SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
(X ) Soliciting Material Pursuant to Rule 14a-12
FILING BY:
US AIRWAYS GROUP, INC
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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( ) 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
MAY 24, 2000
[United Company Logo] / [US Airways Company Logo]
[Slide 1]
"The Premier Global Carrier"
Unparalleled Access
May 24, 2000
Confidential Draft 5/23/00, 9pm
[Slide 2]
Safe Harbor
This presentation contains certain "forward-looking" statements within the
meaning of the Private Securities Reform Act of 1995. These statements are
based on management's current expectations and are naturally subject to
uncertainty and changes in circumstances. Actual results may vary
materially from the expectations contained herein. The forward-looking
statements contained herein include statements about future financial and
operating results and benefits of the pending merger between United and US
Airways. Factors that could cause actual results to differ materially from
those described herein include: industry capacity decisions; the airline
pricing environment; competitors' route decisions; the inability to obtain
regulatory approvals; actions of the U.S., foreign and local governments;
domestic and international travel patterns; the inability to successfully
integrate the businesses of United and US Airways; costs related to the
merger; the inability to achieve cost-cutting synergies resulting from the
merger; labor integration issues; the economic environment of the airline
industry and the general economic environment. More detailed information
about these factors is set forth in the reports filed by United and US
Airways with the Securities and Exchange Commission. Neither United nor US
Airways is under any obligation to (and expressly disclaims any such
obligation to) update or alter its forward-looking statements, whether as a
result of new information, future events or otherwise.
[Slide 3]
James E. Goodwin
Chairman and Chief Executive Officer
UAL Corporation
[Slide 4]
Outline
o Transaction Overview and Strategic Rationale
o Consumer Benefits
o DC Air
o Labor and Fleet Integration
o Roadmap to Completion
o Economic and Financial Considerations
o US Airways Profile
[Slide 5]
Transaction Overview
o Total offer value $11.6 billion
- Total offer price, $4.3 billion
- Plus the assumption of $1.5 billion in net debt
- and $5.8 billion in aircraft leases.
o $60 per share offer in cash for all US Airways shares
- A premium of 130% over May 23 closing price
o Expected to close in 2001, accretive in year 2
o Financing: Cash on hand, existing credit facilities and other borrowings
o Break-up fee: $160 million
o Spin-off certain Washington Reagan assets to DC Air to enhance competition
[Slide 6]
Strategic Rationale
o East Coast has the largest population in the US
- Northeast alone is a $14 billion travel market
o United has only a 14% market share in the Northeast
o United has a significant opportunity to create a nationwide network
o There were two possible solutions
- Develop own presence -> uneconomical
- Acquire existing carrier -> US Airways is the obvious choice
[Slide 7]
US Airways Completes United's Domestic Network
United Revenue Share US Airways Revenue Share
[Map of the United States depicting [Map of the United States depicting
United's percentage revenue share by US Airways' percentage revenue share
state.] by state.]
[Slide 8]
Combined Operations
[Map of the world depicting countries in which United, US Airways or both
airlines have operations.]
[Slide 9]
Combined Operations - Selected Statistics
United US Airways Total*
- --------------------------------------------------------------------
Fleet (aircraft) 600 403 1,003
Hubs 5 3 8
Employees 97,000 46,000 143,000
Passengers (MM) 81.7 55.0 136.7
Flights 2,356 2,156 4,512
Destinations 133 103 170
* Total includes DC Air
[Slide 10]
Consumer Benefits - Better Service For Travelers
o Benefits for all customers
- Seamless access to the premier global network
- Enhanced convenience: one ticket, one baggage check-in, one club, one
frequent flyer program
o Benefits to US Airways' customers
- United's East-West route network complements US Airways' North-South
network
- New reach to Europe, South America, Asia and Australia
- Access to Star Alliance
o Benefits to United's customers
- First true nationwide network
- Increased East Coast access
[Slide 11]
Creation of DC Air - New Competitive Presence
o DC Air
- Based at Washington-Reagan Airport
- Composed of majority of US Airways' routes from Washington-Reagan
- Will initially wet-lease aircraft and purchase other necessary
operating assets from United
- Will ensure greater competition and consumer benefits
o Purchased and managed by Robert Johnson, Chairman & CEO BET Industries, a
media-entertainment conglomerate
o United to retain Shuttle
o United retains assets to fly non-stop between DCA and PIT, CLT, PHL hubs
[Slide 12]
DC Air
Map of the United States depicting DC Air route flights.
