shares will be
voted in accordance with the recommendations of the Board of Directors.
Stockholders of record at the close of business on March 24, 2000 (the
"Record Date") are entitled to vote at the meeting. On March 24, 2000 the
Company had outstanding 66,612,525 shares of Common Stock. Each share of
Common Stock is entitled to one vote, except as set forth below. From time to
time, the voting power of the Common Stock may be limited by then applicable
U.S. statutory and U.S. Department of Transportation regulatory foreign
ownership restrictions ("Foreign Ownership Restrictions") the breach of which
could result in the loss of any operating certificate or authority of the
Company or certain of its subsidiaries. As of the date hereof, the Company
does not believe that Foreign Ownership Restrictions limit the voting power of
any Common Stock and the Company expects that the holders thereof will be
entitled to their full voting power at the annual meeting.
Required Votes
The vote of the holders of a plurality of the votes cast by holders of
shares of Common Stock will elect candidates for director (Item No. 1 on your
proxy). Abstentions or broker non-votes as to the election of directors will
not affect the election of the candidates receiving the plurality of votes.
The vote of the holders of at least a majority of the shares of Common Stock
present in person or represented by proxy at the meeting and entitled to vote
is required (i) to ratify the Board of Directors' appointment of KPMG LLP as
the Company's independent public accountants for 2000 (Item No. 2), (ii) to
approve an increase in the number of shares of Common Stock available under
the 1996 Stock Incentive Plan of the Company (Item No.3), (iii) to approve the
stockholder
<PAGE>
proposal regarding cumulative voting (Item No. 4), and (iv) to approve the
stockholder proposal regarding confidential voting (Item No. 5). Therefore,
abstentions as to these particular proposals will have the same effect as
votes against such proposals. With respect to Items No. 2 and No. 3, broker
non-votes will be treated as votes against the proposal. With respect to Items
No. 4, and No. 5, however, broker non-votes will be deemed shares of stock not
entitled to vote on such proposal and will not be counted as votes for or
against such proposal, and will not be included in calculating the number of
votes necessary for approval of such proposal.
BENEFICIAL SECURITY OWNERSHIP
The following information pertains to Common Stock beneficially owned by all
directors, nominees for director and executive officers of the Company (or its
principal operating subsidiary US Airways, Inc. ("US Airways")) as of January
31, 2000. Unless indicated otherwise by footnote, the owner exercises sole
voting and investment power over the securities (other than unissued
securities, the ownership of which has been imputed to such owner).
<TABLE>
<CAPTION>
Number of Percent of
Owner Shares Class(1)
----- --------- ----------
<S> <C> <C>
Directors and Nominees for Director
Mathias J. DeVito............................ 6,500(2)
Rakesh Gangwal............................... 1,467,026(3) 2.2%
Peter M. George.............................. 391
Robert L. Johnson............................ 2,251(4)
Robert LeBuhn................................ 23,412(2)(5)
John G. Medlin, Jr........................... 9,500(2)
Hanne M. Merriman............................ 6,000(2)
Thomas H. O'Brien............................ 782
Hilda Ochoa-Brillembourg..................... 14,296(6)
Richard B. Priory............................ 337
Raymond W. Smith............................. 7,258(2)
Stephen M. Wolf.............................. 2,162,265(7) 3.3%
Executive Officers
Lawrence M. Nagin............................ 335,500(8)
N. Bruce Ashby............................... 70,684(9)
Thomas A. Mutryn............................. 81,136(10)
20 directors and executive officers of the
Company as a group............................ 4,366,999(11) 6.6%
</TABLE>
- --------
(1) Percentages are shown only where they exceed one percent of the number of
shares outstanding and are based on shares of Common Stock outstanding on
January 31, 2000.
(2) These holdings include 4,500 shares of Common Stock issuable within 60
days of January 31, 2000 upon exercise of stock options.
(3) Mr. Gangwal's holdings include 412,450 shares of Common Stock which are
subject to certain restrictions ("Restricted Stock") and 875,000 shares
of Common Stock issuable within 60 days of January 31, 2000 upon exercise
of stock options.
(4) These holdings include 1,500 shares of Common stock issuable within 60
days of January 31, 2000 upon exercise of stock options.
(5) These holdings include 10,000 shares of Common stock held in trust.
(6) These holdings include 14,000 shares of Common stock held jointly by Ms.
Ochoa-Brillembourg and her spouse.
(7) Mr. Wolf's holdings include 321,121 shares of Restricted Stock and
1,485,000 shares of Common Stock issuable within 60 days of January 31,
2000 upon exercise of stock options.
(8) Mr. Nagin's holdings include 45,331 shares of Restricted Stock and
258,000 shares of Common Stock issuable within 60 days of January 31,
2000 upon exercise of stock options.
(9) Mr. Ashby's holdings include 22,500 shares of Restricted Stock and 43,000
shares of Common Stock issuable within 60 days of January 31, 2000 upon
exercise of stock options.
(10) Mr. Mutryn's holdings include 44,166 shares of Restricted Stock and
33,334 shares of Common Stock issuable within 60 days of January 31, 2000
upon exercise of stock options.
(11) All directors' and executive officers' holdings include 958,568 shares of
Restricted Stock and 2,774,034 shares of Common Stock issuable within 60
days of January 31, 2000 upon exercise of stock options.
2
<PAGE>
Set forth below are the number of options and units of phantom stock of the
Company ("Deferred Stock Units") held by each director pursuant to the
director compensation programs. See "Compensation of Directors" below.
Although each Deferred Stock Unit represents the economic equivalent of a
share of Common Stock, no voting rights are attached thereto and the Deferred
Stock Units lack certain other attributes of Common Stock.
<TABLE>
<CAPTION>
Number of Number of Director
Owner Deferred Stock Units Stock Options(1)
----- -------------------- ------------------
<S> <C> <C>
Directors
Mathias J. DeVito................ 10,069.29 6,000
Rakesh Gangwal................... -0- -0-
Peter M. George.................. 500.00 1,500
Robert L. Johnson................ 1,000.00 3,000
Robert LeBuhn.................... 9,111.38 6,000
John G. Medlin, Jr. ............. 9,185.42 6,000
Hanne M. Merriman................ 6,239.13 6,000
Thomas H. O'Brien................ 500.00 1,500
Hilda Ochoa-Brillembourg......... 500.00 1,500
Richard B. Priory................ 500.00 1,500
Raymond W. Smith................. 4,694.78 6,000
Stephen M. Wolf.................. -0- -0-
</TABLE>
- --------
(1) The holdings for each director (other than Messrs. Gangwal, George,
Johnson, O'Brien, Priory and Wolf and Ms. Ochoa-Brillembourg) include
4,500 shares of Common Stock issuable within 60 days of January 31, 2000
upon the exercise of stock options. The holdings for Mr. Johnson include
1,500 shares of Common Stock issuable within 60 days of January 31, 2000
upon the exercise of stock options. These options are also reflected in
the Beneficial Security Ownership table on page 2.
The only persons known to the Company (from Company records and reports on
Schedules 13D and 13G filed with the Securities and Exchange Commission (the
"SEC")) which owned, as of March 24, 2000, more than 5% of its Common Stock
are listed below:
<TABLE>
<CAPTION>
Percent
Name and address Amount and nature of
Title of Class of beneficial owner of beneficial ownership Class(1)
-------------- ------------------- ----------------------- --------
<C> <S> <C> <C>
Common Stock Morgan Stanley 4,249,480(2) 6.38%
Dean Witter &
Co.
1585 Broadway
New York, New
York 10036
Common Stock Tiger Management 16,512,700(3) 24.79%
LLC
Tiger
Performance LLC
101 Park Avenue
New York, New
York 10178
</TABLE>
- --------
(1) Represents percentage of shares of Common Stock outstanding on March 24,
2000.
(2)As set forth in a Schedule 13G, dated February 1, 2000, as of December 31,
1999.
(3)As set forth in a Schedule 13D, dated July 30, 1999, as of July 30, 1999.
3
<PAGE>
ELECTION OF DIRECTORS (Item No. 1)
Pursuant to the by-laws of the Company, the Board of Directors consists of
12 members. All of the directors were elected in May, 1999 by the stockholders
of the Company. Each director of the Company is also a director of the
Company's principal operating subsidiary, US Airways. Directors will be
elected to hold office for one year or until the election and qualification of
their successors. Proxies will be voted only for the nominees named below.
Except as noted otherwise, the following biographies describe the business
experience of each nominee for at least the past five years.
<TABLE>
<CAPTION>
Served as
director
since
---------
<S> <C> <C>
Mathias J. DeVito, 69... Mr. DeVito is Chairman Emeritus of the Board and 1981
Chairman of the Executive Committee of The Rouse
Company (real estate development and manage-
ment). He also serves as a Director of Allfirst
Financial, Inc., Mars Supermarkets, Inc. and
subsidiaries of The Rouse Company. He is a mem-
ber of the Board of the Maryland Institute, Col-
lege of Art, and former Chairman of the Greater
Baltimore Committee. Mr. DeVito is Chairman of
the Human Resources Committee and a member of
the Executive and Safety Committees of the Board
of Directors.
Rakesh Gangwal, 46...... Mr. Gangwal became President and Chief Executive 1996
Officer of the Company on November 18, 1998 and
President and Chief Executive Officer of US Air-
ways on May 20, 1998. Mr. Gangwal had been Pres-
ident and Chief Operating Officer of the Company
and US Airways since February 19, 1996. Prior
thereto, Mr. Gangwal had served as Executive
Vice President--Planning and Development of Air
France since November 1994. Mr. Gangwal previ-
ously served in a variety of management roles at
United Air Lines over an eleven-year period,
culminating in the role of Senior Vice Presi-
dent--Planning. Mr. Gangwal is a Director of
Boise Cascade Corporation.
Peter M. George, 56..... Mr. George is Vice Chairman and Chief Executive 1998
Officer of Hilton Group PLC and Chairman of
Hilton International (hotel and gaming
industries) and has held such positions since
1994. Mr. George also serves as a Director of
the Hilton Hotels Corporation and Magna
Entertainment Corporation. Mr. George is a
member of the Nominating and Human Resources
Committee.
