<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND +
+MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES OR ACCEPT OFFERS TO BUY +
+THESE SECURITIES PRIOR TO THE TIME THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS +
+DELIVERED IN FINAL FORM. THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE +
+ACCOMPANYING PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE +
+NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR +
+SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUPPLEMENT (Subject to Completion, Issued November 25, 1998)
(To Prospectus dated November 17, 1998)
Filed Pursuant to Rule 424(a)
Regstration No. 333-64425
$447,768,564
[LOGO OF U.S AIRWAYS]
1998-1 Pass Through Trusts
PASS THROUGH CERTIFICATES, SERIES 1998-1
-----------
US Airways, Inc. is issuing through three separate pass through trusts Class A,
Class B and Class C Certificates, Series 1998-1, to finance the purchase of
twenty-three (23) Airbus Aircraft. We are offering only the Class A and Class B
Certificates pursuant to this Prospectus Supplement. Concurrently with the
issuance of the Class A and Class B Certificates, the Class C Trust will issue
Class C Certificates in the principal amount of $141,366,760.* The Class C
Certificates are not being offered hereby.
Interest will be payable in respect of the Certificates semiannually, on each
January 30 and July 30, beginning January 30, 1999. Principal payments in
respect of the Certificates are scheduled for January 30 and July 30 in certain
years, beginning on July 30, 1999 in the case of the Class A Certificates and
January 30, 2000 in the case of the Class B Certificates.
The Class A Certificates will rank senior in right of distributions to the
Class B and Class C Certificates. The Class B Certificates will rank junior in
right of distributions to the Class A Certificates and will rank senior to the
Class C Certificates.
ABN AMRO Bank N.V., acting through its Chicago branch, will provide a liquidity
facility for each Class of Certificates in an amount sufficient to make three
semiannual interest payments.
The Certificates represent interests only in pass through trusts formed to
finance the acquisition of the Airbus Aircraft and do not represent interests
in or obligations of US Airways, Inc. or any of its affiliates.
-----------
INVESTING IN THE CERTIFICATES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE S-18.
-----------
<TABLE>
<CAPTION>
Pass Through Principal Interest Final Expected Public
Certificates Amount* Rate Distribution Date* Offering Price
- ------------ ------------ -------- ------------------ --------------
<S> <C> <C> <C> <C>
1998-1A $366,486,666 % January 30, 2018 100%
1998-1B 81,281,898 July 30, 2018 100
</TABLE>
- -----
* Indicative only. Subject to change.
-----------
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
-----------
The underwriters will purchase all of the Class A and Class B Certificates if
any are purchased, subject to the satisfaction of certain conditions. The
aggregate proceeds from the sale of the Class A and Class B Certificates will
be $447,768,564. US Airways, Inc. or Owner Participants will pay the
underwriters a commission of $ . Morgan Stanley & Co. Incorporated expects to
deliver the Class A and Class B Certificates to purchasers on December , 1998.
The Certificates will not be listed on any national securities exchange.
-----------
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
LEHMAN BROTHERS
SALOMON SMITH BARNEY
December , 1998
<PAGE>
PRESENTATION OF INFORMATION
These offering materials consist of two documents: (a) this Prospectus
Supplement, which describes the terms of the Certificates that US Airways,
Inc. ("US Airways" or the "Company") currently is offering, and (b) the
accompanying Prospectus, which provides general information about US Airways'
pass through certificates, some of which may not apply to the Certificates
that we currently are offering. The information in this Prospectus Supplement
replaces any inconsistent information included in the accompanying Prospectus.
We have given certain capitalized terms specific meanings for purposes of
this Prospectus Supplement. The "Index of Terms" attached as Appendix I to
this Prospectus Supplement lists the page in this Prospectus Supplement or the
accompanying Prospectus on which we have defined each such term.
At varying places in this Prospectus Supplement and the Prospectus, we refer
you to other sections of such documents for additional information by
indicating the caption heading of such other sections. The page on which each
principal caption included in this Prospectus Supplement and the Prospectus
can be found is listed in the Table of Contents below. All such cross
references in this Prospectus Supplement are to captions contained in this
Prospectus Supplement and not in the Prospectus, unless otherwise stated.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary............................................. S-5
Summary of Terms of Certificates.......................................... S-5
Cash Flow Structure...................................................... S-6
Equipment Notes and the Aircraft......................................... S-7
Loan to Aircraft Value Ratios............................................ S-8
The Offering.............................................................. S-9
Summary Financial and Operating Data...................................... S-16
Risk Factors.............................................................. S-18
Risk Factors Relating to US Airways...................................... S-18
Risk Factors Relating to the Airline Industry............................ S-20
Risk Factors Relating to the Certificates and the Offering............... S-22
The Company............................................................... S-25
Domestic Service......................................................... S-25
Expanding International Service.......................................... S-26
Code Sharing Relationships............................................... S-27
The US Airways and American Airlines Marketing Relationship.............. S-28
Labor Agreements......................................................... S-28
Fleet Rationalization and the Airbus Aircraft............................ S-28
US Airways' Market Position.............................................. S-29
The SABRE Group Agreement................................................ S-29
On-Line Reservation System............................................... S-29
Change in Culture -- A New Outlook....................................... S-29
Use of Proceeds........................................................... S-30
Description of the Certificates........................................... S-30
General.................................................................. S-31
Payments and Distributions............................................... S-32
Pool Factors............................................................. S-34
Reports to Certificateholders............................................ S-36
Indenture Defaults and Certain Rights Upon an Indenture Default.......... S-37
Purchase Rights of Certificateholders.................................... S-39
PTC Event of Default..................................................... S-39
Merger, Consolidation and Transfer of Assets............................. S-39
Modifications of the Pass Through Trust Agreements and Certain Other
Agreements.............................................................. S-40
Obligation to Purchase Equipment Notes................................... S-42
Termination of the Trusts................................................ S-45
The Trustees............................................................. S-45
Book-Entry; Delivery and Form............................................ S-45
Description of the Deposit Agreements..................................... S-46
General.................................................................. S-46
Unused Deposits.......................................................... S-47
Distribution Upon Occurrence of a Triggering Event....................... S-47
Distribution Upon Occurrence of a Termination Event...................... S-47
Depositaries............................................................. S-48
Description of the Escrow Agreements...................................... S-48
Description of the Liquidity Facilities................................... S-49
General.................................................................. S-49
Drawings................................................................. S-50
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reimbursement of Drawings................................................ S-52
Liquidity Events of Default.............................................. S-53
Liquidity Provider....................................................... S-53
Description of the Intercreditor Agreement................................ S-54
Intercreditor Rights..................................................... S-54
Priority of Distributions................................................ S-55
The Subordination Agent.................................................. S-58
Description of the Aircraft and the Appraisals............................ S-59
The Aircraft............................................................. S-59
The Appraisals........................................................... S-59
Deliveries of Aircraft................................................... S-60
Substitute Aircraft...................................................... S-60
Description of the Equipment Notes........................................ S-61
General.................................................................. S-61
Subordination............................................................ S-61
Principal and Interest Payments.......................................... S-61
Redemption............................................................... S-62
Security................................................................. S-63
Loan to Value Ratios of Equipment Notes.................................. S-64
Limitation of Liability.................................................. S-66
Indenture Defaults, Notice and Waiver.................................... S-66
Remedies................................................................. S-67
Modification of Indentures and Leases.................................... S-69
Indemnification.......................................................... S-70
The Leases............................................................... S-70
Certain United States Federal Income Tax Consequences..................... S-76
General.................................................................. S-76
Tax Treatment of the Certificateholders.................................. S-77
Effect of Subordination on Subordinated Certificateholders............... S-77
Sale or Other Disposition of the Certificates............................ S-78
Foreign Certificateholders............................................... S-78
Information Reporting and Back-Up Withholding............................ S-79
Certain Massachusetts Taxes............................................... S-79
ERISA Considerations...................................................... S-79
General.................................................................. S-79
Plan Assets Issues....................................................... S-80
Prohibited Transaction Exemptions........................................ S-80
Underwriter Exemption May Apply to Purchase of Class A Certificates by
Plans................................................................... S-81
Special Considerations Applicable to Insurance Company General Accounts.. S-82
Plan of Distribution...................................................... S-82
Class A and Class B Certificates......................................... S-82
General.................................................................. S-83
Purchase of Class C Certificates.......................................... S-84
Legal Matters............................................................. S-84
Experts................................................................... S-84
</TABLE>
<TABLE>
<S> <C>
Index of Terms...................................................... Appendix I
Appraisal Letters................................................... Appendix II
</TABLE>
S-2
<PAGE>
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
The Company................................................................ 4
Use of Proceeds............................................................ 4
Ratio of Earnings to Fixed Charges......................................... 5
General Outline of Trust Structure......................................... 5
Description of the Certificates............................................ 6
General................................................................... 6
Book-Entry Registration................................................... 7
Payments and Distributions................................................ 10
Pool Factors.............................................................. 11
Reports to Certificateholders............................................. 11
Voting of Equipment Notes................................................. 12
Events of Default and Certain Rights upon an Event of Default............. 12
Merger, Consolidation and Transfer of Assets.............................. 14
Modifications of the Basic Agreement...................................... 15
Modification of Indenture and Related Agreements.......................... 16
Cross-Subordination Issues................................................ 16
Termination of the Trusts................................................. 16
Delayed Purchase of Equipment Notes....................................... 16
Liquidity Facility........................................................ 16
The Trustee............................................................... 16
Description of the Equipment Notes......................................... 17
General................................................................... 17
Principal and Interest Payments........................................... 18
Redemption................................................................ 18
Security.................................................................. 18
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Delayed Lease Commencement............................................... 20
Mandatory Prepayments During the Pre-Funding Period...................... 21
Ranking of Equipment Notes............................................... 21
Payments and Limitation of Liability..................................... 21
Defeasance of the Indentures and the Equipment Notes in Certain
Circumstances........................................................... 22
Assumption of Obligations by US Airways.................................. 23
Liquidity Facility....................................................... 23
Intercreditor Issues..................................................... 23
Owner Participant; Revisions to Agreements............................... 23
Certain United States Federal Income Tax Consequences..................... 24
General.................................................................. 24
Tax Treatment of the Trusts and Certificateholders....................... 24
Effect of Subordination of Subordinated Certificateholders............... 25
Original Issue Discount.................................................. 25
Sale or Other Disposition of the Certificates............................ 25
Foreign Certificateholders............................................... 26
Information Reporting and Backup Withholding............................. 26
ERISA Considerations...................................................... 27
Plan of Distribution...................................................... 27
Legal Opinions............................................................ 28
Experts................................................................... 28
Other Information......................................................... 29
Effects of Year 2000..................................................... 29
</TABLE>
US Airways has not authorized anyone to provide you with information
concerning this offering other than the information contained in this
Prospectus Supplement and the related Prospectus. US Airways is offering to
sell Certificates and seeking offers to buy Certificates only in jurisdictions
where such offers and sales are permitted. The information contained in this
Prospectus Supplement and the related Prospectus is accurate only as of the
date of this Prospectus Supplement, regardless of the time of delivery of this
Prospectus Supplement and the related Prospectus or any sale of Certificates.
S-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-4
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information from this Prospectus Supplement
and the accompanying Prospectus and may not contain all of the information that
is important to you. For more complete information about the Certificates and
US Airways, you should read this entire Prospectus Supplement and the
accompanying Prospectus, as well as the materials filed with the Securities and
Exchange Commission that are considered to be part of such Prospectus. See
"Incorporation of Certain Documents by Reference" in the Prospectus.
SUMMARY OF TERMS OF CERTIFICATES*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CERTIFICATES CERTIFICATES CERTIFICATES
---------------- ---------------- ----------------
<S> <C> <C> <C>
Aggregate Face Amount...... $366,486,666 $81,281,898 $141,366,760
Ratings:
Moody's.................. A2 Baa1 Ba1
Standard & Poor's........ AA- A BBB-
Initial Loan to Aircraft
Value (cumulative) (1).... 39.6% 48.3% 64.0%
Expected Principal
Distribution Windows
(in years)................ 0.6 - 19.1 1.1 - 19.6 5.1 - 19.1
Initial Average Life (in
years from issuance
date)..................... 12.7 10.6 12.5
Regular Distribution
Dates..................... January 30 January 30 January 30
and July 30 and July 30 and July 30
Final Expected Regular
Distribution Date......... January 30, 2018 July 30, 2018 January 30, 2018
Final Maturity Date........ July 30, 2019 January 30, 2020 July 30, 2019
Minimum Denomination....... $1,000 $1,000 $1,000
Section 1110 Protection.... Yes Yes Yes
Liquidity Facility
Coverage.................. 3 semiannual 3 semiannual 3 semiannual
interest interest interest
payments payments payments
</TABLE>
- --------
* The Classes and amounts of Certificates offered and the terms of the
Certificates are indicative only and subject to change.