o Over $500 Million Annual Revenue
o Over 100 Round Trip Flights per Day
o Service to 44 airports
o 3 Million Annual Passengers
o 500 mile stage length
[Slide 13]
Labor Integration
o IAM
- Representation determined by NMB process
- Union determines seniority list
o AFA
- Determined by AFA merger policy
o Pilots
- Determined by ALPA merger policy
[Slide 14]
Fleets Are Compatible
- ------------------------------------------------------------------------------
United Fleet US Airways Fleet
Type Current Type Current
- ------------------------------------------------------------------------------
A320 family 87 A320 family 49
B727 75 Common B727 4
B737 182 Aircraft B737 198
B757 98 496 297 B757 34
B767 53 B767 12
- ------------------------------------------------------------------------------
B747 51 Other F-100 40
B777 42 Aircraft MD-80/DC9 64
DC10 11 104 106 A330 2
- ------------------------------------------------------------------------------
600 403
- ------------------------------------------------------------------------------
[Slide 15]
Roadmap to Completion
o US Airways stockholder approval
o Regulatory approvals
o Expected to close in 2001
[Slide 16]
Economic and Financial Considerations
Douglas A. Hacker
Executive Vice President Finance and Planning
and Chief Financial Officer
UAL Corporation
[Slide 17]
Transaction Highlights
o Total transaction value $11.6 billion
- Total offer price of $4.3 billion
- plus the assumption of $1.5 billion in net debt
- and $5.8 billion in aircraft operating leases
o US Airways standalone transaction multiples 2001
- Transaction Value/EBITDAR 6 x
- Transaction Value/Revenues 1 x
o Accretive in year 2 (reported and cash EPS)
o Financing: Cash on hand, existing and new credit facilities, and
other borrowings
[Slide 18]
Shareholder Value Creation
o This combination creates value for shareholders well in excess of the
purchase price
US Airways Standalone Value + Value Created - Purchase Price = Incremental
Value to UAL
[Slide 19]
Shareholder Value
Other Benefits Transition Costs
Revenue Benefits Purchase Price
US Airways Standalone Value to UAL Shareholders
[Slide 20]
Earnings Accretion
Other Benefits Financing Cost
Revenue Benefits Goodwill Amortization
US Airways Standalone {Accretion}
UAL Standalone Pro Forma combination
[Slide 21]
EPS Accretion / (Dilution) to United
[Table depicting estimated EPS Accretion/ (Dilution) to United in 2001,
2002 and 2003.]
- ----------------------------------------------------------------------------
Year Reported EPS Cash EPS
- ----------------------------------------------------------------------------
2001E 34% -2.0%
- ----------------------------------------------------------------------------
2002E 31% 57%
- ----------------------------------------------------------------------------
2003E 39% 65%
- ----------------------------------------------------------------------------
[Slide 22]
Revenue Benefits
o Increased Connectivity
- Customers offered more options in commonly served cities
- Over 560 new online city pairs created for United and US Airways
passengers
- Improved business traffic mix
o Increased City Presence
- As a carrier's service share in a city increases, that carrier
achieves greater revenue efficiency
o Improved Overall Asset Allocation
- Route reallocation
[Slide 23]
Revenue Benefits
[Pie chart depicting revenue benefits.]