Robert L. Johnson, 53... Mr. Johnson is the Chairman and Chief Executive 1998
Officer of BET Holdings, Inc. (media-entertain-
ment holding company). Mr. Johnson also serves
as a Director of the Hilton Hotels Corporation,
The United Negro College Fund, the National
Cable Television Association--Academy of Cable
Programming, the American Film Institute,
General Mills Corporation, Gerald Stevens Corpora-
tion, and the Advertising Council. He is a mem-
ber of the Audit and Nominating Committees of
the Board of Directors.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Served as
director
since
---------
<S> <C> <C>
Robert LeBuhn, 67....... Mr. LeBuhn is a private investor and is a Direc- 1966
tor of Acceptance Insurance Companies, Cambrex
Corporation and Enzon, Inc. He is Trustee and
President of the Geraldine R. Dodge Foundation,
Morristown, New Jersey; a trustee and Treasurer
of All Kinds of Minds, Chapel Hill, North Caro-
lina; a trustee of Executive Service Corps,
Aspen, Colorado; director of The International
Research Foundation for Children's Eyecare, Inc.,
New York and a member of the National Council of
the Aspen Music Festival and School in Aspen,
Colorado. He is Chairman of the Safety Committee
and a member of the Audit and Executive Commit-
tees of the Board of Directors.
John G. Medlin, Jr., Mr. Medlin is Chairman Emeritus and, until 1987
66..................... April, 1998, was Chairman of the Board of Wacho-
via Corporation (bank holding company), a posi-
tion he had held since 1988. Mr. Medlin also
served as Chief Executive Officer of Wachovia
Corporation from 1977 until December 31, 1993.
Mr. Medlin is a trustee of The Duke Endowment,
the National Humanities Center, Wake Forest Uni-
versity, the Research Triangle Foundation and
the Winston-Salem Foundation. He also is a
Director of BellSouth Corporation, Burlington
Industries, Inc., Media General, Inc., R.J.
Reynolds Tobacco Holdings, Inc. and Wachovia Corpo-
ration. He is Chairman of the Nominating Commit-
tee and a member of the Executive and Human
Resources Committees of the Board of Directors.
Hanne M. Merriman, 58... Mrs. Merriman is the Principal in Hanne Merriman 1985
Associates (retail business consultants). Mrs.
Merriman is a Director of Ameren Corporation,
Central Illinois Public Service Company, State
Farm Mutual Automobile Insurance Company, The
Rouse Company, Ann Taylor Stores Corporation, T.
Rowe Price Mutual Funds, and Finlay Enterprises,
Inc. She is a member of the National Women's Forum
and a Director of Children's Hospital. She was a
member of the Board of Directors of the Federal
Reserve Bank of Richmond, Virginia from 1984-1990
and served as Chairman in 1989-1990. Mrs. Merriman
is Chairman of the Audit Committee and is a member
of the Human Resources and Safety Committees of the
Board of Directors.
Thomas H. O'Brien, 63... Mr. O'Brien is Chairman and Chief Executive Of- 1999
ficer of The PNC Financial Services Group, Inc.
(diversified financial services) and has held
those combined titles since June, 1988; he also
serves as Chairman and Chief Executive Officer
of PNC Bank, National Association. Mr. O'Brien
serves as a Director of Bell Atlantic Corpora-
tion, BlackRock, Inc. and Hilb, Rogal & Hamilton
Company. He also is a board member of the Extra
Mile Education Foundation, the Carnegie Museums
of Pittsburgh, Pittsburgh Opera, University of
Pittsburgh, and the Board of Visitors, Univer-
sity of Pittsburgh's Graduate School of Busi-
ness. He is also a member of The Bankers
Roundtable. Mr. O'Brien is a member of the Audit
and Safety Committees.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Served as
director
since
---------
<S> <C> <C>
Hilda Ochoa- Ms. Ochoa-Brillembourg is President and Chief 1999
Brillembourg, 55....... Executives Officer of Strategic Investment
Management and Managing Director of Emerging
Markets Management (investment management), and
has held such position since 1987. Prior to
that, she was the Chief Investment Officer of
the Pension Investment Division at the World
Bank. Ms. Ochoa-Brillenbourg serves as a
Director of World Bank/ International Monetary
Fund Credit Union and also the Harvard
Management Company. She also is a member of the
Pension Advisory Board of the ARCO Investment
Management Company. Ms. Ochoa-Brillembourg is
also a trustee of the Washington Opera, the
Rockefeller Center for Latin American Studies at
Harvard University and the Meridian
International Center. She is a member of the
Audit and Nominating Committees.
Richard B. Priory, 53... Mr. Priory is Chairman of the Board, President 1999
and Chief Executive Officer of the Duke Energy
Corporation (global energy services). Prior to
that, he was President and Chief Operating Offi-
cer of Duke Power Company from 1994 until its
merger with Pan Energy Corporation in 1997. Mr.
Priory joined Duke Power Company in 1976. He is
a member of the Board of Directors of the Dana
Corporation, J.A. Jones Applied Research Compa-
ny, and the Foundation of the University of
North Carolina at Charlotte. Mr. Priory is a
member of the Nominating and Safety Committees.
Raymond W. Smith, 62.... Mr. Smith is Chairman of Rothschild North Ameri- 1990
ca, Inc. (international investment banking).
Prior to that he was Chairman of the Board and
Chief Executive Officer of Bell Atlantic Corpo-
ration from 1989 until December 1998. Previous-
ly, Mr. Smith had served as Vice Chairman and
President of Bell Atlantic and Chairman of The
Bell Telephone Company of Pennsylvania. Mr.
Smith currently holds the position of Chairman
of the Bell Atlantic Venture Fund, Inc. He is a
member of the Board of Directors of CBS Corpora-
tion, a trustee of Carnegie Mellon University
and the Lincoln Center Theater and is active in
many civic and cultural organizations. He is a
member of the Executive and Human Resources Com-
mittees of the Board of Directors.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Served as
director
since
---------
<S> <C> <C>
Stephen M. Wolf, Mr. Wolf is Chairman of the Board of Directors 1996
58................. of the Company and US Airways and was first
elected to those positions in January, 1996. Mr.
Wolf also served as Chief Executive Officer of
the Company from January 1996 until November
1998, and as the Chief Executive Officer of US
Airways from January 1996 until May 1998. Imme-
diately prior to joining US Airways, Mr. Wolf
was a senior advisor to the investment bank La-
zard Freres & Co. Mr. Wolf was Chairman and
Chief Executive Officer of UAL Corporation and
United Air Lines, Inc. from December 1987 until
July 1994. Mr. Wolf is a Director of Philip Mor-
ris Companies, R.R. Donnelley & Sons Co., The
Brookings Institution, Georgetown University and
the Alzheimer's Disease and Related Disorders
Association. Mr. Wolf is also Chairman of the
Executive Committee.
</TABLE>
Committees and Meetings of the Board of Directors
The Board of Directors of the Company held eleven meetings in 1999. The
Board of Directors has established the following standing committees: Audit
Committee, Executive Committee, Human Resources Committee, Nominating
Committee and Safety Committee. During 1999, the Audit Committee held six
meetings, the Executive Committee held four meetings, the Human Resources
Committee held eight meetings, the Nominating Committee held two meetings, and
the Safety Committee held one meeting.
The Audit Committee, in consultation with financial officers of the Company
and the independent public accountants, assists in establishing the scope of
the annual audit. The Audit Committee (1) reviews annual and quarterly
financial statements and periodic reports filed with the SEC, (2) recommends
to the Board of Directors the appointment of independent public accountants,
(3) reviews the annual programs of the internal audit staff and (4) reviews
programs designed to protect and maintain the assets of the Company, including
insurance and internal security programs.
The Human Resources Committee determines the salaries, incentive
compensation, stock option and restricted stock grants, retirement and other
benefits which accrue to officers of the Company and its subsidiaries. The
Human Resources Committee makes recommendations to the Board of Directors
concerning the levels of compensation and benefits for the Chairman and the
Chief Executive Officer.
The Nominating Committee is responsible for making recommendations regarding
the nomination of individuals for election to the Board of Directors. The
Nominating Committee will consider individuals recommended by stockholders.
Any such recommendation must be submitted in writing prior to January 1 of
each year, accompanied by a description of the proposed nominee's
qualifications and other relevant biographical information, and should be
addressed to the Nominating Committee, in care of the Secretary of the
Company.
During 1999, each of the incumbent directors (other than Messrs. O'Brien and
Priory and Ms. Ochoa- Brillembourg) seeking reelection attended 75 percent or
more of the meetings of the Board of Directors and of the committees on which
the director served. Messrs. O'Brien and Priory and Ms. Ochoa-Brillembourg
attended 75 percent or more of all meetings of the Board of Directors after
their election to the Board.
7
<PAGE>
Compensation of Directors
The annual retainer and meeting fee payable to non-employee directors in
1999 were $22,000 and $1,000, respectively. Mr. DeVito, Chairman of the Human
Resources Committee, Mrs. Merriman, Chairman of the Audit Committee, Mr.
Medlin, Chairman of the Nominating Committee, and Mr. LeBuhn, Chairman of the
Safety Committee, each receives an additional fee of $2,000 per year for
serving in those respective capacities. Pursuant to the terms of the US
Airways Group, Inc. Nonemployee Directors Stock Purchase Plan, the directors
may elect to receive all or a portion of their retainer and meeting fees in
the form of stock. Messrs. Wolf and Gangwal receive salaries in their
capacities as officers of US Airways and receive no additional compensation as
directors of the Company and US Airways.
Effective in May 1996, the compensation for non-employee directors was
changed from cash compensation plus retirement income to cash and stock
compensation. Each year active directors receive a grant of 1,500 stock
options and 500 Deferred Stock Units, both of which vest on the earlier of the
completion of their term of office or one year after grant. Using stock based
compensation for directors is intended to more closely align directors'
financial interests with that of shareholders of the Company. Additionally,
effective December 31, 1995 the Retirement Plan for Outside Directors of USAir
Group, Inc. was terminated and the value of the accrued benefits for past
service was converted into Deferred Stock Units based on the average price of
the stock in the month of December 1995. In recognition of their service on
the Board of Directors, former directors Messrs. Goodman and Horrigan received
an additional payment equivalent to 1,000 and 500 deferred stock units,
respectively.
Each director, director's spouse and the director's dependent children are
provided transportation on US Airways and reimbursement for federal and state
income taxes incurred thereon. Additionally, these benefits are provided for
retired directors. During 1999, non-employee directors received the following
benefits under this program: Mathias J. DeVito, $12,965; Peter M. George,
$20,376; Robert L. Johnson, $2,342; Robert LeBuhn, $32,546; John G. Medlin,
Jr., $6,559; Hanne M. Merriman, $18,654; Thomas H. O'Brien, $1,530; Hilda
Ochoa-Brillembourg, $10,492; Richard B. Priory, $1,790; and Raymond W. Smith,
$4,981. In addition, George J. W. Goodman, John W. Harris and Edward A.
Horrigan also served as active non-employee directors during part of 1999.