(1) These percentages are calculated as of January 30, 2000, the first Regular
Distribution Date after all Aircraft are scheduled to have been delivered.
In making such calculations, we have assumed that all Aircraft are
delivered prior to such date, that the maximum principal amount of the
Equipment Notes is issued and that the aggregate appraised Aircraft base
value is $906,005,467 as of such date. The appraised base value is only an
estimate and reflects certain assumptions, which assumptions may not
reflect current market conditions. See "Description of the Aircraft and the
Appraisals--The Appraisals." The Mandatory Economic Terms require that the
initial loan to Aircraft value, based on the foregoing appraisals, for each
Aircraft as of its delivery date be not in excess of 40.5% in the case of
the Series A Equipment Notes, 51.0% in the case of Series B Equipment Notes
and 67.0% in the case of the Series C Equipment Notes.
S-5
<PAGE>
CASH FLOW STRUCTURE
Set forth below is a diagram illustrating the structure for the offering of
the Class A and Class B Certificates and the private placement of the Class C
Certificates and certain cash flows.
Diagram omitted, which shows that US Airways will pay to the Loan Trustee for
Leased Aircraft and Owned Aircraft (i) the Lease Rental Payments, which are
assigned by the Loan Trustee, on Leased Aircraft and (ii) the Mortgage Payments
on Owned Aircraft. From such Lease Rental Payments and Mortgage Payments, the
Loan Trustee will make Equipment Note Payments on the Series A Equipment Notes,
the Series B Equipment Notes and the Series C Equipment Notes with respect to
all Aircraft to the Subordination Agent. Excess Rental Payments will be paid by
the Loan Trustee to the Lessors for Leased Aircraft. From such Equipment Note
Payments, the Subordination Agent will pay Principal, Premium, if any, and
Interest Distributions to the Pass Through Trustee for the Class A Trust, the
Pass Through Trustee for the Class B Trust and the Pass Through Trustee for the
Class C Trust, who will pay such principal, premium, if any, and interest
distributions to the Holders of Class A Certificates, the Holders of Class B
Certificates and Holders of Class C Certificates, respectively. The
Subordination Agent may also receive Advances, if any, and pay Reimbursements,
if any, to the Liquidity Provider. The applicable Depositary will make Interest
Payments on the Deposits to the Paying Agent on behalf of the Escrow Agent.
From such Interest Payments, the Paying Agent on behalf of the Escrow Agent
will make payments to the Holders of Class A Certificates, the Holders of Class
B Certificates and the Holders of Class C Certificates.
- --------
(1) Each Aircraft leased to US Airways will be subject to a separate Lease and
a related Indenture; each Owned Aircraft will be subject to a separate
Indenture.
(2) A portion of the proceeds of the public offering of the Class A and Class B
Certificates and a portion of the proceeds of the private placement of the
Class C Certificates will be used by the Trusts to purchase on or shortly
after the Issuance Date Equipment Notes relating to three of the Aircraft
delivered prior to the issuance of the Certificates. The remaining proceeds
from the sale of the Certificates initially will be held in escrow and
deposited with the Depositaries. The Depositaries will hold such funds as
interest-bearing Deposits. Each Trust will withdraw funds from the Deposits
relating to such Trust to purchase the corresponding series of Equipment
Notes from time to time as each Aircraft is financed. The scheduled
payments of interest on the Equipment Notes and on the Deposits relating to
a Trust, taken together, will be sufficient to pay accrued interest on the
outstanding Certificates of such Trust. The Liquidity Facilities will not
cover interest on the Deposits. If any funds remain as Deposits with
respect to any Trust at the Delivery Period Termination Date, such funds
will be withdrawn by the Escrow Agent and distributed to the holders of the
Certificates issued by such Trust, together with accrued and unpaid
interest thereon and, in the case of Deposits relating to the Class A and
Class B Certificates, a Deposit Make-Whole Premium payable by US Airways,
provided that no premium will be paid with respect to unused Deposits
attributable to the failure of an Aircraft to be delivered prior to the
Delivery Period Termination Date due to any reason not occasioned by US
Airways' fault or negligence.
S-6
<PAGE>
EQUIPMENT NOTES AND THE AIRCRAFT
Set forth below is certain information about the Equipment Notes expected to
be held in the Trusts and the Aircraft expected to secure such Equipment Notes:
<TABLE>
<CAPTION>
MAXIMUM
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
EXPECTED SERIES A SERIES B SERIES C
REGISTRATION MANUFACTURER'S AIRCRAFT DELIVERY EQUIPMENT EQUIPMENT EQUIPMENT APPRAISED
AIRCRAFT TYPE NUMBER SERIAL NUMBER MONTH(1) NOTES* NOTES* NOTES(2)* BASE VALUE(3)
------------- ------------ -------------- ----------------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Airbus A319............. N700UW 0885 October 15, 1998 $15,053,333 $2,735,430 $5,755,411 $37,633,333
Airbus A319............. N701UW 0890 October 20, 1998 15,053,333 3,617,069 5,759,185 37,633,333
Airbus A319............. N702UW 0896 November 2, 1998 15,062,667 3,647,600 5,779,505 37,656,667
Airbus A319............. N703UW 0904 November 10, 1998 15,062,667 3,643,831 5,783,274 37,656,667
Airbus A319............. N704US 0922 December 1998 15,073,333 3,523,910 5,793,467 37,683,333
Airbus A319............. N705UW 0929 December 1998 15,073,333 3,523,910 5,793,467 37,683,333
Airbus A320............. N101UW 0936 January 1999 17,594,667 4,706,573 7,063,070 43,986,667
Airbus A319............. N706US 0946 January 1999 15,253,333 3,414,504 5,793,467 38,133,333
Airbus A319............. N707UW 0949 January 1999 15,253,333 3,249,879 5,793,467 38,133,333
Airbus A319............. N708UW 0972 February 1999 15,264,000 3,387,021 5,788,248 38,160,000
Airbus A319............. N709UW 0997 March 1999 15,273,333 3,406,805 5,797,284 38,183,333
Airbus A320............. N102UW 0844 May 1999 17,777,333 3,100,808 7,110,663 44,443,333
Airbus A320............. N103US 0861 May 1999 17,777,333 4,179,107 7,110,663 44,443,333
Airbus A319............. N710UW 1019 May 1999 15,412,000 3,353,182 5,823,677 38,530,000
Airbus A320............. N104UW 0863 June 1999 17,789,333 4,069,042 7,125,015 44,473,333
Airbus A320............. N105UW 0868 June 1999 17,789,333 4,069,042 7,125,015 44,473,333
Airbus A319............. N711UW 1033 June 1999 15,421,333 3,369,900 5,831,762 38,553,333
Airbus A319............. N712US 1038 June 1999 15,421,333 3,369,900 5,831,762 38,553,333
Airbus A320............. N106US 1044 July 1999 17,937,333 3,846,114 7,134,730 44,843,333
Airbus A319............. N713UW 1040 July 1999 15,536,000 3,292,757 5,843,407 38,840,000
Airbus A319............. N714US 1046 July 1999 15,536,000 3,292,757 5,843,407 38,840,000
Airbus A319............. N715UW 1051 July 1999 15,536,000 3,241,379 5,843,407 38,840,000
Airbus A319............. N716UW 1055 July 1999 15,536,000 3,241,379 5,843,407 38,840,000
</TABLE>
- --------
*Indicative only. Subject to change.
(1) The delivery dates for the first four Aircraft are set forth in this table.
The delivery date for any other Aircraft may be delayed or accelerated. The
Delivery Period Termination Date for purposes of this offering will be no
later than October 31, 1999. See "Description of the Aircraft and the
Appraisals--Deliveries of Aircraft." US Airways has the option to
substitute other aircraft if the delivery of any Aircraft is expected to be
delayed for more than 30 days after the month scheduled for such delivery
or beyond the Delivery Period Termination Date. See "Description of the
Aircraft and the Appraisals--Substitute Aircraft."
(2) The actual principal amount of the Series C Equipment Notes issued for any
Aircraft may be less than the amounts set forth in this table depending on
the circumstances of the financing of such Aircraft. The aggregate
principal amount of all the Equipment Notes of each Series will not exceed
the aggregate face amount of the Certificates of the corresponding Class.
(3) The appraised base value of each Aircraft set forth above is the lesser of
the mean and median base values of such Aircraft as appraised by three
independent appraisal and consulting firms, and, in the case of future
deliveries, projected as of the scheduled delivery month of each Aircraft.
Such appraisals are based upon varying assumptions (which assumptions may
not reflect current market conditions) and methodologies. An appraisal is
only an estimate of value and should not be relied upon as a measure of
realizable value. See "Risk Factors--Risk Factors Relating to the
Certificates and the Offering--Appraisals and Realizable Value of
Aircraft."
S-7
<PAGE>
LOAN TO AIRCRAFT VALUE RATIOS*
The following table sets forth loan to Aircraft value ratios ("LTVs") for
each Class of Certificates as of January 30, 2000 (the first Regular
Distribution Date that occurs after all Aircraft are scheduled to have been
delivered) and each July Regular Distribution Date thereafter assuming that
Equipment Notes of each series in the maximum principal amount for all of the
Aircraft are acquired by the Trusts prior to the Delivery Period Termination
Date. The LTVs for any Class of Certificates as of dates prior to January 30,
2000 are not meaningful, since the property of the Trusts will not include
during such period all of the Equipment Notes expected to be acquired by the
Trusts and the related Aircraft will not be included in the calculation. The
table should not be considered a forecast or prediction of expected or likely
LTVs but simply a mathematical calculation based on one set of assumptions. See
"Risk Factors--Risk Factors Relating to the Certificates and the Offering--
Appraisals and Realizable Value of Aircraft."
<TABLE>
<CAPTION>
ASSUMED CLASS A CLASS B CLASS C
AGGREGATE CERTIFICATES CERTIFICATES CERTIFICATES CLASS A CLASS B CLASS C
AIRCRAFT POOL POOL POOL CERTIFICATES CERTIFICATES CERTIFICATES
DATE VALUE(1) BALANCE(2) BALANCE(2) BALANCE(2) LTV(3) LTV(3) LTV(3)
- ---- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 30, 2000........ $906,005,467 $359,006,272 $79,030,857 $141,366,760 39.6% 48.3% 64.0%
July 30, 2000........... 878,518,967 351,407,586 78,801,916 141,366,760 40.0 49.0 65.1
July 30, 2001........... 851,032,467 340,412,986 76,332,652 141,366,760 40.0 49.0 65.6
July 30, 2002........... 823,545,967 329,418,386 73,391,825 141,366,760 40.0 48.9 66.1
July 30, 2003........... 796,059,467 318,423,786 68,603,746 141,366,760 40.0 48.6 66.4
July 30, 2004........... 768,572,967 307,429,186 61,746,172 141,295,297 40.0 48.0 66.4
July 30, 2005........... 741,086,467 295,937,798 53,947,490 141,184,641 39.9 47.2 66.3
July 30, 2006........... 713,599,967 284,364,265 46,393,222 139,124,625 39.8 46.4 65.8
July 30, 2007........... 686,113,467 272,526,384 42,405,751 132,179,874 39.7 45.9 65.2
July 30, 2008........... 658,626,967 260,317,401 39,847,814 126,406,369 39.5 45.6 64.8
July 30, 2009........... 631,140,467 251,466,985 37,260,040 117,627,845 39.8 45.7 64.4
July 30, 2010........... 603,653,967 240,824,141 34,924,019 100,802,379 39.9 45.7 62.4
July 30, 2011........... 576,167,467 230,284,861 32,485,562 76,000,229 40.0 45.6 58.8
July 30, 2012........... 548,680,967 216,446,395 30,047,105 48,687,432 39.4 44.9 53.8
July 30, 2013........... 521,194,467 185,179,130 24,201,179 7,861,099 35.5 40.2 41.7
July 30, 2014........... 490,304,233 135,550,903 19,228,892 3,382,094 27.6 31.6 32.3
July 30, 2015........... 453,655,567 112,265,018 16,663,594 3,292,829 24.7 28.4 29.1
July 30, 2016........... 417,006,900 75,781,157 16,663,594 663,409 18.2 22.2 22.3
July 30, 2017........... 317,617,100 21,609,986 12,328,243 77,524 6.8 10.7 10.7
July 30, 2018........... 0 0 0 0 NA NA NA
</TABLE>
- --------
* The Classes of Certificates, the Aircraft, the periodic outstanding balances
and the resulting LTVs for each Class of Certificates are indicative only
and subject to change.