[Slide 24]
Increased Connections
New Online Connections Achieve a Higher CRS Screen Display
Interline: This connection appears on page 8 of the CRS display
US Airways 121 CLT-DEN 800A 939A
United 5594 COS 1025A 1102P
Online: With the United code it appears on page 1 of the CRS display
United 121 CLT-DEN 800A 939A
United 5594 COS 1025A 1102A
[slide 25]
Increased City Presence
Increasing presence in a city drives revenue benefit
o As an airline gets larger in a city, it offers:
- Increased frequencies on key routes
- A wider selection of destinations
o This leads to increased revenue due to:
- Corporate volume agreements
- A more attractive frequent-flyer program
- Becoming the 'Natural Choice'
[Slide 26]
US Airways Enhances United's Eastern Presence
City Revenue Rankings East Of Ohio
United US Airways Combined
New York 4 5 3
Washington 1 2 1
Atlanta 5 7 4
Boston 4 3 1
Orlando 5 2 2
Philadelphia 3 1 1
Miami 2 4 2
Tampa 7 2 2
Ft. Lauderdale 8 2 2
Pittsburgh 5 1 1
[Slide 27]
Improved Asset Allocation
Some aircraft redeployed to more strategic/
profitable markets:
- East Coast-International
- Carribean
- Hub Markets
Opportunity to cancel unprofitable flights:
Cost savings benefit of early
retirement of older aircraft
[Slide 28]
Cost Synergies
o Station, line maintenance and overhead consolidation
- Labor force efficiencies accomplished through growth of the business
and normal attrition
o More efficient aircraft utilization and facility consolidation
o Other ongoing benefits
- Advertising consolidation
- Liability insurance savings
[Slide 29]
Proposed Financing
o Cash required at closing approximately $4.4 billion
o Sources
- Cash on hand
- Existing and new credit facilities
- Secured and unsecured borrowings
o United will retain significant financial flexibility
o Revenue benefits will quickly begin to restore balance sheet post
completion
[Slide 30]
Liquidity and Credit Ratios
2000 Pro Forma B/(W)
UAL Standalone 2001 2002
-------------- ---- ----
Adj Total Debt/EBITDAR 3.7X (1.3) (0.1)
Adj Total Debt/Total Cap 69% (11) (8)
EBITDAR/Adj Total Interest Exp 2.2X (0.5) (0.1)
[Slide 31]
Summary
o Leading airline with first true nationwide network
- Significant consumer benefits
o DC Air divestiture will enhance competition
o Combination creates value well in excess of purchase price
- Driven by large revenue benefits
[Slide 32]
"The Premier Global Carrier"
Unparalleled Access
[Slide 33]
Stephen M. Wolf
Chairman
US Airways Group, Inc.
and US Airways, Inc.
[Slide 34]
Rakesh Gangwal
President and Chief Executive Officer
US Airways Group, Inc.
and US Airways, Inc.
[Slide 35]
US Airways Is The Sixth-Largest
U.S. Domestic Carrier In Terms Of ASMs
(1999 Available Seat Miles in Billions)
[Bar graph reflecting carrier available seat miles in billions]
Carrier ASM
- ------- ---
UA 176.6
AA 161.1
DL 144.8
NW 99.5
CO 77.2
US 59.1
WN 52.9
TW 35.6
HP 25.9
[Slide 36]
US Airways Is A Merger Of Seven Small Airlines
[Graphic depicting the mergers of predecessor airlines]
Lake Central - Allegheny
Allegheny
Mohawk- Allegheny
Empire - Piedmont Allegheny
PSA
Piedmont US Air
US Air
US Airways Shuttle
US Airways
[Slide 37]
We Had Too Many Different Aircraft Types
o B767-200
o B757-200
o MD-80
o B727 (Shuttle)
o B737-300 and -400
o B737-200
o DC9-30
o F100
o F28
[Slide 38]
Product Quality And Service Levels
Were Significantly Below Par
[Slide 39]
Our Cost Structure Was High
[Slide 40]
A Management Change Occurred At
US Airways In January 1996
[Slide 41]
We Embarked On A Five Point Business Plan
Become Change the Culture
"The Carrier of Choice" of the Company
World-Class
Global Carrier
Achieve Competitive Exploit the Rationalize the Fleet
Cost Structure Route Network
[Slide 42]
We Changed Our Name And Livery
[Photograph of a US Airways plane in flight.]
[Slide 43]
We Purchased The US Airways Shuttle
[Photograph of a US Airways Shuttle plane in flight.]
[Slide 44]
We Introduced Regional Jet Service In January, 1998
[Photograph of a US Airways regional jet in flight.]
[Slide 45]
In June 1998, We Launched Our Response To Low-Cost Carriers
[Photograph of a Metro Jet plane.]
[Slide 46]
In November 1998, We Introduced The A320 Family Into Our Operations
[Photograph of US Airways plane in flight.]
[Slide 47]
In May 2000, We Introduced The A330 Widebody Into Our Operations
[Photograph of a US Airways plane in flight.]