Messrs. Goodman, Harris and Horrigan received, $0, $9,688 and $12,102,
respectively, in travel benefits under this program while they were active
directors. Messrs. Goodman, Harris and Horrigan continue to receive these
benefits as retired directors.
Executive Officers
The executive officers of the Company are: Stephen M. Wolf, Chairman of the
Company and US Airways; Rakesh Gangwal, President and Chief Executive Officer
of the Company and US Airways; Lawrence M. Nagin, Executive Vice President--
Corporate Affairs and General Counsel of the Company and US Airways; N. Bruce
Ashby, Senior Vice President--Corporate Development of US Airways; B. Ben
Baldanza, Senior Vice President--Marketing of US Airways; Michelle V. Bryan,
Senior Vice President--Human Resources of US Airways; Alan W. Crellin, Senior
Vice President--Customer Service of US Airways; Christopher Doan, Senior Vice
President--Maintenance of US Airways; Thomas A. Mutryn, Senior Vice
President--Finance and Chief Financial Officer of the Company and US Airways;
Gregory T. Taylor, Senior Vice President--Planning of US Airways and Anita P.
Beier, Vice President and Controller of the Company and US Airways. Messrs.
Wolf, Gangwal and Nagin joined the Company and US Airways in early 1996. Ms.
Bryan joined US Airways in 1983 and was promoted to Senior Vice President,
Human Resources in January, 1999. Mr. Crellin joined US Airways' predecessor,
Pacific Southwest Airlines in 1971, was promoted to Vice President--Customer
Service in 1995 and was promoted to Senior Vice President--Customer Service in
March, 2000. Mr. Doan joined US Airways in March, 1997. Mr. Ashby joined US
Airways in April 1997 and became Senior Vice President--Corporate Development
in June, 1999. Mr. Mutryn joined the Company and US Airways in November,
1998. Mr. Taylor joined US Airways in November, 1998 and was promoted to
Senior Vice President--Planning in June, 1999. Mr. Baldanza joined US Airways
in September, 1999. Ms. Beier joined the Company and US Airways in June, 1999.
8
<PAGE>
Compensation of Executive Officers
The Summary Compensation Table below sets forth the compensation paid during
the years indicated to the individual who served as the Chief Executive
Officer during the last fiscal year and the four remaining most highly
compensated executive officers of the Company as of the last day of the last
fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Other Restricted
Name and Principal Annual Stock LTIP All Other
Position Year Salary Bonus(A) Compensation Awards(G) Options(#) Payouts(M) Compensation(O)
------------------ ---- -------- --------- ------------ ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen M. Wolf......... 1999 $600,000 $ 600,000 $ 4,325,146(B) $ 0 0 $ 0(N) $ 208,593
Chairman 1998 $580,000 $ 580,000 $ 4,236,052(B) $10,883,964(H) 525,000 -- $ 198,900
1997 $500,000 $ 500,000 $ 176,188(B) $ 1,920,000(H) 0 -- $ 323,857
Rakesh Gangwal.......... 1999 $675,000 $ 675,000 $ 1,912,405(C) $ 0 0 $ 0(N) $ 183,261
President and Chief 1998 $566,538 $ 566,538 $ 2,900,620(C) $10,946,813(I) 625,000 -- $ 162,660
Executive Officer 1997 $428,846 $ 429,000 $ 26,087(C) $ 1,200,000(I) 0 -- $ 77,445
Lawrence M. Nagin....... 1999 $390,577 $ 425,000 $ 488,638(D) $ 548,750(J) 0 $186,827 $ 191,666
Executive Vice 1998 $373,846 $ 432,000 $ 558,081(D) $ 499,226(J) 30,000 -- $ 132,046
President-- 1997 $351,538 $ 387,000 $ 17,418(D) $ 0 45,000 -- $ 95,442
Corporate Affairs and
General Counsel
N. Bruce Ashby.......... 1999 $256,115 $ 250,000 $ 0 $ 301,813(K) 0 $104,883 $ 57,786
Senior Vice President-- 1998 $254,904 $ 222,375 $ 4,584(E) 0 35,000 -- $ 45,919
Corporate Development 1997 -- -- -- -- -- -- --
Thomas A. Mutryn........ 1999 $337,308 $ 375,000 $ 61,254(F) $ 411,563(L) 0 $111,600 $ 96,155
Senior Vice President 1998 $ 34,615 $ 117,000 $ 26,999(F) $ 823,594(L) 100,000 -- $ 34,933
Finance and Chief 1997 -- -- -- -- -- -- --
Financial Officer
</TABLE>
- --------
(A) Incentive awards reflected for the years 1999, 1998, and 1997 were earned
in 1999, 1998, and 1997 but paid in 2000, 1999, and 1998, respectively.
(B) Amount disclosed for 1999 includes $18,000 paid for automobile expenses,
and $790 in income and tax liablility payments related to personal travel
provided by US Airways. The amount disclosed also includes $4,306,356 for
income tax liabilities incurred to permit the retention of Restricted
Stock vesting pursuant to Mr. Wolf's Restricted Stock agreements with US
Airways. Amount disclosed for 1998 includes $75,000 in living expenses
reimbursed for 1998 and $60,191 paid for tax liability on such amount,
$21,500 paid for tax and financial planning services for 1998, $18,000
paid for automobile expenses, and $2,219 in income and tax liability
payments related to personal travel provided by US Airways. The amount
disclosed also includes $4,059,141 for income tax liabilities incurred to
permit the retention of Restricted Stock vesting pursuant to Mr. Wolf's
Restricted Stock agreements with US Airways. Amount disclosed for 1997
includes $75,000 in living expenses reimbursed for 1997 and $62,975 paid
for tax liability on such amount, $25,000 paid for tax and financial
planning services for 1997, $12,000 paid for automobile expenses, and
$1,213 in income and tax liability payments related to personal travel
provided by US Airways.
(C) Amount disclosed for 1999 includes $18,000 paid for automobile expenses,
and $2,398 in income and tax liability payments related to personal travel
provided by US Airways. The amount disclosed also includes $1,892,007 for
income tax liabilites incurred to permit the retention of Restricted Stock
vesting pursuant to Mr. Gangwal's Restricted Stock agreement with US
Airways. Amount disclosed for 1998 includes $18,000 paid for automobile
expenses, $1,509 in income and tax liability payments related to personal
travel provided by US Airways, and $40,934 paid for tax liability related
to moving expenses. The amount disclosed also includes $2,840,177 for
income tax liabilities incurred to permit the retention of Restricted
Stock vesting pursuant to Mr. Gangwal's Restricted Stock agreement with US
Airways. Amount disclosed for 1997 includes $18,799 paid for automobile
expenses and $7,288 in income and tax liability payments related to
personal travel provided by US Airways.
(D) Amount disclosed for 1999 includes $9,000 paid for automobile expense,
$2,400 paid for tax and financial planning service, $10,059 in income and
tax liability payments related to personal travel provided by US Airways,
and $16,134 paid for tax liability related to moving expense. The amount
disclosed also includes $451,045 for income tax liabilities incurred to
permit the retention of Restricted Stock vesting pursuant to Mr. Nagin's
Restricted Stock agreement with US Airways. Amount disclosed for 1998
includes $9,000 paid for automobile expenses, $300 paid for tax and
financial planning service, and $1,982 in income and tax liability
payments related to personal travel provided by US Airways. The amount
disclosed also includes $546,799 for income tax liabilities incurred to
permit the retention of Restricted Stock vesting pursuant to Mr. Nagin's
Restricted Stock agreement with US Airways. Amount disclosed for 1997
includes $6,000 in automobile expenses, $4,200 paid for tax and financial
planning services, and $7,218 in income and tax liability payments related
to personal travel provided by US Airways (paid in 1998 for 1997).
9
<PAGE>
(E) Amount disclosed reflects income tax liability payments related to
personal travel on US Airways.
(F) Amount disclosed for 1999 includes $20,186 in income and tax liability
payments related to personal travel provided by US Airways and $41,068
paid for tax liability related to moving expense. Amount disclosed for
1998 includes $7,198 in income and tax liability payments related to
personal travel provided by US Airways and $19,800 paid for tax liability
related to moving expense.
(G) The aggregate number of shares of Restricted Stock held by each of Messrs.
Wolf, Gangwal, Nagin, Ashby and Mutryn, on December 31, 1999, and the
respective value of such shares based on the fair market value of the
stock on such date ($32.0625) were, respectively: Mr. Wolf-302,371 shares,
$9,694,770; Mr. Gangwal-287,450 shares, $9,216,366; Mr. Nagin-27,831
shares, $892,331; Mr. Ashby-7,500 shares, $240,469 and Mr. Mutryn-19,166
shares, $614,510. The Restricted Stock is entitled to the same dividends
payable on outstanding shares of Common Stock.
(H) Amount disclosed for 1998 reflects an award of 28,621 shares of Restricted
Stock effective January 21, 1998, vesting on January 20, 2001, based on
the closing price ($63.75) on the grant date; and an award of 15,625
shares of Restricted Stock effective May 11, 1998, vesting immediately,
based on the closing price ($64.00) on the grant date. In addition, in
connection with a new long term employment arrangement between US Airways
and Mr. Wolf, Mr. Wolf received an award of 150,000 shares effective
November 16, 1998, vesting ratably on each of the four anniversaries of
the grant date, based on the closing price ($47.0625) on the grant date.
The amount disclosed for 1998 also includes an award of 18,735.363 shares
of Restricted Stock effective March 16, 1999, vesting immediately, based
on the closing price ($53.375) on the grant date. Amount disclosed for
1997 reflects an award of 80,000 shares of Restricted Stock effective
April 1, 1997, vesting on April 1, 2001, based on the closing price
($24.00) on the grant date.
(I) Amount disclosed for 1998 reflects an award of 37,450 shares of Restricted
Stock effective January 21, 1998, vesting on January 20, 2001, based on
the closing price ($63.75) on the grant date; and an award of 7,812.5
shares of Restricted Stock effective May 11, 1998, vesting immediately,
based on the closing price ($64.00) on the grant date. In addition, in
connection with a new long term employment arrangement between US Airways
and Mr. Gangwal, Mr. Gangwal received an award of 150,000 shares of
Restricted Stock effective November 16, 1998, with 30,000 shares vesting
on November 16, 2000 and November 16, 2001, respectively, and 45,000
shares vesting on November 16, 2002 and November 16, 2003, respectively
based on the closing price ($47.0625) on the grant date. The amount
disclosed for 1998 also includes an award of 18,735.363 shares of
Restricted Stock effective March 16, 1999, vesting immediately, based on
the closing price ($53.375) on the grant date. Amount disclosed for 1997
reflects an award of 50,000 shares of Restricted Stock effective April 1,
1997, vesting on April 1, 2001, based on the closing price ($24.00) on the
grant date.