(1) We have assumed the initial appraised value of each Aircraft, determined as
described under "--Equipment Notes and the Aircraft," declines by 3% per
year for the first fifteen years after the year of delivery of such
Aircraft and by 4% per year for the next five years. Other depreciation
assumptions would result in important differences in the LTVs.
(2) In calculating the outstanding balances, we have assumed that the Trusts
will acquire the maximum principal amount of Equipment Notes for all
Aircraft.
(3) The LTVs for each Class of Certificates were obtained for each Regular
Distribution Date by dividing (i) the expected outstanding balance of such
Class together with the expected outstanding balance of all other Classes
equal or senior in right of payment to such Class after giving effect to
the distributions expected to be made on such date, by (ii) the assumed
value of all of the Aircraft on such date based on the assumptions
described above. The outstanding balances and LTVs may change if, among
other things, the aggregate principal amount of the Equipment Notes
acquired by the Trusts is less than the maximum permitted under the terms
of this offering or the amortization of the Equipment Notes differs from
the assumed amortization schedule calculated for purposes of this
Prospectus Supplement.
The above table was compiled on an aggregate basis. However, the Equipment
Notes for an Aircraft will not have a security interest in any other Aircraft.
This means that any excess proceeds realized from the sale of an Aircraft or
other exercise of remedies will not be available to cover any shortfalls on the
Equipment Notes relating to any other Aircraft. See "Description of the
Equipment Notes--Loan to Value Ratios of Equipment Notes" for examples of LTVs
for the Equipment Notes issued in respect of individual Aircraft, which may be
more relevant in a default situation than the aggregate values shown above.
S-8
<PAGE>
THE OFFERING
Certificates Offered.... . Class A Certificates
. Class B Certificates
Class C Certificates are not offered pursuant to this
Prospectus Supplement, but are being sold at the same
time in a private placement. Each Class of
Certificates will represent a fractional undivided
interest in a related Trust. The Certificates
represent interests in the Trusts only and do not
represent interests in or obligations of US Airways
or any of its affiliates.
Use of Proceeds......... The proceeds from the sale of the Certificates will
be used to purchase Equipment Notes issued to finance
the acquisition of 23 new Airbus Aircraft to be
operated by US Airways and its affiliates. A portion
of the proceeds from such sale will be used by the
Trusts to purchase on or shortly after the Issuance
Date Equipment Notes relating to three of the
Aircraft delivered prior to the issuance of the
Certificates. The remaining proceeds from such sale
initially will be held in escrow and deposited with
the applicable Depositary. Each such Trust will
withdraw funds from the escrow relating to such Trust
to acquire Equipment Notes.
Subordination Agent,
Trustee,
Paying Agent and Loan
Trustee................ State Street Bank and Trust Company.
Escrow Agent............ First Security Bank, National Association.
Depositaries............ Credit Suisse First Boston, New York branch, for the
Class A and Class B Certificates; Citibank, N.A., for
the Class C Certificates.
Liquidity Provider...... ABN AMRO Bank N.V., acting through its Chicago
branch.
Trust Property.......... The property of each Trust will include:
. Equipment Notes acquired by such Trust.
. All monies receivable under the Liquidity Facility
for such Trust.
. Funds from time to time deposited with the Trustee
in accounts relating to such Trust.
. Rights of the Trust to acquire Equipment Notes
under the Note Purchase Agreement.
. Rights of the Trust under the related Escrow and
Paying Agent Agreement.
. Rights of the Trust under the Intercreditor
Agreement.
Regular Distribution
Dates................... January 30 and July 30, commencing on January 30,
1999.
Record Dates............ The fifteenth day preceding the related Distribution
Date.
S-9
<PAGE>
Distributions........... The Trustee and the Paying Agent, as the case may be,
will distribute all payments of principal, premium
(if any) and interest received on the Equipment Notes
held in each Trust and all payments of interest and
Deposit Make-Whole Premium (if any) on the Deposits
relating to each Trust to the holders of the
Certificates of such Trust, subject, in the case of
payments on the Equipment Notes, to the subordination
provisions applicable to the Certificates.
Subject to the subordination provisions applicable to
the Certificates, scheduled payments of principal and
interest made on the Equipment Notes will be
distributed on the applicable Regular Distribution
Dates.
Subject to the subordination provisions applicable to
the Certificates, payments of principal, premium (if
any) and interest made on the Equipment Notes
resulting from any early redemption or purchase of
such Equipment Notes will be distributed on a Special
Distribution Date after not less than 15 days' notice
to Certificateholders.
Subordination........... After distributions are made to reimburse the
Liquidity Provider (if necessary), distributions on
the Certificates will be made in the following order:
. First, to the holders of the Class A Certificates.
. Second, to the holders of the Class B Certificates.
. Third, to the holders of the Class C Certificates.
If US Airways is in bankruptcy or certain other
specified events have occurred but US Airways is
continuing to meet certain of its obligations, the
subordination provisions applicable to the
Certificates permit distributions to be made to
junior Certificates prior to making distributions in
full on the senior Certificates.
Control of Loan The holders of at least a majority of the outstanding
Trustee................. principal amount of Equipment Notes issued under each
Indenture will be entitled to direct the Loan Trustee
under such Indenture in taking action as long as no
Indenture Default is continuing thereunder. If an
Indenture Default is continuing, subject to certain
conditions, the "Controlling Party" will direct the
Loan Trustees (including in exercising remedies, such
as accelerating such Equipment Notes or foreclosing
the lien on the Aircraft securing such Equipment
Notes).
The Controlling Party will be:
. The Class A Trustee.
. Upon payment of final distributions to the holders
of Class A Certificates, the Class B Trustee.
. Upon payment of final distributions to the holders
of Class B Certificates, the Class C Trustee.
. Under certain circumstances, the Liquidity Provider.
S-10
<PAGE>
In exercising remedies during the nine months after
the earlier of (a) the acceleration of the Equipment
Notes issued pursuant to any Indenture or (b) the
bankruptcy of US Airways, the Controlling Party may
not sell such Equipment Notes or the Aircraft subject
to the lien of such Indenture for less than certain
specified minimums or modify lease rental payments
for such Aircraft below a specified threshold.
Right to Buy Other
Classes of
Certificates........... If US Airways is in bankruptcy or certain other
specified events have occurred, the
Certificateholders may have the right to buy the more
senior Classes of Certificates on the following
basis:
. The Class B Certificateholders will have the right
to purchase all of the Class A Certificates.
. The Class C Certificateholders will have the right
to purchase all of the Class A and Class B
Certificates.
The purchase price will be the outstanding balance of
the applicable Class of Certificates plus accrued and
unpaid interest, plus any other amounts then due to
the Certificateholders of such Class.
Liquidity Facilities.... Under the Liquidity Facility for each Trust, the
Liquidity Provider will, if necessary, make advances
in an aggregate amount sufficient to pay interest on
the applicable Certificates on up to three successive
semiannual Regular Distribution Dates at the
applicable interest rate for such Certificates. The
Liquidity Facilities cannot be used to pay any other
amount in respect of the Certificates and will not
cover interest payable on amounts held in escrow as
Deposits with the Depositaries.
Notwithstanding the subordination provisions
applicable to the Certificates, the holders of the
Certificates to be issued by each Trust will be
entitled to receive and retain the proceeds of
drawings under the Liquidity Facility for such Trust.
Upon each drawing under any Liquidity Facility to pay
interest on the Certificates, the Subordination Agent
will, to the extent of available funds, reimburse the
Liquidity Provider for the amount of such drawing.
Such reimbursement obligation and all interest, fees
and other amounts owing to the Liquidity Provider
will rank senior to the Certificates in right of
payment.
Escrowed Funds.......... Funds paid to the Escrow Agent by the
Certificateholders will be deposited with the
applicable Depositary and held as Deposits pursuant
to separate Deposit Agreements for each Trust. Funds
may be withdrawn by the Escrow Agent at the direction
of the applicable Trustee from time to time to
purchase Equipment Notes prior to the Delivery Period
Termination Date. On each Regular Distribution Date,
the applicable Depositary will pay to the Paying
Agent interest accrued on the Deposits
S-11
<PAGE>
relating to each Trust at a rate per annum equal to
the interest rate applicable to the Certificates
issued by such Trust. The Paying Agent, on behalf of
the Escrow Agent, will pay such interest to the
applicable Certificateholders. The Deposits relating
to a Trust and interest paid thereon will not be
subject to the subordination provisions applicable to
the Certificates. The Deposits cannot be used to pay
any other amount in respect of the Certificates.
Unused Escrowed Funds... Less than all of the Deposits held in escrow may be
used to purchase Equipment Notes by the Delivery
Period Termination Date. This may occur because of
delays in the delivery of Aircraft or other reasons.
If any funds remain as Deposits with respect to any
Trust after the Delivery Period Termination Date,
they will be withdrawn by the Escrow Agent for such
Trust and distributed, with accrued and unpaid
interest, to the holders of Escrow Receipts relating
to the respective Trust after at least 15 days' prior
written notice. In addition, in the case of Deposits
relating to the Class A and Class B Certificates,
such distribution will include a premium payable by
US Airways equal to the Deposit Make-Whole Premium
with respect to such Trust's remaining Deposits,
provided that no premium will be paid with respect to
unused Deposits attributable to the failure of an
Aircraft to be delivered prior to the Delivery Period
Termination Date due to any reason not occasioned by
US Airways' fault or negligence. See "Description of
the Deposit Agreements --Unused Deposits."
Obligation to Purchase
Equipment Notes........ The Class A, Class B and Class C Trustees will be
obligated to purchase the Series A, Series B and
Series C Equipment Notes issued with respect to each
Aircraft pursuant to the Note Purchase Agreement. US
Airways may enter into a leveraged lease financing or
a secured debt financing with respect to each
Aircraft pursuant to forms of financing agreements
attached to the Note Purchase Agreement. In the case
of a Leased Aircraft, the terms of the financing
agreements entered into may differ from the forms of
such agreements described in this Prospectus
Supplement because a third party, the Owner
Participant, which will provide a portion of the
financing of each Aircraft, may request changes.
However, under the Note Purchase Agreement, the terms
of such financing agreements must (a) contain the
Mandatory Document Terms set forth in the Note
Purchase Agreement with such modification as is
expressly permitted by the terms of the Note Purchase
Agreement and (b) not vary the Mandatory Economic
Terms set forth in the Note Purchase Agreement. In
addition, US Airways must (a) certify to the Trustees
that any such modifications do not materially and
adversely affect the Certificateholders and (b)
obtain written confirmation from each Rating Agency
that the use of versions of such agreements modified
in any material respect will not result in a
withdrawal, suspension or downgrading of the rating
of any Class of Certificates. The Trustees will not
be obligated to purchase Equipment Notes if, at the
time of issuance, US Airways is in bankruptcy or
certain other specified events have occurred. See
"Description of the Certificates--Obligation to
Purchase Equipment Notes."
S-12
<PAGE>
Equipment Notes
(a) Issuer............. Leased Aircraft. For Aircraft leased by US Airways,
the related Equipment Notes will be issued by First
Security Bank, National Association, acting as Owner
Trustee. The Owner Trustee will not be individually
liable for such Equipment Notes. However, US Airways'
scheduled rental obligations under the related Lease
will be in amounts sufficient to pay scheduled
payments on such Equipment Notes.
Owned Aircraft. If US Airways purchases an Aircraft,
the related Equipment Notes will be issued by US
Airways.
(b) Interest........... The Equipment Notes held in the Class A Trust and the
Class B Trust will accrue interest at the rate per
annum for the Certificates issued by such Trust set
forth on the cover page of this Prospectus
Supplement. The Equipment Notes held in the Class C
Trust will accrue interest at the rate per annum set
forth under the section captioned "Purchase of Class
C Certificates." Interest on all Equipment Notes will
be payable on January 30 and July 30 of each year,
commencing on January 30, 1999. Interest is
calculated on the basis of a 360-day year consisting
of twelve 30-day months.