[Slide 48]
The Airbus Contracts Are "One Of A Kind"
o Pricing
o Financing
o Terms and Conditions
[Slide 49]
We Expanded Transatlantic Operations Significantly
[Map depicting US Airways transatlantic routes.]
Capacity (ASMs) Up 263%
Grew From 4.0% to 12.3% of System
[Slide 50]
We Launched Employee Task Forces
o MetroJet
o On-Time Departures and Arrivals
o PAWOB (Lost Baggage)
o Aircraft / Ground Equipment Damage
o Fuel Consumption
[Slide 51]
Most Importantly, We Have Made Spectacular Strides In Providing Superior
Customer Service
[Photograph of US Airways Employees.]
[Slide 52]
[logos]
US Airways Was Rated #1 In The
1999 Annual Airline Quality Rating Survey
[Slide 53]
Our New Web Site Is A Great Success
[Home page of the US Airways website.]
[Slide 54]
We Are Increasing Our Online Sales and Reducing Commission Expense (Percent of
Revenue)
[Bar chart depicting the % of ticket sold online]
Quarter Percentage
1Q99 3.6%
2Q99 4.8%
3Q99 6.6%
4Q99 7.5%
1Q00 9.3%
[Bar chart depicting commission expense as a percentage of revenue]
Quarter Percentage
1Q99 6.7%
2Q99 6.3%
3Q99 6.4%
4Q99 5.9%
1Q00 4.9%
[Slide 55]
Our E-Ticketing Penetration Is Among The Highest In The Industry
[Bar graph depicting E-Ticketing penetration]
Carrier Percentage
- ------- ----------
AMR 37.0%
CAL 41.0%
DAL 50.0%
UAL 52.0%
NW 55.0%
US 64.0%
LUV 75.0%
[Slide 56]
All Major Labor Negotiations Are Behind Us...
o Fleet Service Employees Closed March 1999
o Shuttle Pilots Interim Agmt. Closed March 1999
o Bermuda Agents Closed March 1999
o Flight Crew Training Instructors Closed April 1999
o Pilots - Check Airmen Closed May 1999
o Shuttle Mechanics Integration Closed May 1999
o Dispatchers Closed July 1999
o Mechanics and Related Closed October 1999
o Passenger Service Employees Closed November 1999
o Shuttle Pilots - Integration Closed March 2000
o Flight Attendants Closed May 2000
o Simulator Engines Negotiations Ongoing
[Slide 57]
And We Began Growing US Airways
[Line graph depicting aircraft from 1990 through 2000 and showing upward
growth beginning in 1997]
Year Number of Planes
- ---- ----------------
90 454
91 436
92 440
93 441
94 424
95 394
96 390
97 376
98 388
99 392
00 418
[Slide 58]
Domestic Capacity And Traffic Trends:
May Through August (Year-over-Year Change)
[Bar graph depicting ASMs and RPMs]
ASMs RPMs
---- ----
1999 3.4% -2.0%
2000E 12.5% 14.0%
[Slide 59]
The Intrinsic Value Of US Airways
[Slide 60]
U.S. Domestic 48 State Air Travel Revenues
(Originating Passenger Revenues For 1999)
[Map of the United States]
West $15.3 Bil
Central $19.9 Bil
East $22.6 Bil
Total $57.8 Bil
[Slide 61]
US Airways Is The Leading Carrier For Intra-East Coast Passengers
[Map of the United States - with east coast states highlighted] [PIT, PHL,
BWI and CLI airport locations identified on the map]
Share of Psgrs
- --------------
US 37
DL 29
CO 9
UC 1
[Slide 62]
Combined With Our Express Operations, Our East Coast Presence Is Unmatched
[Map of east coast routes]]
o 1,041 Daily Jet Departures
o 1,614 Daily Express Departures
o 92 Cities Served
[Slide 63]
Long Haul Traffic From US Airways Core Region Is Fragmented Among Many
Carriers
[Map of east coast states]
[Slide 64]
Merger Will "Plug In" US Airways' Intra-East Coast Network To United's Global
Network
[Map of east coast states with arrow pointing towards a text box containing
the word "Europe".]