(J) Amount disclosed for 1999 reflects an award of 10,000 shares of Restricted
Stock, effective May 18, 1999, vesting 25% on each of May 18, 2000 and the
three succeeding anniversaries of the grant date, based on the closing
price ($54.875) on the grant date. Amount disclosed for 1998 reflects on
award of 7,831 shares of Restricted Stock, effective January 21, 1998,
vesting on January 20, 2001, based on the closing price ($63.75) on the
grant date.
(K) Amount disclosed for 1999 reflects an award of 5,500 shares of Restricted
Stock, effective May 18, 1999, vesting 25% on each of May 18, 2000 and the
three succeeding anniversaries of the grant date, based on the closing
price ($54.875) on the grant date.
(L) Amount disclosed for 1999 reflects an award of 7,500 shares of Restricted
Stock, effective May 18, 1999, vesting 25% on each of May 18, 2000 and the
three succeeding anniversaries of the grant date, based on the closing
price ($54.875) on the grant date. Amount disclosed for 1998 reflects an
award of 17,500 shares of Restricted Stock, effective November 16, 1998,
vesting 16.67% on November 16, 1998 and the five succeeding anniversaries
of the grant date, based on the closing price ($47.0625) on the grant
date.
(M) LTIP payments reflected for the year 1999 were earned for the period 1997-
1999 but paid in 2000.
(N) Messrs. Wolf and Gangwal have declined to accept payments from the US
Airways Group, Inc. Long Term Incentive Plan for the performance period
ending with fiscal year 1999.
(O) As further described herein, amounts disclosed include the value of
benefits under the US Airways officer split dollar life insurance program,
contributions to the defined contribution pension plans, and moving
expense payments. Under the split dollar life insurance plan of US
Airways, individual life insurance coverage is available to executive
officers, with US Airways paying the premium associated with this
coverage. Based on life expectancy and other assumptions, US Airways
expects to recover the premiums it pays with respect to the whole life
component of the coverage. The following amounts reflect the value of the
benefits accrued in 1999, calculated on an actuarial basis, ascribed to
the insurance policies purchased on the lives of the executives, plus the
dollar value of premiums paid by US Airways with respect to the insurance:
Mr. Wolf--$45,515; Mr. Gangwal--$42,386; Mr. Nagin--$36,342; Mr. Ashby--
$12,253; and Mr. Mutryn--$24,779. During 1999, US Airways made
contributions to the accounts of Messrs. Wolf, Gangwal, Nagin, Ashby and
Mutryn, in certain defined contribution pension plans, in the following
amounts, respectively: $163,078, $140,875, $114,014, $45,533, $21,446.
During 1999, US Airways paid $41,310 in moving expenses for Mr. Nagin, and
$49,930 in moving expenses for Mr. Mutryn.
10
<PAGE>
Stock Option Grants in Last Fiscal Year
The following table provides information on stock option grants in 1999 to
the named executive officers.
<TABLE>
<CAPTION>
Percent of Total
Number of Shares Options Granted Exercise Grant Date
Underlying to Employees or Base Expiration Present Value
Name Option Granted in 1999 Price Date $
---- ---------------- ---------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Stephen M. Wolf......... 0 0% N/A N/A N/A
Rakesh Gangwal.......... 0 0% N/A N/A N/A
Lawrence M. Nagin....... 0 0% N/A N/A N/A
N. Bruce Ashby.......... 0 0% N/A N/A N/A
Thomas A. Mutryn........ 0 0% N/A N/A N/A
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table provides information on the number of options held by
the named executive officers at fiscal year-end 1999. A portion of the
unexercised options held by the officers were in-the-money based on the fair
market value of the Common Stock on December 31, 1999 ($32.0625).
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SAR's at Options/SAR's at
Year End (#) Year-End ($)
Shares Acquired Value Realized ------------------------- -------------------------
Name on Exercise (#) $ Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen M. Wolf......... 0 $ 0 1,410,000 415,000 $24,346,875 $ 1,490,625
Rakesh Gangwal.......... 0 $ 0 705,000 770,000 11,687,500 2,921,875
Lawrence M. Nagin....... 0 $ 0 204,000 96,000 3,214,125 954,000
N. Bruce Ashby.......... 0 $ 0 37,000 53,000 398,625 299,188
Thomas A. Mutryn........ 0 $0 33,334 66,666 0 0
</TABLE>
Long-Term Incentive Plan--Basis of Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Performance
or other Estimated future payouts
period under non-stock price-
until based plans(2)
maturation ------------------------
or Threshold Target Maximum
Name payout(1) (%) (%) (%)
---- ----------- --------- ------ -------
<S> <C> <C> <C> <C>
Stephen M. Wolf............................ 1997-1999 0 220 440
Rakesh Gangwal............................. 1997-1999 0 220 440
Lawrence M. Nagin.......................... 1997-1999 0 80 160
N. Bruce Ashby............................. 1997-1999 0 70 140
Thomas A. Mutryn........................... 1997-1999 0 80 160
</TABLE>
- --------
(1) Awards for this cycle are determined based upon the Company's pre-tax
margin as compared to the pre-tax margin of selected competitors.
(2) Awards are stated as a percentage of the officer's base annual salary.
Actual awards paid for the performance period are listed in the "LTIP
Payout" column in the Summary Compensation Table on page 9.
11
<PAGE>
Retirement Benefits
Currently, US Airways maintains a defined contribution plan retirement
program comprised of (i) a money purchase pension plan where contributions are
based on a percentage of compensation and is age-weighted, (ii) a 401(k)
savings plan with a Company match, and (iii) a profit sharing plan. The profit
sharing plan has been eliminated with respect to all salaried employees
effective January 1, 2000. This retirement program is an individual account
program. US Airways has also adopted an unfunded supplemental defined
contribution plan which will provide those benefits otherwise payable to
officers under the qualified defined contribution plans, but which, under the
Internal Revenue Code ("Code"), are not permitted to be contributed through
the qualified plans maintained by US Airways. The amounts contributed by the
Company to each named executive officer's account under the qualified defined
contribution plans and supplemental defined contribution plan are included in
the Summary Compensation Table above.
Prior to 1992, US Airways' retirement plan (the "Retirement Plan") for its
salaried employees was a defined benefit plan which provided noncontributory
benefits based upon both years of service and the employee's highest three-
year average annual compensation during the last ten calendar years of
service. The Retirement Plan is integrated with the Social Security program so
that the benefits provided thereunder are reduced by a portion of the
employee's benefits from Social Security. US Airways' contributions to the
Retirement Plan are not allocated to the account of any particular employee.
Under the Retirement Plan, benefits usually begin at the normal retirement
age of 65, however, the Retirement Plan also provides benefits for employees
electing early retirement from ages 55 through 64. If such an election is
made, the benefits may be reduced to reflect the longer interval over which
the benefits will be paid. Executive officers hired prior to December 31, 1991
participated in the Retirement Plan on the same basis as other employees of US
Airways. The Retirement Plan was frozen on December 31, 1991, and there have
been no benefit accruals under the Retirement Plan since that date.
Contributions to and benefits payable under the Retirement Plan must be in
compliance with the applicable guidelines or maximums established by the Code.
US Airways has adopted an unfunded supplemental plan which will provide those
benefits which would otherwise be payable to officers under the Retirement
Plan, but which, under the Code, are not permitted to be funded or paid
through the qualified plans maintained by US Airways. Benefit accruals under
the supplemental plan also ceased upon the freezing of the Retirement Plan on
December 31, 1991. Such supplemental plan provides that any benefits under the
unfunded supplemental plan will be paid in the form of a single, lump sum
payment. Such supplemental plans are specifically provided for under
applicable law and have been adopted by many corporations under similar
circumstances. As of December 31, 1999, no executive officers were entitled to
receive retirement benefits under this supplemental plan.
12
<PAGE>
The following table presents the noncontributory benefits payable per year
for life to employees under the frozen Retirement Plan and the unfunded
supplemental plan described above, assuming normal retirement in the current
year. The table also assumes the retiree would be entitled to the maximum
Social Security benefit in addition to the amounts shown.
<TABLE>
<CAPTION>
Final Credited Service
Average --------------------------------------------
Earnings 10 Years 15 Years 20 Years 25 Years 30 Years
- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 100,000......................... $ 18,841 $ 28,262 $ 37,682 $ 47,103 $ 52,103
200,000......................... $ 42,841 $ 64,262 $ 85,682 $107,103 $117,103
300,000......................... $ 66,841 $100,262 $133,682 $167,103 $182,103
400,000......................... $ 90,841 $136,262 $181,682 $227,103 $247,103
500,000......................... $114,841 $172,262 $229,682 $287,103 $312,103
600,000......................... $138,841 $208,262 $277,682 $347,103 $377,103
700,000......................... $162,841 $244,262 $325,682 $407,103 $442,103
800,000......................... $186,841 $280,262 $373,682 $467,103 $507,103
900,000......................... $210,841 $316,262 $421,682 $527,103 $572,103
1,000,000......................... $234,841 $352,262 $469,682 $587,103 $637,103
1,100,000......................... $258,841 $388,262 $517,682 $647,103 $702,103
1,200,000......................... $282,841 $424,262 $565,682 $707,103 $767,103
1,300,000......................... $306,841 $460,262 $613,682 $767,103 $832,103
1,400,000......................... $330,841 $496,262 $661,682 $827,103 $897,103
1,500,000......................... $354,841 $532,262 $709,682 $887,103 $962,103
</TABLE>
The values reflected in the above chart represent the application of the
Retirement Plan formula to the specified amounts of compensation and years of
service. The compensation covered by the Retirement Plan is salary and bonus,
as reported in the Summary Compensation Table. None of the individuals
included in the Summary Compensation Table have received credited years of
service under the Retirement Plan.
Messrs. Wolf, Gangwal, Nagin, Ashby and Mutryn have entered into agreements
which provide for a supplement to their accrued retirement benefits under the
Retirement Plan. The benefits under the supplemental retirement arrangements
are based on the greater of $1,000,000 or actual salary and bonus for Mr.
Wolf, the greater of actual salary and bonus or base salary and assumed
maximum bonus for Mr. Gangwal, base salary and assumed maximum bonus for
Mr. Nagin, and base salary and assumed bonus paid for Messrs. Ashby and
Mutryn. The benefits payable to Messrs. Wolf, Gangwal and Nagin (and under
certain circumstances the benefits payable to Mr. Ashby) are subject to an
offset for benefits payable under the tax-qualified and non-qualified defined
contribution plan retirement program. The credited years of service under
these supplemental arrangements for each of the individuals included in the
Summary Compensation Table are as follows: Mr. Wolf-30 years,
Mr. Gangwal-20 years, Mr. Nagin-16 years, Mr. Ashby-3 years and Mr. Mutryn-1
year.