(c) Principal.......... Principal payments on the Series A, Series B and
Series C Equipment Notes are scheduled to begin on
July 30, 1999, January 30, 2000 and January 30, 2004,
respectively.
(d) Redemption and
Purchase........... Aircraft Event of Loss. If an Event of Loss occurs
with respect to an Aircraft, all of the Equipment
Notes issued with respect to such Aircraft will be
redeemed, unless such Aircraft is replaced by US
Airways under the related financing agreements. The
redemption price in such case will be the unpaid
principal amount of such Equipment Notes, together
with accrued interest, but without any premium.
Optional Redemption. The issuer of the Equipment
Notes with respect to an Aircraft may elect to redeem
them prior to maturity. The redemption price in such
case will be the unpaid principal amount of such
Equipment Notes, together with accrued interest plus
a Make-Whole Premium. See "Description of the
Equipment Notes--Redemption."
Purchase by Owner. In the case of a Leased Aircraft,
if a Lease Event of Default is continuing, the
applicable Owner Trustee or Owner Participant may
elect to purchase all of the Equipment Notes with
respect to such Aircraft, subject to the terms of the
applicable Leased Aircraft Indenture. The purchase
price in such case will be the unpaid principal
amount of such Equipment Notes, together with accrued
interest, but without any premium (provided, that a
Make-Whole Premium will be payable under certain
circumstances specified in the Leased Aircraft
Indenture). In the case of an Owned Aircraft, US
Airways will have no comparable right to purchase the
Equipment Notes under such circumstances.
(e) Security........... The Equipment Notes issued with respect to each
Aircraft will be secured by a security interest in
such Aircraft and, in the case of each Leased
S-13
<PAGE>
Aircraft, in the related Owner Trustee's rights under
the Lease with respect to such Aircraft (with certain
exceptions).
The Equipment Notes are not cross-collateralized.
This means that the Equipment Notes issued in respect
of an Aircraft will not be secured by any other
Aircraft or Leases and that any excess proceeds from
the sale of an Aircraft or other exercise of remedies
with respect to such Aircraft will not be available
to cover any shortfall with respect to any other
Aircraft.
By virtue of the Intercreditor Agreement, the
Equipment Notes are cross-subordinated. This means
that payments received on a junior class of Equipment
Notes issued in respect of one Aircraft may be
applied in accordance with the priority of payment
provisions set forth in the Intercreditor Agreement
to make payments in respect of a more senior class of
Certificates.
There are no cross-default provisions in the
Indentures or in the Leases. This means that if the
Equipment Notes issued with respect to one or more
Aircraft are in default and the Equipment Notes
issued with respect to the remaining Aircraft are not
in default, no remedies will be exercisable with
respect to the remaining Aircraft.
(f) Section 1110
Protection......... US Airways' outside counsel will provide its opinion
to the Trustees that the Indenture Trustee (as
assignee of the Lessor's rights with respect to
Leased Aircraft) will be entitled to the benefits of
Section 1110 of the U.S. Bankruptcy Code with respect
to the applicable Aircraft. See "Description of the
Equipment Notes--Remedies."
Certain Federal Income
Tax Consequences....... Each Trust will not itself be subject to U.S. federal
income taxation. Each U.S. Certificate Owner is
required to report on its federal income tax return
its pro rata share of the entire income from the
relevant Deposits and income from the Equipment Notes
and other property held by the relevant Trust. See
"Certain United States Federal Income Tax
Consequences" in this Prospectus Supplement and in
the Prospectus.
ERISA Considerations.... In general, employee benefit plans subject to Title I
of ERISA or Section 4975 of the Code (or entities
which may be deemed to hold the assets of any such
plan) will be eligible to purchase the Certificates,
subject to certain conditions and the circumstances
applicable to such plans. Each person who acquires a
Certificate will be deemed to have represented and
warranted that either: (a) no employee benefit plan
assets have been used to purchase such Certificate or
(b) the purchase and holding of such Certificate are
exempt from the prohibited transaction restrictions
of ERISA and Section 4975 of the Code pursuant to one
or more prohibited transaction statutory or
administrative exemptions. See "ERISA
Considerations."
S-14
<PAGE>
Rating of the
Certificates............ It is a condition to the issuance of the Class A and
Class B Certificates that such Certificates be rated
by Moody's or Standard & Poor's not less than the
ratings set forth below.
<TABLE>
<CAPTION>
STANDARD
CERTIFICATES MOODY'S & POOR'S
------------ ------- --------
<S> <C> <C>
Class A A2 AA-
Class B Baa1 A
</TABLE>
A rating is not a recommendation to purchase, hold or
sell Certificates, since such rating does not address
market price or suitability for a particular
investor. There can be no assurance that such ratings
will not be lowered or withdrawn by a Rating Agency.
<TABLE>
<CAPTION>
STANDARD
MOODY'S & POOR'S
------- --------
<S> <C> <C>
Rating of each <C>
Depositary.............. Short Term.......................... P-1 A-1+
Threshold Rating for
the Liquidity
Provider............... Short Term
Class A............................. P-1 A-1+
Class B............................. P-1 A-1
Class C............................. P-1 A-1
Liquidity Provider
Rating.................. The Liquidity Provider meets the threshold ratings
requirement for each Class of Certificates.
</TABLE>
S-15
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
The following tables summarize certain consolidated financial data and
certain operating data with respect to US Airways. The following selected
consolidated financial data for the years ended December 31, 1997, 1996, 1995,
1994, and 1993 is derived from the audited consolidated financial statements of
US Airways incorporated by reference in the Prospectus of US Airways and should
be read in conjunction therewith. The consolidated financial data of US Airways
for the nine months ended September 30, 1998 and 1997 is derived from the
unaudited condensed consolidated financial statements of US Airways
incorporated by reference in the Prospectus, which include all adjustments
(consisting solely of normal recurring accruals) that US Airways considers
necessary for the fair presentation of the financial position and results of
operations for these periods. Operating results for the nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. US Airways' selected
consolidated financial data should be read in conjunction with, and is
qualified in its entirety by reference to, the consolidated financial
statements, including the notes thereto.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------- --------------------------------------
1998 1997 1997 1996 1995 1994 1993
(UNAUDITED)
-------------- ------ ------ ------ ------ ------
(IN MILLIONS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA
Operating Revenues...... $6,469 $6,414 $8,501 $7,704 $6,985 $6,579 $6,623
Operating Expenses...... 5,650 5,896 7,915 7,335 6,750 7,096 6,772
------ ------ ------ ------ ------ ------ ------
Operating Income
(Loss)................. 819 518 586 369 235 (517) (149)
Non-Operating Income
(Expense), Net......... (74) 113 87 (178) (198) (199) (226)
------ ------ ------ ------ ------ ------ ------
Income (Loss) Before
Taxes and Accounting
Change................. 745 631 673 191 37 (716) (375)
Income Tax Provision
(Credit)............... 300 99 (379) 8 4 -- --
Accounting Change(1).... -- -- -- -- -- -- (44)
------ ------ ------ ------ ------ ------ ------
Net Income (Loss)....... $ 445 $ 532 $1,052 $ 183 $ 33 $ (716) $ (419)
====== ====== ====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges.......... 2.8 2.4 2.2 1.3 1.1 + +
OPERATING DATA(2)
Revenue passenger miles
(millions)(3).......... 31,263 31,793 41,579 38,943 37,618 37,941 35,221
Available seat miles
(millions)(4).......... 42,260 44,254 58,294 56,885 58,163 61,027 59,485
Passenger load fac-
tor(5)................. 74.0% 71.8% 71.3% 68.5% 64.7% 62.2% 59.2%
Breakeven passenger load
factor(6).............. 66.3% 66.7% 66.4% 67.9% 64.9% 67.3% 61.7%
Passenger revenue per
available seat mile
(cents)(7)............. 12.61 12.15 12.20 11.95 10.78 9.70 10.22
Operating cost per
available seat mile
(cents)(8)............. 12.39 12.23 12.33 12.69 11.40 11.02 11.12
Average yield per reve-
nue passenger mile
(cents)(9)............. 17.05 16.91 17.10 17.46 16.66 15.61 17.27
Average passenger jour-
ney (miles)(10)........ 714 715 709 688 664 638 656
</TABLE>
S-16
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
(UNAUDITED)
------------- ------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
FINANCIAL DATA--BALANCE SHEET
Assets:
Cash and Cash Equivalents........................... $ 720 $1,092
Short-term Investments.............................. 721 870
Other Current Assets................................ 1,319 973
Total Property and Equipment, Net................... 3,306 3,460
Other Assets, Net(11)............................... 2,790 1,870
------ ------
Total Assets...................................... $8,856 $8,265
====== ======
Liabilities and Stockholder's Equity:
Current Liabilities................................. $2,708 $2,450
Long-term Debt and Capital Leases................... 1,970 2,425
Deferred Credits and Other Long-Term Liabilities.... 2,576 2,288
Stockholder's Equity................................ 1,602 1,102
------ ------
Total Liabilities and Stockholder's Equity........ $8,856 $8,265
====== ======
</TABLE>
- --------
+ For the years ended December 31, 1994 and 1993, earnings were not sufficient
to cover fixed charges. Additional earnings of approximately $721 million
for the year ended December 31, 1994 and $385 million for the year ended
December 31, 1993, would have been required to achieve a ratio of 1.0. For
purposes of calculating this ratio, earnings consist of pre-tax income,
fixed charges, capitalized interest and amortization of previously
capitalized interest. Fixed charges consist of interest expense,
amortization of debt issue expense and the portion of rental expense
representative of interest expense.
(1) Cumulative effect of change in method of accounting for post-employment
benefits.
(2) Includes US Airways' "mainline" operations as well as the operations of
its low-fare product, MetroJet. These statistics include free frequent
travelers and related miles they flew. Certain nonrecurring items and
revenues and expenses associated with US Airways' capacity purchase
arrangements with certain affiliated airlines have been excluded from
these calculations for better comparability between periods.
(3) Revenue passengers multiplied by the number of miles they flew. Includes
scheduled service only (excludes charter service).
(4) Seats available multiplied by the number of miles flown (a measure of
capacity). Includes scheduled service only (excludes charter service).
(5) Percentage of aircraft seating capacity that is actually utilized
(calculated by dividing revenue passenger miles by available seat miles).
Includes scheduled service only (excludes charter service).
(6) Percentage of aircraft seating capacity that must be utilized in order for
the airline to break-even at the pre-tax income level.
(7) Passenger transportation revenue divided by available seat miles (a
measure of unit revenue). Includes scheduled service only (excludes
charter service).
(8) Total operating expenses divided by available seat miles (a measure of
unit cost).
(9) Passenger transportation revenue divided by revenue passenger miles (a
measure of the average revenue received for each mile a revenue passenger
is carried). Includes scheduled service only (excludes charter service).
(10) Includes scheduled service only (excludes charter service).
(11) US Airways' noncurrent receivable from its parent, US Airways Group, was
$1.17 billion as of September 30, 1998, compared to $210 million as of
December 31, 1997. The increase reflects primarily two factors: US
Airways' funding of US Airways Group's common stock purchase programs, and
US Airways' funding of US Airways Group's obligations to purchase new
flight equipment with expected delivery dates beyond one year.
S-17
<PAGE>
RISK FACTORS
You should carefully read the following risk factors before purchasing any
Pass Through Certificates.
RISK FACTORS RELATING TO US AIRWAYS
LEVERAGE AND LIQUIDITY
US Airways has a higher proportion of debt compared to its equity capital
than most of its principal competitors. A majority of US Airways' property and
equipment is subject to liens securing indebtedness. US Airways requires
substantial cash resources in order to meet scheduled debt and lease payments
and to finance day-to-day operations. Accordingly, US Airways may be less able
than some of its competitors to withstand a prolonged recession in the airline
industry or respond as flexibly to changing economic and competitive
conditions.
As of September 30, 1998, US Airways had:
. $1.44 billion of cash, cash equivalents and short-term investments;
. a ratio of current assets to current liabilities of 1.02;
. $2.04 billion of long-term debt and capital lease obligations; and
. a ratio of debt to equity of 1.27.