[Slide 65]
Merger Will "Plug In" US Airways' Intra-East Coast Network To United's Global
Network
[Map of east coast states with arrows pointing towards two text boxes with
the words "Europe" and "Carribean and Latin America" written in them.]
[Slide 66]
Merger Will "Plug In" US Airways' Intra-East Coast Network To United's Global
Network
[Map of east coast states with arrows pointing towards three text boxes
with the words "Europe", "Carribean and Latin America" and "Domestic
East-West" written in them.]
[Slide 67]
Merger Will "Plug In" US Airways' Intra-East Coast Network To United's Global
Network
[Map of east coast states with arrows pointing towards four text boxes with
the words "Europe", "Carribean and Latin America", "Domestic East-West" and
"Pacific" written in them.]
[Slide 68]
[logo]
US Airways
[Slide 69]
Proxy Legend
In connection with merger, US Airways will be filing a proxy statement with
the Securities and Exchange Commission. STOCKHOLDERS OF US AIRWAYS ARE
URGED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a
free copy of the proxy statement when it becomes available and other
documents filed by United and US Airways with the Securities and Exchange
Commission in connection with the merger at the Securities and Exchange
Commission's web site at www.sec.gov. Stockholders of US Airways may also
obtain for free the proxy statement and other documents filed by US Airways
in connection with the merger by directing a request to: US Airways, 2345
Crystal Drive, Arlington, Virginia 22227, Attention: Kimberly Holland,
Investor Relations, Telephone: (703) 872-5009, email:
[email protected]. Stockholders of US Airways may also obtain
for free documents filed by United in connection with the merger by
directing a request to: United Airlines, 1200 East Algonquin Road, Elk
Grove Village, Illinois 60007, Attention: Patty Chaplinski, Investor
Relations, Telephone: (847) 700-7501, email: [email protected]. US
Airways and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from US Airways stockholders in
favor of the merger. These directors and executive officers include the
following: N. Bruce Ashby, Mathias J. DeVito, Rakesh Gangwal, Peter M.
George, Robert L. Johnson, Robert LeBuhn, John G. Medlin, Jr., Hanne M.
Merriman, Thomas A. Mutryn, Thomas H. O'Brien, Larry M. Nagin, Hilda
Ochoa-Brillembourg, Richard B. Priory, Raymond W. Smith, Stephen M. Wolf.
Collectively, as of January 31, 2000, the directors and executive officers
of US Airways may be deemed to beneficially own approximately 6.6% of the
outstanding shares of US Airways common stock. Stockholders of US Airways
may obtain additional information regarding the interests of participants
by reading the proxy statement when it becomes available. United and
certain of its directors and executive officers may also be deemed to be
participants in the solicitation of proxies from US Airways stockholders in
favor of the merger. These directors and executive officers include:
Christopher Bowers, Frederic F. Brace, Rono J. Dutta, James E. Goodwin,
Douglas A. Hacker, Francesca M. Maher, Peter McDonald, Andrew Studdert and
Daniel Walsh. As of the date of this communication, United, Mr. Brace, Mr.
Dutta, Mr. Goodwin, Mr. Hacker and Ms. Maher do not beneficially own any
shares of US Airways common stock. Private Securities Reform Act of 1995.
These statements are based on management's current expectations and are
naturally subject to uncertainty and changes in circumstances. Actual
results may vary materially from the expectations contained herein. The
forward-looking statements contained herein include statements about future
financial and operating results and benefits of the pending merger between
United and US Airways. Factors that could cause actual results to differ
materially from those described herein include: industry capacity
decisions; the airline pricing environment; competitors' route decisions;
the inability to obtain regulatory approvals; actions of the U.S., foreign
and local governments; domestic and international travel patterns; the
inability to successfully integrate the businesses of United and US
Airways; costs related to the merger; the inability to achieve cost-cutting
synergies resulting from the merger; labor integration issues; the economic
environment of the airline industry and the general economic environment.
More detailed information about these factors is set forth in the reports
filed by United and US Airways with the Securities and Exchange Commission.
Neither United nor US Airways is under any obligation to (and expressly
disclaims any such obligation to) update or alter its forward-looking
statements, whether as a result of new information, future events or
otherwise.
[Slide 70]
[United Company Logo] / [US Airways Company Logo]
[Slide 71]