Employment Arrangements
Under his employment arrangements with the Company and US Airways, Mr. Wolf
is entitled to an annual base salary of not less than $600,000. In addition,
Mr. Wolf is eligible for an annual bonus pursuant to the terms of the
Company's Incentive Compensation Plan. Under the plan, Mr. Wolf may receive a
bonus of 100% of
13
<PAGE>
annual base salary for target results, which may be increased for results in
excess of the target up to a maximum bonus of 200% of base salary. Mr. Wolf is
also eligible for a bonus of 220% of his average annual base salary from the
Company's Long Term Incentive Plan ("LTIP") if certain target results are
achieved during the performance period, which may be increased to a maximum
bonus of 440% for results exceeding the target. Mr. Wolf has declined to
accept payment from the LTIP for the performance period ending with fiscal
year 1999.
Under his employment agreement with the Company and US Airways, Mr. Gangwal
is entitled to an annual base salary of not less than $675,000. In addition,
Mr. Gangwal is eligible for an annual bonus pursuant to the terms of the
Company's Incentive Compensation Plan. If the Company achieves its target
objectives, Mr. Gangwal may receive a bonus of 100% of his annual base salary,
which may be increased for results in excess of the target up to a maximum
bonus of 200% of his base salary. Mr. Gangwal also may receive a bonus of 220%
of his average annual base salary if the Company achieves its target
objectives during the performance period under the LTIP, which may be
increased up to a maximum of 440% of his average annual base salary for
results exceeding the target. Mr. Gangwal has declined to accept payment from
the LTIP for the performance period ending with fiscal year 1999.
Under his employment arrangements with US Airways, Mr. Nagin is entitled to
annual base salary of not less than $410,000. Messrs. Nagin, Ashby and Mutryn
are eligible for an annual bonus pursuant to the terms of the Company's
Incentive Compensation Plan. If the Company achieves its target objectives,
Messrs. Nagin and Mutryn may each receive a bonus of 60% of his annual base
salary, which may be increased for results in excess of the target up to a
maximum bonus of 120% of his base salary. Messrs. Nagin and Mutryn are each
also eligible for a bonus under the LTIP of 80% of his average annual base
salary if the Company achieves its target objectives which may be increased up
to a maximum of 160% for results exceeding target.
Under the Incentive Compensation Plan, Mr. Ashby may receive a bonus of 50%
of his annual base salary if the Company achieves its target objectives which
may be increased up to a maximum bonus of 100% of his base salary for results
exceeding the target. Mr. Ashby is also eligible for a bonus under the LTIP
ranging from 70% of his average annual base salary if the Company achieves the
target results to a maximum bonus of 140% for results that are in excess of
target for the performance period.
In connection with their employment arrangements, each of Messrs. Wolf,
Gangwal and Nagin are entitled to reimbursement of fees for certain tax and
financial planning advice.
Arrangements Concerning Termination of Employment and Change of Control
US Airways currently has employment contracts (the "Employment Contracts")
with Messrs. Wolf, Gangwal and Nagin (the "Executives"). The terms of the
Employment Contracts extend until the earlier of the fourth anniversary
thereof for Mr. Wolf, and the third anniversary thereof for Messrs. Gangwal,
and Nagin, or the Executive's normal retirement date, and are subject to
automatic one-year annual extensions on each anniversary date unless advance
written notice is given by US Airways. In exchange for each Executive's
commitment to devote his full business efforts to US Airways, the agreements
provide that each Executive will be re-elected to his current position and
will receive (1) an annual base salary at a rate not less than that in effect
during the previous year, (2) incentive compensation as provided in the
contract and (3) insurance, disability, medical and other benefits generally
granted to other officers. In the event of a change of control, as defined in
each Employment Contract, the term of each Employment Contract is
automatically extended until the earlier of the fourth or third anniversary,
as applicable, of the change of control date or the Executive's normal
retirement date.
The Employment Contracts provide that, should US Airways or any successor
fail to re-elect the Executive to his or her position, assign the Executive to
inappropriate duties which result in a diminution in the Executive's position,
duties, authority or responsibilities, fail to compensate the Executive as
provided in the Employment Contract, transfer the Executive in violation of
the Employment Contract, fail to require any successor to US Airways to comply
with the Employment Contract or otherwise terminate the Executive's employment
in
14
<PAGE>
violation of the Employment Contract, the Executive may elect to treat such
failure as a breach of the Employment Contract if the Executive then
terminates employment. As liquidated damages as the result of an event not
following a change of control that is deemed to be a breach of the Employment
Contracts, US Airways or its successor would be required to pay the Executive
a lump sum equal to (i) his annual base salary for the then remaining term of
the Employment Contract, in the case of Mr. Wolf, or (ii) three years' base
salary in the case of Messrs. Gangwal and Nagin, and to continue granting
certain employee benefits for the then remaining term of the Executive's
Employment Contract. If the breach follows a change of control, the Executive
would be entitled to receive (i) an amount equal to the product of three times
the sum of the Executive's annual base salary plus an annual bonus, and (ii)
additional pension, health insurance, travel and certain other benefits. In
addition, in the case of the Executives during the 30-day period immediately
following the first anniversary of a change of control, the Executive may
elect to terminate his Employment Contract for any reason and receive the
liquidated damages described in the immediately preceding sentence. Each
Employment Contract provides that the Executive shall be entitled to recover
from US Airways reasonable attorney's fees in connection with enforcement of
such Executive's rights under the Employment Contract. Each Employment
Contract also provides that any payments the Executive receives in the event
of a termination after a change of control shall be increased, if necessary,
such that, after taking into account all taxes he would incur as a result of
such payments, the Executive would receive the same after-tax amount he would
have received had no excise tax been imposed under Section 4999 of the Code.
Messrs. Wolf's, Gangwal's and Nagin's benefits under the supplemental
retirement agreement will vest immediately upon a change of control, a
termination of employment without cause or upon resignation for good reason.
Messrs. Wolf's, Gangwal's and Nagin's restricted stock will vest immediately
upon a change of control or his death or disability. All of Messrs. Wolf's,
Gangwal's and Nagin's stock options will vest immediately upon a change of
control. In addition, certain of Messrs. Wolf's, Gangwal's and Nagin's stock
options and restricted stock will vest immediately upon a termination without
cause or upon resignation for good reason.
The Company has also entered into severance agreements ("Severance
Agreement") with Messrs. Ashby and Mutryn. Mr. Ashby's Severance Agreement
extends until the earlier of the severance of Mr. Ashby's employment, or Mr.
Ashby's retirement date. Pursuant to the terms of his Severance Agreement, if
US Airways should assign Mr. Ashby to duties which are inconsistent with his
position, authorities, duties or responsibilities, fail to compensate Mr.
Ashby in accordance with the terms of the Severance Agreement, require
relocation under certain circumstances, fail to require any successor to US
Airways to comply with the Severance Agreement or otherwise terminate
Mr. Ashby's employment in violation of the Severance Agreement, Mr. Ashby may
elect to treat such failure as a breach of the Severance Agreement if Mr.
Ashby then terminates his employment. As a result of such breach of the
Severance Agreement, US Airways shall pay Mr. Ashby a lump sum payment equal
to one year's base salary.
If such breach of his Severance Agreement occurs following a change of
control, Mr. Ashby will be entitled to receive (i) a lump sum payment equal to
the product of three times the sum of Mr. Ashby's annual salary plus annual
bonus, (ii) health insurance benefits until such time as Mr. Ashby qualifies
for group health insurance benefits from another employer, (iii) travel
benefits for Mr. Ashby's life; and (iv) continuation of certain other benefits
during the remainder of the three year period following the change of control.
His Severance Agreement provides that Mr. Ashby shall be entitled to recover
from US Airways reasonable attorney's fees in connection with enforcement of
Mr. Ashby's rights under the Severance Agreement. The Severance Agreement
further provides that any payments Mr. Ashby receives in the event of
termination after a change of control shall be increased, if necessary, such
that, after taking into account all taxes he would incur as a result of such
payments, Mr. Ashby would receive the same after-tax amount he would have
received had no excise tax been imposed under Section 4999 of the Code.
15
<PAGE>
Mr. Mutryn's Severance Agreement extends until the earlier of the severance
of Mr. Mutryn's employment, or his retirement date. Pursuant to the terms of
his Severance Agreement, if following a change of control, US Airways should
assign him duties which are inconsistent with his position, authorities,
duties or responsibilities, fail to compensate him in accordance with the
terms of his Severance Agreement, require relocation under certain
circumstances, fail to require any successor to US Airways to comply with the
Severance Agreement or otherwise terminate Mr. Mutryn's employment in
violation of his Severance Agreement, Mr. Mutryn may elect to treat such
failure as a breach of the Severance Agreement if he then terminates his
employment.
Under such circumstances Mr. Mutryn will be entitled to receive (i) a lump
sum payment equal to the product of three times the sum of Mr. Mutryn's annual
salary plus annual bonus, (ii) health insurance benefits until such time as
Mr. Mutryn qualifies for group health insurance benefits from another
employer, (iii) travel benefits for Mr. Mutryn's life; and (iv) continuation
of certain other benefits during the remainder of the three year period
following the change of control. His Severance Agreement provides that Mr.
Mutryn shall be entitled to recover from US Airways reasonable attorney's fees
in connection with enforcement of his rights under the Severance Agreement.
The Severance Agreement further provides that any payments Mr. Mutryn receives
in the event of termination after a change of control shall be increased, if
necessary, such that, after taking into account all taxes he would incur as a
result of such payments, Mr. Mutryn would receive the same after-tax amount he
would have received had no excise tax been imposed under Section 4999 of the
Code.
Messrs. Ashby's and Mutryn's benefits under the supplemental retirement
agreement will vest immediately upon a change of control or upon resignation
for good reason.
Currently, under the Company's 1996 Stock Incentive Plan (the "1996 Plan"),
pursuant to which employees of the Company and its subsidiaries have been
awarded stock options with respect to Common Stock and shares of restricted
stock, the occurrence of a change of control, as defined, would make all
granted options immediately exercisable without regard to the vesting
provisions thereof, and under certain circumstances, would cause shares of
restricted stock to vest. In addition, grantees would be able, during the 60-
day period immediately following a change of control, to surrender all
unexercised stock options under the 1996 Plan to the Company for a cash
payment equal to the excess, if any, of the fair market value of the Common
Stock over the exercise prices of such stock options.