The ability of US Airways to fulfill its short-term and long-term cash needs
and to service its debt obligations depends upon a variety of factors,
including:
. the rates US Airways pays to acquire resources vital to its operations,
such as labor and aviation fuel;
. the prices US Airways can obtain for its services;
. the absence of adverse general economic changes;
. continued unit operating cost reductions; and
. the ability of US Airways to attract new capital.
There can be no assurances that any of these factors will produce an outcome
favorable to US Airways. Continued unit cost reductions (particularly in
personnel costs) are especially critical to enable US Airways to become more
competitive with airlines with lower unit operating costs and those with
greater financial strength.
US Airways Group, Inc. ("US Airways Group"), US Airways' parent corporation,
has agreed to acquire up to 430 new Airbus aircraft, accompanying jet engines
and ancillary assets. As of September 30, 1998, US Airways Group had 128
Airbus Model A320 family single-aisle aircraft on firm order, 112 Airbus Model
A320 family aircraft subject to reconfirmation prior to delivery and options
for 160 additional Airbus Model A320 family aircraft. In addition, US Airways
Group had seven Airbus Model A330-300 widebody aircraft on firm order, seven
aircraft subject to reconfirmation and options for 16 additional Airbus Model
A330 family aircraft. Of the first 128 A320 family aircraft, 43 of the
aircraft scheduled for delivery between 2000 to 2002 are subject to
cancellation with 18 months notice and payment of a cancellation fee. The new
single-aisle aircraft are expected to replace, at a minimum, US Airways'
McDonnell Douglas DC-9-30 and MD-80 and Boeing 737-200 aircraft. The Airbus
Model A330-300 aircraft are expected to be deployed by US Airways in
transatlantic markets. As of September 30, 1998, the minimum determinable
payments associated with US Airways Group's acquisition agreements for Airbus
aircraft (including progress payments, payments at delivery, buyer-furnished
equipment, spares, capitalized interest, penalty payments, cancellation fees
and/or nonrefundable deposits) were estimated to be $303 million for the
remainder of 1998, $1.29 billion in 1999, $2.04 billion in 2000 and $79
million in 2001.
US Airways anticipates financing US Airways Group's acquisition of the new
Airbus aircraft with a combination of enhanced pass through trust
certificates, other debt, leveraged leases and cash. This financing will
result in a significant increase in US Airways' financial obligations. As of
November 24, 1998, US Airways had commitments or letters of intent which it
believes will provide financing for at least 25% of the anticipated purchase
price of all of its 128 firm-order Airbus aircraft. These commitments include
a financing commitment
S-18
<PAGE>
between US Airways and an affiliate of Airbus (the "Airbus Financing
Commitment"). Subject to certain conditions described below, such affiliate
will fulfill its commitment with respect to the Aircraft being financed with
the proceeds of the Certificates through the purchase by Airbus Industrie
Financial Services ("AIFS") of the Class C Certificates. However, further
financing or internally-generated funds is needed to satisfy the Company's
capital commitments for the balance of the aircraft purchase price and for
other aircraft-related expenditures. Other capital expenditures, such as for
training simulators, rotables and other aircraft components, also are expected
to increase in conjunction with the acquisition of the new aircraft and jet
engines. There can be no assurance that sufficient financing will be available
for all aircraft and other capital expenditures not covered by commercial
financing.
US Airways currently is unable to predict the full impact that the purchase
of the new aircraft will have on its future operating cash flows. US Airways
expects decreases in certain expenses as US Airways replaces several older,
diverse aircraft types with newer, more efficient aircraft. US Airways may,
however, experience increases in certain expenses resulting from US Airways'
growth plans, including higher ownership costs and costs associated with
integrating new aircraft types into its operating fleet. An economic downturn,
additional government regulation, intensified competition from lower-cost
competitors or increases in the cost of aviation fuel could have a material
adverse effect on US Airways' results of operations, financial condition and
future prospects.
FINANCIAL HISTORY
US Airways recorded net income of $445.3 million for the nine months ended
September 30, 1998, $1.05 billion for 1997 and net income of $183.2 million
and $33.0 million for 1996 and 1995, respectively. However, it recorded net
losses in excess of $3.23 billion on revenues of approximately $35.88 billion
from 1989 through 1994. Historically, the United States airline industry's
results have correlated with the performance of the economy. US Airways cannot
predict whether the favorable economic conditions of the last several years
will continue.
TRANSACTIONS WITH US AIRWAYS GROUP, INC.
Historically, US Airways has funded certain activities and financing
transactions of US Airways Group. As of September 30, 1998, US Airways Group
owed US Airways $1.38 billion, of which $1.17 billion was not expected to be
collected prior to September 30, 1999. This reflects an increase from December
31, 1997 when US Airways Group owed US Airways $419 million of which $210
million was not expected to be collected prior to December 31, 1998. The
increase is due primarily to US Airways' funding of US Airways Group's common
stock purchase programs and an increase in US Airways Group's obligations for
purchase deposits for new flight equipment, including the new Airbus aircraft.
On November 23, 1998, US Airways Group announced that its board of directors
authorized the purchase from time to time in the open market or privately
negotiated transactions of up to $500 million of its common stock.
HIGH PERSONNEL COSTS
US Airways' personnel costs are the largest single component of its
operating costs (approximately 38% for the nine months ended September 30,
1998). US Airways' unit operating costs, and particularly its personnel costs,
generally are higher than those of its competitors. US Airways believes that
it must reduce its operating cost structure substantially to achieve sustained
improved financial performance.
The current status of US Airways' principal labor union agreements is as
follows:
. Pilots. US Airways' pilots ratified a new five year labor agreement in
October 1997. The new agreement became effective on January 1, 1998 and
becomes amendable on January 1, 2003. The labor agreement includes
various provisions which US Airways believes will help address its high
cost structure, including work rule changes and linking the compensation
of US Airways' pilots to the compensation of pilots at several other
major domestic air carriers. The new contract also includes provisions
which allowed US Airways to launch its MetroJet service, its competitive
response to low-cost, low-fare competition, and introduce regional jet
aircraft on certain routes operated by US Airways Express.
. Flight Attendants. US Airways' labor agreement with its flight attendants
became amendable in January 1997. US Airways currently is in negotiations
over the labor agreements with the Association of Flight Attendants
covering US Airways' flight attendants.
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. Passenger Service. US Airways' passenger service employees voted for
representation by the Communications Workers of America (the "CWA") on
September 27, 1997. The election was a re-run election mandated by the
National Mediation Board ("NMB"). US Airways has filed an action
challenging the NMB order in federal court. US Airways is still in
negotiations over an initial contract with the CWA.
. Mechanics. US Airways' mechanics and related employees, represented by the
International Association of Machinists and Aerospace Workers ("IAMAW"),
filed on September 29, 1998 with the NMB for mediation of its contract
negotiations with US Airways. Negotiations resumed in November 1998 under
the auspices of an NMB-appointed mediator.
. Fleet Service. US Airways' fleet service employees, represented by IAMAW,
filed on June 23, 1998 with the NMB for mediation of its negotiations
with US Airways for its initial contract. A tentative agreement was
reached by representatives of the IAMAW and US Airways on August 17,
1998. The members of the IAMAW rejected the tentative agreement, and
negotiations reconvened on October 6, 1998.
US Airways cannot predict the outcome of its current negotiations with its
unionized employees at this time. With respect to its current negotiations, US
Airways may not be able to obtain meaningful wage and benefit concessions and
productivity improvements from its unionized employees, which would impede US
Airways' drive to meaningfully lower costs.
GEOGRAPHICAL CONCENTRATION
A substantial portion of US Airways' flights are to or from cities in the
Eastern United States. As of November 1998, approximately 85% of US Airways'
departures originated from, and approximately 56% of its capacity (available
seat miles) was deployed within the United States east of the Mississippi
River. Accordingly, severe weather, downturns in the economy and air traffic
control problems in the Eastern United States adversely affect US Airways'
results of operations and financial condition more than they affect airlines
that do not have flights concentrated in the Eastern United States.
YEAR 2000 MATTERS
For a discussion of US Airways' preparations for year 2000 issues related to
its information technology and non-information technology systems, see the
section of the Prospectus captioned "Other Information--Effects of Year 2000."
RISK FACTORS RELATING TO THE AIRLINE INDUSTRY
GENERAL INDUSTRY CONDITIONS
The airline industry is highly competitive and susceptible to price
discounting and similar promotions. US Airways believes that, for the
foreseeable future, demand for more profitable "business fares" will remain
essentially flat and demand for lower-profit "leisure fares," which are
affected by the general economy, will remain highly price sensitive. These
conditions will make it difficult for airlines, including US Airways, to
implement regular price increases. Therefore, US Airways believes it must
reduce its cost structure substantially in order to ensure its long-term
financial stability.
CURRENT COMPETITIVE POSITION
Most of US Airways' operations are in competitive markets. US Airways
competes with at least one major airline on most of its routes between major
cities. US Airways also competes with all forms of ground transportation.
Vigorous price competition exists in the airline industry. Competitors
frequently offer sharply reduced discount fares and other promotions to
increase the number of passengers during normally slack travel periods, to
generate cash flow and to increase market share in selected markets. US
Airways often elects to match discount or promotional fares in certain markets
in order to compete in those discounted markets.
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SIGNIFICANT IMPACT OF LOW-COST, LOW-FARE COMPETITION
US Airways' foremost competitive threat is the growth of low-cost, low-fare
competition in its primary operating region, the Eastern United States. US
Airways estimates that 45% of its traffic base overlapped with low-cost, low-
fare competition as of October 1998, compared to 47% as of February 1998; 50%
as of April 1997; and 49% as of March 1996. The lower overlap as of October
1998 was due primarily to schedule changes implemented by US Airways.
Competing directly with low-cost, low-fare competition typically reduces the
profits realized by US Airways. US Airways' service between the Northeast
United States and Florida has been particularly affected by low-cost, low-fare
competition.
US Airways' primary low-cost, low-fare competition is Southwest Airlines Co.
("Southwest Airlines") and Delta Express. Southwest Airlines has exhibited
steady growth within the Eastern United States since launching service at
Baltimore-Washington International Airport in 1993. In October 1996, Delta Air
Lines, a major air carrier which was itself experiencing pressure from low-
cost, low-fare competition, launched Delta Express, its low-cost product.
US Airways has the highest unit operating cost (operating cost per available
seat mile or cost per available seat mile) of all major domestic air carriers.
US Airways' cost per available seat mile was 12.39 cents for the first nine
months of 1998. In contrast, Southwest Airlines reported unit operating costs
for the first nine months of 1998 of 7.35 cents, and Delta Air Lines reported
an overall unit operating cost of 8.91 cents for the same period.
US Airways launched MetroJet, its competitive response to low-cost, low-fare
competition, on June 1, 1998. US Airways believes that MetroJet is enabling US
Airways to compete effectively against low-cost, low-fare competitors in the
markets in which MetroJet operates. US Airways also believes that MetroJet
improves the attractiveness of its product offering, particularly with respect
to predominately leisure markets such as service between the Northeast United
States and Florida.
AVIATION FUEL
Aviation fuel costs represent a significant portion of US Airways' operating
costs; approximately 8% of US Airways' operating costs for the nine months
ended September 30, 1998. Significant increases in aviation fuel costs could
materially and adversely effect US Airways' results of operations. Fuel prices
continue to be susceptible to, among other factors, political events and
market factors that US Airways cannot control. If a fuel supply shortage
resulting from a disruption of oil imports or otherwise occurs, higher fuel
prices or curtailment of scheduled service could result.
REGULATORY MATTERS
US Airways is subject to a wide range of government regulation. Changes in
government regulation can have a material impact on US Airways' results of
operations and financial condition. In the last several years, the Federal
Aviation Administration ("FAA") has issued a number of airworthiness
directives and other regulations relating to:
. collision avoidance systems;
. airborne windshear avoidance systems;
. noise abatement;
. cargo compartment smoke detection and fire suppression;
. increased capability of flight data recorders to record information; and
. maintenance procedures to be conducted on certain older aircraft.
US Airways expects to continue to incur expenditures relating to compliance
with noise and aging aircraft modifications and insulation and fire safety. In
addition, several airports have increased substantially the rates
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charged to airlines. The ability of airlines to contest these increases is
restricted by federal legislation, United States Department of Transportation
("DOT") regulations and judicial decisions.