In addition under the terms of the LTIP, upon the occurrence of a change in
control, as defined, each participant in the LTIP will be entitled to receive
a payment with respect to each performance period that has not been completed
equal to the amount that would have been paid with respect to such performance
period if the performance factors for such period had been achieved at the
target level.
Notwithstanding anything to the contrary set forth in any of the Company's
or US Airways' filings under the Securities Act of 1933, or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that incorporates by
reference this Proxy Statement, in whole or in part, the following Report and
Performance Graph shall not be incorporated by reference into any such
filings.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Human Resources Committee (the "Committee") is responsible for
determining the annual salary, short-term and long-term cash and stock
incentive compensation, and other compensation of the executive officers,
including the executive officers named in the Summary Compensation Table. This
report describes the policies and approach of the committee in establishing
executive compensation during 1999.
16
<PAGE>
Committee Approach To Compensation
In determining the principal components of executive compensation, the
Committee, in consultation with an independent compensation consultant,
considers the following factors: (a) Company performance, both year over year
and in comparison to other companies within the airline industry; (b) the
individual performance of the executive; (c) comparative compensation studies;
(d) historical compensation levels at the Company; and (e) the overall
competitive environment in executive compensation needed to attract, retain
and motivate talented and experienced senior management.
The Committee reviews the compensation levels for peer-level positions of
premier companies of similar size to the Company, as well as at other major
domestic passenger airlines, including, but not limited to, American Airlines
("American"), Continental Airlines, Inc. ("Continental"), Delta Air Lines,
Inc. ("Delta"), Northwest Airlines, Inc. and United Airlines ("United"). Two
of these airlines are included in the S & P Airline Index used in the
Performance Graph.
Generally, the Committee reviews airline compensation survey data and base
salary is targeted to be at or below median levels for the named executive
officers. However, stock awards and long-term incentive compensation, and
consequently total compensation, are targeted to link a significant portion of
each executive officer's compensation to the performance of the Company's
stock, thereby increasing shareholder value.
Components of Executive Compensation
Base Salary. Base salaries are reviewed annually, in connection with
promotions and when responsibilities for the position are changed. Given the
Company's continuing need to reduce business costs in order to compete with
low fare competitors, the Committee's executive compensation approach is to
maintain base salaries at or below the industry median.
Annual Cash Incentive Compensation. The Committee adopted and administers
the Incentive Compensation Plan (the "ICP plan"). All officers, including the
named executive officers, and certain other key management employees of the
Company are eligible to participate in the ICP plan. The ICP plan provides for
the payment of both incentive and discretionary awards. The incentive awards
are based upon the Company achieving a pre-established performance objective
which is set by the Committee annually. The Committee also establishes target
percentages for each executive. The target awards for the executive officers
range from 50% to 60% of base salary for Senior Vice Presidents to 60% for
Executive Vice Presidents, and 100% of base salary for the Chief Executive
Officer and for the Chairman. If the Company's objective is exceeded, then the
incentive award may also be increased up to a maximum amount of double the
target percentage, or 100% to 200% of base salary. The Committee retains the
discretion to adjust any award based on individual performance. The Committee
also retains the discretion to pay a discretionary award in a year when the
Company did not achieve its objective or to pay an award in addition to the
maximum incentive award when circumstances are appropriate for such
discretionary awards.
For the 1998 fiscal year the Company's results exceeded the objective and in
1999 the Committee awarded incentive payments to the executive officers
ranging from their target percentage up to the maximum percentage. For the
1999 fiscal year, the Committee set as the Company's target objective a stated
percentage "Operating Margin." While the Company was unable to reach its
performance objectives because of a number of factors more fully described in
other Company documents, including the Form 10-K for fiscal year 1999, the
Committee has authorized a special one-time award for 1999 to be paid in
recognition of the significant effort exhibited during this year by the
participants in the ICP plan to establish a platform for the future growth and
long-term success of the Company.
17
<PAGE>
Long Term Cash Incentive Compensation. During 1998, the Board of Directors
adopted a long term cash incentive compensation plan ("LTIP"). The LTIP was
approved by the shareholders at the 1999 Annual Meeting of Stockholders. The
LTIP was deemed necessary to hire and retain high performance executives. The
purpose of the LTIP is to tie a portion of total compensation to operating
results over a longer time period. With this overall compensation approach,
the Committee believes it will more closely align executive compensation with
Company performance while enabling the Company to recruit and retain talented
executives with attractive total compensation packages.
In the first two performance periods ending with fiscal year 1999 and 2000,
the Committee has set as the Company's objective the weighted average pre-tax
adjusted margin of selected competitors. The target award percentage for
executive officers under the LTIP ranges from 70% to 80% of average annual
base salary for Senior Vice Presidents, 80% of average annual base salary for
Executive Vice Presidents and 220% of average annual base salary for the Chief
Executive Officer and the Chairman.
For the first performance period ending with fiscal year 1999, the LTIP will
pay out at 62% of the target percentage established by the Committee based
upon the Company's pre-tax adjusted margin. Payments will be made to the plan
participants during 2000. However, both the Chairman and the Chief Executive
Officer have declined to accept payments for the performance period ending
with fiscal year 1999.
Stock Options. The executive officers of the Company participate in the
Company's 1996 Stock Incentive Plan (the "1996 Plan") which is administrated
by the Committee. The Committee is authorized to grant options under the 1996
Plan at an exercise price equal to the fair market value of a share of Common
Stock on the effective date of the grant. The Committee is also authorized
under the terms of the 1996 Plan to grant awards of restricted stock. The
Committee set the long-term incentive compensation for its executive officers
at the high end of the comparison range. The Committee believes that granting
stock options and restricted stock to executive officers aligns the
executive's interests more closely with those of the stockholders of the
Company by tying a meaningful portion of compensation to the performance of
the Company's stock. The Committee considers the individual performance of
each executive officer, historical stock grants made by the Company to the
individual and the recommendations of a consultant based on survey data.
Historically, stock options have generally been granted annually, although
this practice was interrupted during 1993 through 1996. In 1996, when Mr.
Wolf, as Chairman and Chief Executive Officer, and other executive officers
joined the Company, the Committee awarded them sizable grants of stock options
and restricted stock in part to induce them to join the Company and also as an
incentive to build shareholder value. These grants had vesting schedules over
a four-year period. Based on the significant improvement in the performance of
the Company during 1997 and 1998, the Committee granted Messrs. Wolf, Gangwal
and Nagin additional shares of restricted stock in 1998 (with cliff vesting in
the year 2001), while the executive officers also received additional grants
of stock options (ratably vesting over a five-year period). Options and
restricted stock were also granted to Messrs. Wolf and Gangwal in 1998 in
connection with the CEO succession, as described below under "CEO
Compensation".
During 1999, the Committee granted additional shares of restricted stock to
certain executive officers of the Company and other key management employees.
The Committee deemed such awards necessary in order to continue to attract,
retain and motivate talented and experienced senior management and other key
employees.
18
<PAGE>
The Committee supports and encourages stock ownership in the Company by its
executive officers and in 1998 it promulgated standards regarding levels of
ownership by officers. The stock ownership requirement is based on a multiple
of base salary and ranges from 200% of base salary for Senior Vice Presidents
to 300% of base salary for Executive Vice Presidents and 500% of base salary
for the Chief Executive Officer and the Chairman. Options and unvested
restricted stock holdings are not included in the executive's holdings for
purposes of meeting this standard.
CEO Compensation
During 1998, the Company and US Airways implemented their plan for Chief
Executive Officer succession. Stephen M. Wolf served as Chairman and Chief
Executive Officer for US Airways through May 1998 and of the Company through
November 1998. During this time period, consistent with the Committee's
executive compensation approach, Mr. Wolf's base salary was set well below the
industry median. In May 1998, the President and Chief Operating Officer,
Rakesh Gangwal, succeeded to the position of President and CEO for US Airways
and assumed that role for the Company in November of 1998. Mr. Wolf remains
Chairman, continuing in an executive capacity at both US Airways and the
Company. In setting the compensation packages for these new positions, it was
the Committee's intent to incent and retain Mr. Wolf to remain as an active
executive for at least five years while ensuring Mr. Gangwal's retention and
succession to the CEO role. In this regard, Mr. Wolf's salary and cash
incentive compensation targets were not changed but he was awarded restricted
stock and stock option grants with a graduated vesting schedule designed for
retention. In connection with becoming the CEO, the Committee increased Mr.
Gangwal's base salary, but consistent with the overall philosophy, the salary
remains below industry median and lower than that of the CEO at major
competitors such as American, Continental, Delta, and United. The Committee
also granted Mr. Gangwal restricted stock and stock options awards, with a
delayed vesting schedule designed to make this total compensation package at
the high-end of the industry comparison range if the Company's stock price
performance is favorable.
Deductibility of Executive Compensation
Section 162(m) of the Code limits the tax deduction of a publicly-held
company allowed for compensation paid to the Chief Executive Officer and to
the four most highly compensated executive officers other than the Chief
Executive Officer. Generally, the Committee desires to maintain the tax
deductibility of compensation for executive officers to the extent it is
feasible and consistent with the objectives of the Company's compensation
programs. Some, but not all, of the compensation programs established for
executive officers comply with the deductibility requirements under Section
162(m). The Committee continues to consider ways to maximize the deductibility
of executive compensation, but intends to retain the discretion the Committee
deems necessary to compensate executive officers in a manner commensurate with
performance and the competitive environment for executive talent.
This report has been approved by all members of the Committee.
Mathias J. DeVito, Chairman
Peter M. George
John G. Medlin, Jr.
Hanne M. Merriman
Raymond W. Smith
19
<PAGE>
[PERFORMANCE CHART]
US AIRWAYS S&P 500 S&P AIRLINE
1994 33.33 105.41 78.79
1995 103.92 141.36 120.74
1996 183.33 170.01 139.65
1997 490.20 222.72 251.23
1998 407.84 282.12 230.64
1999 251.47 337.21 204.53
The above graph compares the performance of the Company's Common Stock during
the period December 31, 1994 to December 31, 1999 with the S&P 500 Index and
the S&P Airline Index during the relevant time period. The graph depicts the
results of investing $100 in the Company's Common Stock, the S&P 500 Index and
the S&P Airline Index, at closing prices on December 31, 1994. The stock price
performance shown on the graph above is not necessarily indicative of future
price performance. The S&P Airline Index consists of American, Delta, Southwest
Airlines, Inc. and the Company.