Legislation has recently been enacted that would provide for increased
review of certain airline joint ventures by the DOT. In April 1998, the DOT
issued proposed rules designed to regulate perceived anti-competitive behavior
directed at new entrants in the airline industry. Legislation has recently
been enacted requiring, among other things, the National Research Council of
the National Academy of Sciences to complete a comprehensive study pertaining
to competitive issues in the airline industry prior to the DOT's
implementation of any such rules. US Airways cannot predict whether or when
any such proposed rules will be adopted.
US Airways cannot predict what laws and regulations will be adopted, what
changes to aviation treaties and agreements between the United States and
foreign governments may be effected or how any of the foregoing might affect
US Airways. Future laws or regulations may adversely affect US Airways.
RISKS FACTORS RELATING TO THE CERTIFICATES AND THE OFFERING
APPRAISALS AND REALIZABLE VALUE OF AIRCRAFT
Three independent appraisal and consulting firms have prepared base value
appraisals of the Aircraft. Letters summarizing such appraisals are annexed to
this Prospectus Supplement as Appendix II. Such appraisals, which are based on
the base value of the Aircraft, rely on certain varying assumptions and
methodologies and may not reflect current market conditions that could affect
the fair market value of the Aircraft. The appraisals were prepared without
physical inspection of the Aircraft. Appraisals that are based on other
assumptions and methodologies may result in valuations that are materially
different from those contained in such appraisals. See "Description of the
Aircraft and the Appraisals--The Appraisals."
An appraisal is only an estimate of value. It does not indicate the price at
which an Aircraft may be purchased from the Aircraft manufacturer. An
appraisal should not be relied upon as a measure of realizable value. The
proceeds realized upon a sale of any Aircraft may be less than its appraised
value. In particular, the appraisals of the Aircraft to be delivered after the
date of this Prospectus Supplement are estimates of values as of future
delivery dates. The value of an Aircraft, if remedies are exercised under the
applicable Indenture, will depend on market and economic conditions, the
supply of similar aircraft, the availability of buyers, the condition of the
Aircraft and other factors. Accordingly, proceeds realized upon any such
exercise of remedies may not be sufficient to satisfy the total payments due
on the Certificates.
PRIORITY OF DISTRIBUTIONS; SUBORDINATION
Certain Classes of Certificates are subordinated to other Classes in rights
to distributions. See "Description of the Certificates--Payments and
Distributions." Consequently, a payment default under any Equipment Note or a
Triggering Event may cause the distribution to more senior Classes of
Certificates of payments received from payment on one or more junior series of
Equipment Notes. If this occurs, the interest accruing on the remaining
Equipment Notes may be less than the interest accruing on the remaining
Certificates. This is because the remaining Certificates of the junior Classes
may accrue interest at a higher rate than the remaining Equipment Notes, which
include series applicable to the senior Classes bearing interest at a lower
rate. As a result of this possible interest shortfall, the holders of one or
more junior Classes of Certificates may not receive the full amount due to
them after a payment default under any Equipment Note even if all Equipment
Notes are eventually paid in full. See "Description of the Intercreditor
Agreement--Priority of Distributions."
CONTROL OVER COLLATERAL; SALE OF COLLATERAL
If an Indenture Default is continuing, subject to certain conditions, the
Loan Trustee under such Indenture will be directed by the Controlling Party in
exercising remedies under such Indenture, including accelerating the
applicable Equipment Notes or foreclosing the lien on the Aircraft securing
such Equipment Notes. See "Description of the Certificates--Indenture Defaults
and Certain Rights Upon an Indenture Default."
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The Controlling Party will be:
. the Trustee of the Class A Trust, ("Class A Trustee");
. upon payment of final distributions to the holders of Class A
Certificates, the Trustee of the Class B Trust ("Class B Trustee");
. upon payment of final distributions to the holders of Class B
Certificates, the Trustee of the Class C Certificates ("Class C
Trustee"); and
. under certain circumstances, the Liquidity Provider.
During the continuation of any Indenture Default, the Controlling Party may
accelerate and sell the Equipment Notes issued under such Indenture, subject
to certain limitations. See "Description of the Intercreditor Agreement--
Intercreditor Rights--Sale of Equipment Notes or Aircraft." The market for
Equipment Notes during any Indenture Default may be very limited, and there
can be no assurance as to the price at which they could be sold. If the
Controlling Party sells any Equipment Notes for less than their outstanding
principal amount, certain Certificateholders will receive a smaller amount of
principal distributions than anticipated and will not have any claim for the
shortfall against US Airways, any Owner Trustee, any Owner Participant or any
Trustee.
RATINGS OF THE CERTIFICATES
It is a condition to the issuance of the Class A and Class B Certificates
that they receive at least the following ratings from Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc. ("Standard & Poor's" and, together with Moody's,
the "Rating Agencies").
<TABLE>
<CAPTION>
MOODY'S STANDARD & POOR'S
------- -----------------
<S> <C> <C>
Class A Certificates............................... A2 AA-
Class B Certificates............................... Baa1 A
</TABLE>
A rating is not a recommendation to purchase, hold or sell Certificates,
since such rating does not address market price or suitability for a
particular investor. A rating may not remain for any given period of time and
may be lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future (including the downgrading of US Airways, either
Depositary or the Liquidity Provider) so warrant.
The rating of the Certificates is based primarily on the default risk of the
Equipment Notes and the applicable Depositary, the availability of the
Liquidity Facility for the benefit of holders of the Certificates, the
collateral value provided by the Aircraft relating to the Equipment Notes and
the subordination provisions applicable to the Certificates. Standard & Poor's
has indicated that its rating applies to a unit consisting of Certificates
representing the Trust Property and Escrow Receipts initially representing
undivided interests in certain rights to the Deposits. Amounts deposited under
the Escrow Agreements are not property of US Airways and are not entitled to
the benefits of Section 1110 of the U.S. Bankruptcy Code. Neither the
Certificates nor the Escrow Receipts may be separately assigned or
transferred.
AGREEMENTS MAY CHANGE
US Airways currently is in negotiations with several companies to act as
Owner Participant with respect to several of the Aircraft. Such Owner
Participants and other Owner Participants that have not yet been identified
may request changes to the forms of the Participation Agreement, Lease and
Leased Aircraft Indenture attached to the Note Purchase Agreement. As a
result, the actual Participation Agreements, Leases and Leased Aircraft
Indentures entered into by US Airways may differ from the descriptions of such
agreements in this Prospectus Supplement. The degree to which such agreements
may change is limited because (i) such agreements are required to contain the
Mandatory Document Terms (as such Mandatory Document Terms are permitted to
vary under the Note Purchase Agreement), and the Mandatory Economic Terms,
(ii) US Airways is obligated to
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certify that changes to the form agreements do not materially and adversely
affect the Certificateholders and (iii) US Airways is obligated to obtain
written confirmation from the rating agencies that use of versions of such
agreements modified in any material respect will not result in a withdrawal,
downgrade or suspension of the rating of any Class of Certificates.
NOTE PURCHASE AGREEMENT; CLASS C NOTES
The Note Purchase Agreement contains certain conditions to the Class C
Trustee's obligation to enter into the Participation Agreement to purchase the
Series C Equipment Notes to be issued in any particular financing transaction
that do not apply to the Class A and Class B Trustees' obligations to purchase
Series A and Series B Equipment Notes. These conditions are part of the Airbus
Financing Commitment and remain in effect only for so long as AIFS owns any
Class C Certificates. US Airways has no reason to believe that these
conditions will not be satisfied at all times during the Delivery Period. If,
however, at the time of the closing of a financing with respect to any
Aircraft, such conditions are not satisfied, US Airways will still be
obligated to finance such Aircraft but will not issue any Series C Equipment
Notes with respect to such Aircraft.
Any Series C Equipment Notes not purchased by the Class C Trustee will
reduce the aggregate amount of equipment note payments made to the
Subordination Agent under the Intercreditor Agreement. Accordingly, less money
will be available to support the payment obligations on the Class A and Class
B Certificates, which rank senior in right of distributions to the Class C
Certificates.
UNUSED ESCROWED FUNDS
Under certain circumstances, less than all of the funds held in escrow as
Deposits may be used to purchase Equipment Notes by the Delivery Period
Termination Date. See "Description of the Deposit Agreements--Unused
Deposits." If any funds remain as Deposits with respect to any Trust after the
Delivery Period Termination Date, they will be withdrawn by the Escrow Agent
for such Trust and distributed, with accrued and unpaid interest, to the
Certificateholders of such Trust. In addition, if the remaining Deposits
relate to the Class A and Class B Trusts, such distribution will include a
premium payable by US Airways equal to the Deposit Make-Whole Premium with
respect to such remaining Deposits. However, no premium will be paid with
respect to unused deposits attributable to the failure of an Aircraft to be
delivered prior to the Delivery Period Termination Date due to any reason not
occasioned by US Airways' fault or negligence. See "Description of the Deposit
Agreements--Unused Deposits."
LIMITED MARKET FOR RESALES OF THE CERTIFICATES
Prior to the offering of the Class A and Class B Certificates, such
Certificates were not publicly traded. Neither US Airways nor any Trust
intends to apply for listing of such Class A and Class B Certificates on any
securities exchange or otherwise. US Airways has been advised by the
Underwriters that they presently intend to make a market in the Class A and
Class B Certificates, as permitted by applicable laws and regulations, after
consummation of the offering of such Certificates. None of the Underwriters is
obligated, however, to make such a market and any such market-making activity
may be discontinued at any time without notice at the sole discretion of each
Underwriter. There can be no assurance that an active public market for the
Class A and Class B Certificates will develop or that an investment in such
Certificates will be liquid.
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THE COMPANY
US Airways is a certificated air carrier engaged primarily in the business
of transporting passengers, property and mail. It is the principal operating
subsidiary of US Airways Group. US Airways accounted for approximately 90% of
US Airways Group's consolidated operating revenues for the first nine months
of 1998.
US Airways carried approximately 59 million passengers in 1997, and, when
combined with its affiliates, US Airways Shuttle and US Airways Express, 71
million passengers, making US Airways the fourth largest airline in the world
in terms of passengers carried. The US Airways system includes its mainline
domestic and international service and its new MetroJet service, together with
its code share partners US Airways Express and US Airways Shuttle. See "--Code
Sharing Relationships." The combined US Airways system served 202 destinations
worldwide as of November 1998. As of September 30, 1998, US Airways had more
than 38,000 full time equivalent employees.
US Airways has in place a new foundation to seek to achieve its long-term
strategic objective of establishing US Airways as a competitive global
airline:
. a substantially improved line of products including new international
service and international business class, and expanded regional jet
service on certain routes operated by US Airways Express;
. the MetroJet service--US Airways' competitive response to low-cost, low-
fare competition;
. US Airways Group's agreement with Airbus to purchase up to 400 new
aircraft from the Airbus Model A320 family of narrowbody aircraft and up
to 30 new Airbus Model A330 widebody aircraft;
. a new labor contract between US Airways and its pilots; and
. a contract with The SABRE Group that US Airways believes will provide
long-term cost savings and enhancements to US Airways' information
services requirements.
On April 15, 1998, Standard & Poor's raised its senior unsecured credit
ratings of US Airways to B and removed US Airways from CreditWatch, where it
was placed on October 1, 1997. Standard & Poor's cited "sharply improved
operating performance" among other factors for its decision to raise the
credit ratings. On April 23, 1998, Moody's also raised its senior unsecured
credit ratings of US Airways to B1. Credit ratings issued by agencies such as
Standard & Poor's and Moody's affect a company's ability to issue debt or
equity securities and the effective rate at which such financings are
undertaken.
DOMESTIC SERVICE
US Airways' principal connecting hubs are located at the major airports in
Charlotte, Philadelphia and Pittsburgh and at Baltimore-Washington
International Airport. US Airways also has substantial operations at Boston's
Logan International Airport, New York's LaGuardia Airport and Washington's
Ronald Reagan Washington National Airport. As of November 1998, measured by
departures, US Airways was the largest airline at each of these airports and
is the largest air carrier in many other smaller eastern cities such as
Albany, Buffalo, Hartford, Providence, Richmond, Rochester and Syracuse. US
Airways also is the leading airline from the Northeast United States to
Florida and, as of July 1998, US Airways carried approximately 37% of all
intra-East Coast passengers. As of November 1998, approximately 85% of US
Airways' departures and approximately 56% of its capacity (available seat
miles) were deployed within the United States east of the Mississippi River.
Four Northeast United States corridor cities are the core of US Airways'
network: Boston, New York, Philadelphia and Washington. These metropolitan
areas represent approximately 14% of the United States' population as of
August 1998, and approximately one-third of US Airways' jet service in terms
of departures.
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With the exception of Newark Airport and Washington Dulles Airport, US Airways
is the number one carrier in terms of number of departures at these metro
regions' airports as of August 1998. US Airways believes that its intra-East
Coast core provides a platform for growth by allowing US Airways to leverage
its intra-East Coast short-haul presence into long-haul operations.
METROJET
In response to the entrance and growth of "low-cost, low-fare" competition,
including competition from Southwest Airlines and Delta Express, US Airways
launched its "MetroJet" product on June 1, 1998. Through the use of a cross-
functional employee task force, the MetroJet product was developed to serve
the following mission: "To Serve the Low-Fare Demands of the Marketplace
Effectively While Competing at a Profitable Level Against Low-Cost Carriers."
The MetroJet service is designed to be competitive with Southwest Airlines
in terms of labor costs, asset utilization and the on-board product offered.
Southwest Airlines still maintains advantages relating to the cost of employee
benefits and productivity and to the cost of distribution, but US Airways
believes that these advantages have been significantly reduced. US Airways
believes MetroJet will maintain a revenue premium advantage over Southwest
Airlines by virtue of the following factors:
. strong East Coast presence;
. broad-based Dividend Miles program;
. seat assignments at the airport;
. existing customer base;
. vast travel agency network; and
. reciprocal club room access for members of US Airways Clubs and American
Airlines' Admirals Club.
Due to these factors, US Airways also anticipates carrying a few more
passengers per departure than its low-cost competitors, as well as a broader
yield mix of passengers. See "--The US Airways and American Airlines Marketing
Relationship."
US Airways believes it will realize cost savings from MetroJet principally
due to the fact that the MetroJet service is largely a conversion of US
Airways' mainline service. US Airways also realizes cost savings due to the
increased utilization of its fleet. MetroJet currently operates 19 Boeing
B737-200 aircraft and currently serves 15 cities. US Airways anticipates that
MetroJet will operate 22 aircraft with service to 16 cities by the end of 1998
and will operate 54 aircraft by the end of 1999. US Airways' new pilot labor
agreement allows for additional expansion beyond this first phase; up to as
much as 25% of the US Airways system may be flown by MetroJet.
EXPANDING INTERNATIONAL SERVICE
As part of its strategy to become a competitive global airline, US Airways
has expanded and intends to continue to expand its international service. In
the last two years, US Airways has increased its weekly flights to Europe from
21 to 70. In July 1998, US Airways announced its order for up to 30 Airbus
Model A330-300 widebody aircraft and the plans for a new international
terminal at Philadelphia International Airport, US Airways' primary
international gateway.
This commitment to expand international service also is exemplified by the
addition of a second Philadelphia-Paris flight scheduled to commence during
the summer of 1999 and the introduction of "Envoy Class" in December 1997. US
Airways added new service from Philadelphia to London's Gatwick Airport (now
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two flights daily) and from Philadelphia to Amsterdam in April 1998. In
October 1998, US Airways temporarily suspended the second Philadelphia-Paris
flight in order to initiate daily service to Paris from Pittsburgh. However,
in November 1998, US Airways received authority from the U.S. government to
operate a third daily flight to Paris beginning in March 1999 and will resume
the second Philadelphia-Paris flight at that time. US Airways has filed with
the DOT for authority to serve London's Heathrow Airport from the United
States' airports in Boston, Charlotte, Philadelphia and Pittsburgh and, in
November 1998, filed an updated application with the DOT for rights to operate
Philadelphia-Milan service using seven weekly frequencies recently made
available pursuant to an agreement between the United States and Italy. US
Airways anticipates moving its operations at Gatwick Airport to Heathrow
Airport at the earliest possible time. The availability of operating rights at
Heathrow Airport currently is constrained by the bilateral aviation treaty
between the United States and the United Kingdom. US Airways' transatlantic
capacity for the first nine months of 1998 was 10% greater than for the first
nine months of 1997, which in 1997 was approximately 35% greater than for 1996
and has more than doubled from 1995 levels. US Airways continues to explore
additional international opportunities.
On April 22, 1998, US Airways announced that it had postponed its service to
London's Gatwick Airport from Charlotte, citing "unlawful" behavior by the
United Kingdom in refusing to grant commercially viable landing rights for the
flight, which was scheduled to begin on May 7, 1998. While not commercially
viable for once-daily service from Charlotte, US Airways has been able to use
landing rights during the 1998-1999 winter season it intended for use to
Charlotte to add the second Philadelphia--London flight. Upon US Airways'
petition, the DOT dismissed US Airways' complaint against the United Kingdom
over this landing rights issue, which argued that the bilateral aviation
agreement between the United States and the United Kingdom guarantees United
States air carriers a "fair and equal opportunity to compete" with United
Kingdom air carriers. However, US Airways continues to pursue this matter and
intends to establish Charlotte--London service as soon as it is granted
commercially viable landing rights for the flight.
CODE SHARING RELATIONSHIPS
US AIRWAYS EXPRESS
US Airways has code-sharing arrangements with 11 air carriers which operate
under the trade name "US Airways Express," including US Airways Group's
wholly-owned subsidiaries Allegheny Airlines, Inc., Piedmont Airlines, Inc.
and PSA Airlines, Inc. Under a code-share arrangement, one air carrier places
its designator code and sells tickets on flights of another carrier. Through
service agreements, US Airways provides reservations and, at certain stations,
ground support services, in return for service fees. The US Airways Express
network feeds traffic into US Airways' route system at several points,
primarily at US Airways' hubs. As of September 1998, US Airways Express served
175 airports in 36 states in the continental United States, Canada and the
Bahamas, including 73 airports also served by US Airways. During 1997, US
Airways Express air carriers carried approximately 10.9 million passengers,
approximately 55% of whom connected to US Airways' flights.
US AIRWAYS SHUTTLE
US Airways also code shares with US Airways Group's wholly-owned subsidiary,
Shuttle, Inc., which operates under the trade name "US Airways Shuttle." US
Airways Shuttle owns 12 Boeing B727-200 aircraft and currently provides high
frequency service between New York's, LaGuardia Airport; Boston's Logan
International Airport; and Washington's Ronald Reagan Washington National
Airports.
OTHER RELATIONSHIPS
US Airways also has code-share arrangements with Qantas Airways Limited and
Deutsche BA for flights to and from certain Australian and Pacific
destinations and within Germany, respectively.
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THE US AIRWAYS AND AMERICAN AIRLINES MARKETING RELATIONSHIP
On April 23, 1998, US Airways and American Airlines, Inc. ("American
Airlines") announced a marketing relationship that gives customers of both
companies important new benefits, including combined access to both frequent
traveler programs: US Airways' Dividend Miles and American Airlines'
AAdvantage. Under the program, effective August 1, 1998, members who belong to
Dividend Miles and AAdvantage are able to claim awards for travel on both
airlines. In addition, US Airways Club and American Airlines' Admirals Club
members now enjoy reciprocal access to each airlines' airport clubs. During
August 1998, the second phase of the marketing relationship was launched:
enabling Dividend Miles and AAdvantage members who belong to both programs to
combine miles when claiming a travel award on either airline. The third phase
of the relationship, allowing AAdvantage members to earn AAdvantage miles as
well as Dividend Miles on certain US Airways Shuttle flights, was unveiled in
early October 1998.
LABOR AGREEMENTS
A new five-year labor contract between US Airways and its pilots became
effective January 1, 1998. This contract provides the Company's pilots with
job security, guaranteed capacity growth and the opportunity to share in the
success of the airline through stock options. The labor agreement includes
various provisions which US Airways believes will help address its high cost
structure, including work rule changes and linking the compensation of US
Airways' pilots to the compensation of pilots at several other major domestic
air carriers. The new contract also includes provisions which allowed US
Airways to launch MetroJet and introduce jet aircraft on certain routes
operated by US Airways Express. US Airways currently is negotiating agreements
with its flight attendants, machinists and customer service employees. See
"Risk Factors Relating to US Airways--High Personnel Costs."
FLEET RATIONALIZATION AND THE AIRBUS AIRCRAFT
US Airways is committed to rationalizing its fleet through its order for up
to 400 new aircraft from the Airbus Model A320 family of narrowbody aircraft
and its order for up to 30 new Airbus Model A330-300 widebody aircraft. US
Airways' current operating fleet is comprised of eight different aircraft
models--six within the 95-150 seat range--a diversity which reflects the
different airlines that have merged with or been acquired by US Airways over
the years. As of September 30, 1998, US Airways operated 322 aircraft in the
95-150 seat category, including 48 DC-9s, 64 737-200s, 31 MD-80s and 40
Fokker-100s. The complexity and mechanical differences of US Airways' fleet
creates inefficiencies with respect to aircraft maintenance, flight scheduling
and flight crew training.
US Airways believes the addition of the Airbus Model A320 family of aircraft
to US Airways' fleet will allow the airline to enjoy economies of
consolidation in terms of training costs, ground support equipment and spare
aircraft parts. The Airbus aircraft are expected to serve the dual purposes of
retiring older fleet types while growing the fleet overall, and are expected
to permit US Airways the flexibility to further increase capacity through the
exercise of options for additional aircraft. The addition of the Airbus
narrowbody aircraft also provides more seats with lower direct operating costs
per plane mile. As US Airways modernizes its fleet over the next several
years, the airline believes it will realize a reduction in maintenance and
fuel costs associated with retiring aircraft. A newer fleet generally has
greater dispatch reliability, which is expected to enhance further US Airways'
revenues. However, certain ownership costs such as interest expense,
depreciation and aircraft rent expense are likely to increase in conjunction
with the higher ownership and/or rental costs associated with the new
aircraft.
US Airways also believes that upgrading its fleet to include the Airbus
Model A320 family of aircraft will provide the airline with added flexibility
in assigning aircraft to routes based on customer volume and demand.
S-28
<PAGE>
As the full-passenger ranges of the Airbus Model A320 family of aircraft range
from 2,500 to 2,900 nautical miles, these aircraft can be dispatched non-stop
from any of US Airways' four domestic hub cities to most major cities on the
West Coast. Additionally, the aircraft delivered initially will be overwater
equipped and have the range for Caribbean flying.
US Airways' recent order for up to 30 Airbus Model A330-300 aircraft is
designed to take advantage of fleet commonality in order to increase US
Airways' savings. The savings in training costs, ground support equipment and
spare parts will be compounded because the Airbus Model A330-300 aircraft are
consistent in cockpit design with the Airbus Model A320 aircraft. US Airways'
decision to select the Airbus Model A330-300 was based, in part, on its desire
to obtain properly-sized planes in order to upgrade existing routes as well as
to introduce service in new markets. US Airways anticipates that, by combining
the Airbus Model A330-300 deliveries with the Airbus Model A320 deliveries, US
Airways will have one of the most modern commercial air carrier fleets within
a few years time. US Airways also believes that the Airbus Model A330-300
offers exceptional passenger appeal together with comfort and efficiency in
international service.
US AIRWAYS' MARKET POSITION
Historically, demand for air transportation tends to mirror general economic
conditions. Since early 1995, general domestic economic conditions have been
relatively favorable with the level of demand for air transportation
exhibiting a strong correlation. In addition, over the same time period, US
Airways and its affiliated carriers have experienced favorable pricing and
capacity trends in the markets in which they operate.
Most of the markets in which US Airways and its affiliated carriers operate
are highly competitive, especially with respect to leisure traffic. Crucial to
US Airways' ability to compete effectively is the airline's ongoing efforts to
reduce its traditionally high cost structure. The Airbus narrowbody aircraft
are expected to bring substantial operational cost savings to US Airways over
time. In addition, US Airways' new labor agreement with its pilots has opened
the way for the airline to develop its own cost-effective response to the low-
cost, low-fare competition by launching its MetroJet service.
THE SABRE GROUP AGREEMENT
US Airways entered into an extensive contract with The SABRE Group under
which The SABRE Group has assumed responsibility, as of January 1, 1998, for
substantially all of US Airways' information technology requirements. The
agreement with The SABRE Group is expected to result in substantial
information system enhancements and efficiencies, particularly in the areas of
reservations, passenger check-in, yield management and aircraft and crew
scheduling. The SABRE Group also has assumed responsibility for the majority
of US Airways' Year 2000 compliance efforts. These conversion efforts are
expected to be substantially completed as of August 1, 1999. For additional
information regarding The SABRE Group agreement and US Airways' Year 2000
compliance efforts, see the section of the Prospectus captioned "Other
Information--Effects of Year 2000."