SELECTION OF AUDITORS (Item No. 2)
The Board of Directors has named KPMG LLP as independent public accountants
to examine the consolidated financial statements of the Company for fiscal year
2000, subject to ratification by the stockholders. KPMG LLP acted in the same
capacity during 1999. A representative from that firm is expected to be present
at the annual meeting of stockholders and will be afforded an opportunity to
make a statement if the representative desires to do so and to respond to
appropriate questions.
APPROVAL OF AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN OF US AIRWAYS GROUP,
INC. (Item No. 3)
At the 1996 annual meeting, the stockholders of the Company approved the
adoption of the 1996 Plan. At the 1998 annual meeting, the stockholders of the
Company approved the adoption of the first amendment to the 1996 Plan. Since
then, of the approximately 2,000,000 shares of Common Stock then authorized for
issuance under the 1996 Plan, all of the shares (i) have been issued upon the
exercise of stock options, or (ii) have been issued
20
<PAGE>
as Restricted Stock, or (iii) are reserved for issuance upon the exercise of
stock options. In order to support the Company's long-term incentive
compensation programs to attract and retain top quality management, additional
shares are needed. Accordingly, the Board of Directors has approved and
recommends to stockholders the reservation of an additional 3,000,000 shares
of Common Stock for issuance under the 1996 Plan.
The following is a description of the material terms of the 1996 Plan, and
as such is qualified in its entirety by the actual terms of the 1996 Plan, a
copy of which is on file with the SEC.
The 1996 Plan is administered by the Human Resources Committee. The
Committee is composed entirely of directors who are both "nonemployee
directors" (within the meaning of Section 16 of the Exchange Act) and "outside
directors" (within the meaning of Section 162(m) of the Code). All key
employees (and prospective key employees) of the Company and its subsidiaries
will be eligible to participate in the 1996 Plan, with the Committee having
discretion to determine who qualifies as a key employee and the extent of each
key employee's participation in the 1996 Plan. The 1996 Plan may be amended by
the Committee.
Options
Options granted under the 1996 Plan will be either incentive stock options
("ISOs"), as defined under Section 422 of the Code, or nonstatutory stock
options. The aggregate fair market value of the underlying shares of stock on
the date(s) of grant(s) of ISOs exercisable for the first time by any eligible
person in any calendar year under the 1996 Plan or any similar plan of the
Company and its subsidiaries shall not exceed $100,000. The purchase price per
share of stock for the shares covered by any options will not be less than the
fair market value of the Company's Common Stock on the date the option is
granted. Options will be exercisable at such times and pursuant to such
conditions as are established by the Committee, provided however, that no
option will be exercisable more than ten years and one month after it was
granted. Payment of the purchase price of any option shall be made in cash or,
in whole or in part, in Common Stock of the Company, valued at fair market
value on the date of exercise.
Generally, options may be exercised within six months after termination of
employment to the extent of shares then purchasable. If the employment of a
holder is terminated for cause, the holder's options shall terminate ten days
after such termination of employment. The Committee may extend the time to
exercise an option, but not beyond the earlier of three years following
termination of employment of the optionee or the option's expiration date.
If, prior to the 1996 Plan's termination, any option should terminate for
any reason without having been exercised in full, the unpurchased shares shall
again become available for options. The proceeds of the sale of stock under
the 1996 Plan will constitute general funds of the Company.
Restricted Stock
All shares of restricted Common Stock ("Restricted Stock") awarded under the
1996 Plan shall be subject to an award agreement, the terms and conditions of
which shall be established by the Chief Executive Officer from time to time.
Each award agreement shall establish with respect to the shares awarded to
each grantee a "Restricted Period". The Restricted Period may differ among
grantees and have different expiration dates with respect to portions of
shares of Restricted Stock covered by the same award. Restricted Stock awarded
to grantees may not be sold, encumbered or otherwise transferred during the
Restricted Period and, except as otherwise provided by the Committee, the
shares of Restricted Stock of a grantee who terminates employment during the
Restricted Period with respect thereto shall be forfeited and returned to the
Company. Except for such
21
<PAGE>
restrictions, however, a grantee shall have all of the rights of a stockholder
of the Company including, but not limited to, the right to receive any
dividends and the right to vote such shares. Any shares awarded as Restricted
Stock that are forfeited shall thereafter again become available for awards
under the 1996 Plan.
Tax Liability
Subject to the Committee's discretion, agreements between the Company and
grantees in connection with awards of options or Restricted Stock may provide
for the payment by the Company of a supplemental cash payment to grantees
promptly after the exercise of an option or promptly after the date on which
the shares of Restricted Stock awarded are included in the gross income of the
grantee under the Code. Such supplemental cash payments, to the extent
determined by the Committee, shall provide for the payment of such amounts as
may be necessary to result in the grantee not having an incremental tax
liability as a result of such exercise or inclusion in income.
New Plan Benefits
The following table indicates grants under the 1996 Plan that have been made
subject to approval by the stockholders of the proposed amendment.
<TABLE>
<CAPTION>
Name and position Number of shares
<S> <C>
Stephen M. Wolf, Chairman 9,835
Rakesh Gangwal, President and Chief Executive Officer 9,835
Executive Group 19,670
Non-Executive Officer Employee Group 25,000
</TABLE>
Federal Income Tax Treatment
The following discussion of certain relevant federal income tax effects
applicable to options and Restricted Stock granted under the 1996 Plan is a
brief summary only, and reference is made to the Code and the regulations and
interpretations issued thereunder for a complete statement of all relevant
federal tax consequences. This summary is not intended to be exhaustive and
does not describe state, local or foreign tax consequences.
In general, an optionee will not be subject to tax at the time a
nonstatutory stock option is granted. Upon exercise of a nonstatutory stock
option where the exercise price is paid in cash, the optionee generally must
include in ordinary income at the time of exercise an amount equal to the
excess, if any, of the fair market value of the Common Stock at the time of
exercise over the exercise price, and will have a tax basis in such shares
equal to the cash paid upon exercise plus the amount taxable as ordinary
income to the optionee.
The Company generally will be entitled to a deduction in the amount of an
optionee's ordinary income at the time such income is recognized by the
optionee upon the exercise of a nonstatutory stock option. Income and payroll
taxes are required to be withheld on the amount of ordinary income resulting
from the exercise of a nonstatutory stock option.
The grant of an ISO does not result in taxable income to an optionee for
federal income tax purposes, nor is an optionee required to recognize income
upon the exercise of an ISO. The holder may, however, be subject to an
alternative minimum tax in certain instances upon exercise of an ISO. If the
holder of an ISO does not dispose of the stock purchased under such an option
within two years following the date the option was granted, and holds the
stock so acquired for at least one year, the difference between the sale price
and the option price will
22
<PAGE>
be taxed to the optionee as long-term capital gain, rather than as ordinary
income. If an optionee disposes of the stock within either the two-year period
or one-year period referred to above, the tax consequences will be the same as
those described above with respect to nonstatutory stock options.
The corporation is not entitled to any tax deduction in connection with the
grant or exercise of an ISO. However, if the optionee disposes of his stock
within the holding periods described above, the Company may be entitled to a
tax deduction for the amount of ordinary income, if any, realized by the
optionee.
In the case of an award of Restricted Stock, a grantee generally will not be
taxed upon the grant of such an award but, rather, will recognize ordinary
income in an amount equal to the fair market value of the Common Stock at the
time the shares are no longer subject to a substantial risk of forfeiture, as
defined in the Code. The Company generally will be entitled to a tax deduction
at the time and to the extent that income is recognized by such grantee.
On March 24, 2000, the closing price of the Company's Common Stock as
reported on the New York Stock Exchange Composite Tape was $22.375 per share.
The Board of Directors recommends that stockholders vote FOR the proposed
amendment to the 1996 Plan.
STOCKHOLDER PROPOSAL CONCERNING CUMULATIVE VOTING (Item No. 4)
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia, NW, Suite
215 Washington, D.C. 20037, who is the beneficial owner of 250 shares of
Common Stock, has advised the Company of her intention to introduce the
following resolution at the annual meeting. To be adopted, this resolution,
which is opposed by the Board of Directors, would require the affirmative vote
of the holders of at least a majority of the shares of Common Stock, present
in person or represented by proxy at the meeting and entitled to vote.
RESOLVED: "That the stockholders of US AIRWAYS Group, assembled in Annual
Meeting in person and by proxy, hereby request the Board of Directors to take
the necessary steps to provide for cumulative voting in the election of
directors, which means each stockholder shall be entitled to as many votes as
shall equal the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit."
Supporting Statement of Mrs. Evelyn Y. Davis
REASONS: "Many states have mandatory cumulative voting, so do National
Banks." "A Director elected by cumulative voting might vote for a better
annual meeting date." "In addition, many corporations have adopted cumulative
voting."
"Last year the owners of 9,282,945 shares, representing approximately 20.2%
of shares voting, voted FOR this proposal."
"If you AGREE, please mark your proxy FOR this resolution."
Statement of the Company in Opposition to the Stockholder Proposal
The Board of Directors recommends a vote against the cumulative voting
proposal because the Board firmly believes that cumulative voting is not in
the best interest of the Company or its stockholders.
The Company's current voting system insures that each Director is elected by
a plurality of the votes cast. By contrast, cumulative voting would favor
special interests by permitting the election of a Director by a minority of
stockholders.
23
<PAGE>
The Board of Directors believes that each Director should be chosen for his
or her qualifications and ability to serve the Company. To do otherwise would
sacrifice the interests of the Company and stockholders as a whole.
Each Director has the duty to represent all the stockholders and to advance
the best interest of the Company. By permitting a relatively small group of
stockholders to pool their votes and elect a Director, cumulative voting would
produce a conflict between the Director's duty to represent all the
stockholders and the Director's allegance to his or her narrow constituency.
A system of cumulative voting could render a partisan Board, as special
interest concerns prevent the members of the Board from working together as a
smoothly functioning unit. Moreover, the prospect of such an endeavor could
discourage qualified individuals from accepting nominations to the Board.
In summary, the Company believes that the existing system of one vote per
share is working well.
The proposal was rejected by the shareholders last year by a vote of 78.97%
against.
Accordingly, the Board of Directors urges you to vote AGAINST the
stockholder resolution (Item No. 4).
STOCKHOLDER PROPOSAL CONCERNING CONFIDENTIAL VOTING (Item No. 5)
The New York City Police Pension Fund, One Centre Street, New York, New York
10007-2341, which owns 47,455 shares of Common Stock, has advised the Company
of its intention to introduce the following resolution at the annual meeting.
To be adopted, this resolution, which is opposed by the Board of Directors,
would require the affirmative vote of the holders of at least a majority of
the shares of Common Stock, present in person or represented by proxy at the
meeting and entitled to vote.
"RESOLVED, that the shareholders of the Company request that the board of
directors adopt and implement a policy requiring all proxies, ballots and
voting tabulations that identify how shareholders voted be kept
confidential, except when disclosure is mandated by law, such disclosure is
expressly requested by a shareholder or during a contested election for the
board of directors, and that the tabulators and the inspectors of election
be independent and not the employees of the Company."
Supporting Statement of the Proponent
The confidential ballot is fundamental to the American political system. The
reason for this protection is to ensure that voters are not subjected to
actual or perceived coercive pressure. We believe that it is time that this
fundamental principle of the confidential ballot be applied to public
corporations.
Many excellent companies use confidential voting. None have reported any
difficulty reaching quorums or meeting supermajority vote requirements and
those surveyed reported that the added cost of implementing confidentiality
was negligible.
Strong support was shown at the last annual meeting when 38.9% of the votes
were cast in favor of this proposal.
It is our belief that all shareholders need the protection of a confidential
ballot no less than voters in political elections. While we make no imputation
that our Company's management has acted coercively, the existence of this
possibility is sufficient to justify confidentiality.
This resolution would permit shareholders to voluntarily disclose their vote
to management by expressly requesting such disclosure on their proxy cards.
Additionally, shareholders may disclose their vote to any other person they
choose. This resolution would merely restrict the ability of the Company to
have access to the vote of its shareholders without their specific consent.
24
<PAGE>
Many shareholders believe confidentiality of ownership is ensured when
shares are held in street or nominee name. This is not always the case.
Management has various means of determining actual (beneficial) ownership. For
instance, proxy solicitors have elaborate databases that can match account
numbers with the identity of some owners. Moreover, why should shareholders
have to transfer their shares to nominees in an attempt to maintain
confidentiality? In our opinion, this resolution is the only way to ensure a
secret ballot for all shareholders irrespective of how they choose to hold
their shares.
We believe that confidential voting is one of the most basic reforms needed
in the proxy voting system and that the system must be free of the possibility
of pressure and the appearance of retaliation.
We hope that you would agree and vote FOR this proposal.
Statement of the Company in Opposition to the Stockholder Proposal
The Board of Directors believes that approval of the stockholder resolution
would limit the Company's ability to communicate with its stockholders and
urges stockholders to vote against the resolution.
For more than twenty years the Company has used an independent tabulator and
inspectors of election and has no plans to discontinue this practice. The
proponent's resolution would have no effect on the Company's practice in this
regard. However, the Company is opposed to a requirement that balloting be
confidential.
In recent years the SEC has amended its proxy rules to improve
communications between corporations and beneficial owners. In the interest of
promoting an open dialogue with its stockholders, the Company believes it
should be able to communicate with its stockholders as permitted under the
proxy rules without the impediments that confidential voting would impose.
The Company also believes that cutting off its access to voting results
would interfere with the vote gathering and tabulation process. The Company is
responsible for, among other things, soliciting votes to obtain a quorum,
pursuing proxies that are missing in the mails and helping to resolve voting
ambiguities. Currently, a substantial number of the shares of Common Stock are
held in the names of nominees. The tabulating process has become increasingly
cumbersome as ownership has been layered through the use of depositories,
nominees and "street names." The addition of a further layer of secrecy would,
in the Company's view, only make the process more cumbersome and costly. To
the extent the Company cannot participate and clarify voting ambiguities,
shares may not be voted and stockholders may be disenfranchised.
In summary, the Company believes that confidential voting would impair
stockholder communications and would not serve any useful purpose.
This proposal was rejected by the shareholders last year by a vote of 60.49%
against.
Accordingly, the Board of Directors urges you to vote AGAINST the
stockholder resolution (Item No. 5).
25
<PAGE>
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which may come before the
meeting except that indicated above. However, if other business is brought
before the meeting, the persons acting under the enclosed form of proxy may
vote thereunder in accordance with their best judgment.
The Company's by-laws require stockholders who intend to nominate directors
or propose new business at any Annual Meeting to provide advance notice of
such intended action as well as certain additional information. This by-laws
provision requires stockholders to provide the Company with notice of their
intent to nominate directors or propose new business at an Annual Meeting not
less than 30 days nor more than 60 days prior to such Annual Meeting;
provided, however, that in the event less than 40 days prior written notice or
prior public disclosure of the date of the meeting is given or made to the
stockholder, such notices by the stockholder must be received by the Company
not later than close of business on the 10th day following the day on which
such notice of the date of the Annual Meeting was mailed or such public
disclosure was made.
Assuming the 2000 Annual Meeting is held as scheduled, notice of intent to
nominate directors or propose new business to be brought before the 2000
Annual Meeting must have been received in proper form on or before April 24,
2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
One transaction in November, 1998 for Christopher Doan was inadvertently
omitted from the Form 5 filed in February, 1999 for the 1998 fiscal year. The
transaction was reported on the Form 5 for the 1999 fiscal year that was filed
in February, 2000.
COST AND METHOD OF PROXY SOLICITATION
Proxies will be solicited by mail. The expense of such solicitation will be
borne by the Company. Directors, officers, or regular employees of the Company
and US Airways may solicit proxies in person. The cost of such solicitation
will be nominal. In addition, D.F. King & Co., Inc. has been retained by the
Company to assist in soliciting proxies from brokerage firms, bank nominees
and other institutional holders to assure a timely vote by the beneficial
owners of stock held of record by such firms, banks and institutions. This
firm will receive a fee not to exceed $17,500 for its services.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
As discussed above, the Company's by-laws require stockholders who intend to
nominate directors or propose new business at any Annual Meeting to provide
advance notice of such intended action as well as certain additional
information. In addition, in accordance with federal securities laws,
proposals to be submitted by stockholders for consideration at the Company's
next Annual Meeting and inclusion in the Company's 2001 Proxy Statement must
be received by the Company at its executive offices in Arlington, Virginia,
not later than December 15, 2000.
By Order of the Board of Directors,
Jennifer C. McGarey
Secretary
April 14, 2000
26
<PAGE>
FIRST AMENDMENT TO THE
1996 STOCK INCENTIVE PLAN OF US AIRWAYS GROUP, INC.
(as amended and restated as of May 20, 1998)
WHEREAS, US Airways Group, Inc. (the "Company") maintains the 1996
Stock Incentive Plan of US Airways Group, Inc. (the "Plan"); and
WHEREAS, Section 13 of the Plan provides that the Human Resources
Committee (the "Committee") of the Board of Directors of the Company 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:
The second sentence of Section 3 of the Plan is hereby amended by
deleting the number "5,100,000" therein and inserting, in lieu thereof, the
number "8,100,000".
This First Amendment shall be effective upon its approval by the
holders of a majority of the Shares present or represented and entitled to vote
at the 2000 annual meeting of stockholders of the Corporation.
<PAGE>
<TABLE>
<CAPTION>
Detach Proxy Card Here
- ------------------------------------------------------------------------------------------------------------ |
<S> <C> |
_________ |
| | |
--------- |
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1,2 AND 3. |
1. Election of Director Nominees: M.J. DeVito, R. Gangwal, P.M. George, R.L. Johnson, R. LeBuhn, |
J.G. Medlin, Jr., H.M. Merriman, T.H. O'Brien, H. Ochoa-Brillembourg, R.B. Priory, |
R.W. Smith, S.M. Wolf. |
|
|
FOR all nominees ---- WITHHOLD AUTHORITY to vote ---- *EXCEPTIONS ---- |
listed above | | for all nominees listed above | | | | |
---- ---- ---- |
(INSTRUCTIONS: To vote for all nominees other than certain specified nominees, mark the "Exceptions" box |
and write the nominee's name in the space provided below.) |
*Exceptions ________________________________________________________________________________________________ |
|
2. Ratification of the selection of KPMG LLP as auditors. ___ ___ ___ |
FOR | | AGAINST | | ABSTAIN | | |
--- --- --- |
|
3. Approval of an amendment to the 1996 Stock Incentive Plan of US Airways Group, Inc. |
___ ___ ___ |
FOR | | AGAINST | | ABSTAIN | | |
--- --- --- |
- ------------------------------------------------------------------------------------------------------------ |
BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 4 AND 5. |
|
4. Stockholder proposal concerning cumulative voting. ___ ___ ___ |
FOR | | AGAINST | | ABSTAIN | | |
--- --- --- |
| Please Detach Here
5. Stockholder proposal concerning confidential voting. ___ ___ ___ | You Must Detach This
FOR | | AGAINST | | ABSTAIN | | | Portion of the Proxy
--- --- --- | Card Before
| Returning it in the
Change of Address and/ ___ | Enclosed Envelope
or Comments Mark Here | | |
--- |
|
NOTE: Please sign as name appears hereon. Joint |
owners should each sign. When signing as attorney,|
executor, administrator, trustee or guardian, |
please give full title as such. |
|
_________________________________________________ |
Signature |
|
_________________________________________________ |
Signature |
|
Dated: _____________________________________, 2000|
|
(Please sign, date and return this proxy card Votes MUST be indicated |
in the enclosed envelope) (x) in black or blue ink. X |
______________________________________________________________________________________________________________|
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------------
| US AIRWAYS GROUP, INC.
| PROXY
| Proxy Solicited on Behalf of The Board of Directors for Annual Meeting of Stockholders
| on May 17, 2000
| The undersigned hereby appoints J.C. McGarey and L.M. Nagin, and each of them, proxies (each with power
| of substitution) of the undersigned to attend the above annual meeting of stockholders of US Airways Group, Inc.
| and any adjournment or postponement thereof and thereat to vote all shares of stock held by the undersigned, as
| specified on the reverse side, and on any other matters that may properly come before said meeting.
|
| For those participants who may hold shares in the US Airways, Inc. Employee Stock Ownership Plan, the US
| Airways, Inc. Employee Savings Plan, the US Airways, Inc. 401 (k) Savings Plan or the Supplemental Retirement
| Plan of Piedmont Aviation, Inc. (collectively, the "Plans"), please fill in and sign this card and mail it in time
| to be received no later than May 12, 2000, in order to be voted in a timely manner by the administrator of the
| Plans, Fidelity Management Trust Company (the "Administrator"). After May 12, 2000, the instructions cannot be
| revoked and, in accordance with the Plans, you may not vote these shares in person at the meeting. The
| Administrator is authorized to vote the Plan shares for which instructions have been given upon such other business
| as may come before the meeting. The Bank of New York will tally the vote on behalf of the Administrator.
|
| THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
|
| PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
|
| US AIRWAYS GROUP, INC.
| P.O. BOX 11043
| NEW YORK, N.Y. 10203-0043
|
|
|
|
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