ON-LINE RESERVATION SYSTEM
In October 1998, US Airways launched an on-line internet reservation system
called "Personal Travelworks". The new system offers customers the ability to
make their own travel arrangements for flights on US Airways, MetroJet, US
Airways Shuttle and US Airways Express. Visitors to www.usairways.com, and the
new MetroJet internet site, www.flymetrojet.com, can make travel reservations,
purchase tickets and obtain flight schedules, ticket prices and other travel
information on-line.
CHANGE IN CULTURE--A NEW OUTLOOK
US Airways is engaged in a process to change how the airline is perceived
both internally and externally. Hundreds of front-line employees, who have
extensive first-hand knowledge and experience to offer, have been
S-29
<PAGE>
involved in cross-functional task forces to address some of the most important
service issues facing US Airways. US Airways has instituted a company-wide
policy to "make exceptional service a way of life at US Airways" and has
identified teamwork and training as the centerpieces of its efforts. US
Airways is in the process of offering a day-long session called "Creating
Impressions of Excellence" to the majority of its employees throughout the
airline.
US Airways' efforts to change external perceptions of the airline have
produced measurable benefits. US Airways has been working to improve its
performance with respect to several areas traditionally identified in the
industry as barometers of customer satisfaction, such as on-time arrivals and
lost baggage problems. As a result of these strategic initiatives, US Airways
was ranked as the top airline in terms of best overall service in 1997 as
measured by the DOT composite statistics of five selected major United States
airlines. This high level has continued into 1998 as illustrated by the table
below:
<TABLE>
<CAPTION>
FIRST THREE QUARTERS OF 1998
---------------------------------------------
1997 ON-TIME CONSUMER LOST INVOLUNTARY DENIED
AIRLINE RANKING* ARRIVAL COMPLAINTS BAGGAGE BOARDINGS
- ------- -------- ------- ---------- ------- ------------------
<S> <C> <C> <C> <C> <C>
US Airways............... 1 2 2 1 1
American................. 2 1 3 2 3
United................... 3 4 4 5 4
Delta.................... 4 3 1 3 5
Northwest................ 5 5 5 4 2
</TABLE>
- --------
* Composite average of DOT rankings of on-time arrivals, lost baggage,
consumer complaints and involuntarily denied boardings.
USE OF PROCEEDS
A portion of the proceeds of the sale of the Certificates will be used by
the Trusts to purchase Equipment Notes on or shortly after the Issuance Date
from three separate Owner Trustees to finance a portion of the purchase price
of three of the Leased Aircraft delivered during October and November 1998
(the "Delivered Aircraft"). The remaining proceeds from the sale of the
Certificates will be deposited with the applicable Depositary on behalf of the
applicable Escrow Agent for the benefit of the Certificateholders of such
Trusts. Upon the request of the Trustees, the Escrow Agent will withdraw the
applicable Deposits and deliver such proceeds to the Trustees to be used
during the Delivery Period to purchase Equipment Notes issued, at US Airways'
election, either (i) by each Owner Trustee to finance a portion of the
purchase price of the Leased Aircraft or (ii) by US Airways to finance a
portion of the purchase price of the Owned Aircraft. US Airways currently
expects all Aircraft to be Leased Aircraft.
DESCRIPTION OF THE CERTIFICATES
The following description of the particular terms of the Certificates
provides the general terms and provisions of the Certificates. This
description supplements and, to the extent it is inconsistent therewith,
replaces the description of the Certificates set forth in the Prospectus
accompanying this Prospectus Supplement (the "Prospectus"). The statements
under this caption are summaries and do not purport to be complete and are
qualified in their entirety by reference to all of the provisions of the Basic
Agreement, a form of which was filed with the Securities and Exchange
Commission (the "Commission") on September 28, 1998 as an exhibit to US
Airways' Registration Statement on Form S-3, and to all of the provisions of
the Certificates, the Trust Supplements, the Deposit Agreements, the Escrow
Agreements and the Intercreditor Agreement, each of which will be filed as an
exhibit to an Annual Report on Form 10-K, a Quarterly Report on Form 10-Q, or
to a Current Report on Form 8-K to be filed by US Airways with the Commission.
S-30
<PAGE>
Except as otherwise indicated, the following summary relates to each of the
Trusts and the Certificates issued by each Trust. The terms and conditions
governing each of the Trusts will be substantially the same, except as
described under "Description of the Intercreditor Agreement--Priority of
Distributions" below and except that the principal amount and scheduled
principal repayments of the Equipment Notes held by each Trust and the
interest rate and maturity date of the Equipment Notes held by each Trust will
differ. The references to Sections in parentheses in the following summary are
to the relevant Sections of the Basic Agreement unless otherwise indicated.
GENERAL
Each Pass Through Certificate (collectively, the "Certificates") will
represent a fractional undivided interest in one of the three US Airways 1998-
1 Pass Through Trusts (the "Class A Trust," the "Class B Trust," and the
"Class C Trust," and, collectively, the "Trusts"). The Trusts will be formed
pursuant to a pass through trust agreement between US Airways and State Street
Bank and Trust Company, as trustee (the "Trustee"), dated as of (the
"Basic Agreement"), and three separate supplements thereto (each, a "Trust
Supplement" and, together with the Basic Agreement, collectively, the "Pass
Through Trust Agreements"). The Certificates to be issued by the Class A
Trust, the Class B Trust, and the Class C Trust are referred to herein as the
"Class A Certificates," the "Class B Certificates," and the "Class C
Certificates."
The property of each Trust (the "Trust Property") will consist of:
. Subject to the Intercreditor Agreement, Equipment Notes acquired under
the Note Purchase Agreement and issued, at US Airways' election, either
(a) on a nonrecourse basis by the trustees (each, an "Owner Trustee") of
separate owner trusts in each separate leveraged lease transaction with
respect to each Leased Aircraft to finance a portion of the purchase
price of such Leased Aircraft by the Owner Trustee, in which case the
applicable Leased Aircraft will be leased to US Airways, or (b) on a
recourse basis by US Airways in connection with each separate secured
loan transaction with respect to each Owned Aircraft to finance a portion
of the purchase price of such Owned Aircraft by US Airways.
. The rights of such Trust to acquire Equipment Notes under the Note
Purchase Agreement.
. The rights of such Trust under the applicable Escrow Agreement to request
the Escrow Agent to withdraw from the applicable Depositary funds
sufficient to enable each such Trust to purchase Equipment Notes on the
delivery of each Aircraft during the Delivery Period.
. The rights of such Trust under the Intercreditor Agreement (including all
monies receivable in respect of such rights).
. Monies receivable under the Liquidity Facility for such Trust.
. Funds from time to time deposited with the Trustee in accounts relating
to such Trust.
The Certificates of each Trust will be issued in fully registered form only
and will be subject to the provisions described below under "--Book-Entry;
Delivery and Form." Certificates will be issued only in minimum denominations
of $1,000 or integral multiples thereof, except that one Certificate of each
Trust may be issued in a different denomination. (Section 3.01)
The Certificates will represent interests in the respective Trusts, and all
payments and distributions thereon will be made only from the Trust Property
of the related Trust. (Section 3.09) The Certificates will not represent an
interest in or obligation of US Airways, the Trustees, any of the Loan
Trustees or Owner Trustees in their individual capacities, any Owner
Participant or any affiliate of any thereof.
Pursuant to the Escrow Agreement applicable to each Trust, the holders of
Certificates of each such Trust (each a "Certificateholder") as holders of the
Escrow Receipts affixed to each Certificate will be entitled to certain rights
with respect to payments and withdrawals that are required to be made by the
applicable Depositary under the applicable Depositary Agreement. Accordingly,
any transfer of a Certificate will have the effect of transferring the
corresponding rights with respect to such payments, and rights with respect to
payments
S-31
<PAGE>
and withdrawals to be made under the applicable Depositary Agreement may not
be separately transferred by holders of the Certificates. Rights with respect
to the Deposits, payments and withdrawals to be made under the applicable
Depositary Agreement and the Escrow Agreement relating to a Trust, except for
the right to request withdrawals for the purchase of Equipment Notes, will not
constitute Trust Property of such Trust.
PAYMENTS AND DISTRIBUTIONS
The following description of distributions on the Certificates should be
read in conjunction with the description of the Intercreditor Agreement which
may have the consequence of altering the effect of the following provisions in
a default situation. See "Description of the Intercreditor Agreement--Priority
of Distributions." Payments of interest on the Deposits with respect to each
Trust will be made by the applicable Depositary to the Paying Agent and will
be distributed to the Receiptholders on the date receipt of such payment is
confirmed by the Paying Agent and payments of principal, premium (if any) and
interest on the Equipment Notes or with respect to other Trust Property held
in each Trust will be distributed by the Trustee to Certificateholders of such
Trust on the date receipt of such payment is confirmed, except in the case of
certain types of Special Payments.
The Deposits held with respect to the Class A Trust and the Class B Trust
and the Equipment Notes held in each such Trust will accrue interest at the
applicable rate per annum for Certificates to be issued by such Trust set
forth on the cover page of this Prospectus Supplement, payable on January 30
and July 30 of each year, commencing on January 30, 1999 (or, in the case of
Equipment Notes issued after such date, commencing with the first such date to
occur after initial issuance thereof). The Deposits held with respect to the
Class C Trust and Equipment Notes held in such Trust will accrue interest at
the rate per annum for Certificates to be issued by such Trust set forth under
"Purchase of Class C Certificates," payable January 30 and July 30 each year,
commencing on January 30, 1999 (or, in the case of Equipment Notes issued
after such date commencing with the first such date to occur after initial
issuance thereof). The interest rate applicable to each Class of Certificates
is referred to as the "Stated Interest Rate" for such Trust. All such interest
payments will be distributed to Certificateholders of such Trust on each such
date until the final Distribution Date for such Trust, subject in the case of
payments on the Equipment Notes to the Intercreditor Agreement. Interest is
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Payments of interest applicable to the Certificates to be issued by each of
the Trusts will be supported by a separate Liquidity Facility to be provided
by the Liquidity Provider for the benefit of the holders of such Certificates
in an aggregate amount sufficient to pay interest thereon at the Stated
Interest Rate for such Trust on the next three successive Regular Distribution
Dates (without regard to any future payments of principal on such
Certificates).
The Liquidity Facility with respect to each Trust does not cover interest
payable by the applicable Depositary on the Deposits relating to such Trust.
Furthermore, such Liquidity Facility does not provide for drawings thereunder
to pay for principal of or premium on such Certificates, any interest on such
Certificates in excess of the Stated Interest Rates, or, notwithstanding the
subordination provisions of the Intercreditor Agreement, principal of or
interest or premium on the Certificates of any other Class. Therefore, only
the holders of the Certificates to be issued by a particular Trust are
entitled to receive and retain the proceeds of drawings under the Liquidity
Facility for such Trust. See "Description of the Liquidity Facilities".
Payments of principal of the Equipment Notes are scheduled to be received by
the Trustee on January 30 and July 30 in certain years depending upon the
terms of the Equipment Notes held in such Trust.
Scheduled payments of interest on the Deposits and of interest or principal
on the Equipment Notes are herein referred to as "Scheduled Payments," and
January 30 and July 30 of each year are herein referred to as "Regular
Distribution Dates." See "Description of the Equipment Notes--Principal and
Interest Payments." The "Final Maturity Date" for the Class A Certificates is
, for the Class B Certificates is , and for the Class C Certificates
is .
S-32
<PAGE>
The Paying Agent with respect to each Escrow Agreement will distribute on
each Regular Distribution Date to the Certificateholders of the Trust to which
such Escrow Agreement relates all Scheduled Payments received in respect of
the related Deposits, the receipt of which is confirmed by the Paying Agent on
such Regular Distribution Date. The Trustee of each Trust will distribute,
subject to the Intercreditor Agreement, on each Regular Distribution Date to
the Certificateholders of such Trust all Scheduled Payments received in
respect of Equipment Notes held on behalf of such Trust, the receipt of which
is confirmed by the Trustee on such Regular Distribution Date. Each
Certificateholder of each Trust will be entitled to receive its proportionate
share, based upon its fractional interest in such Trust, of any distribution
in respect of Scheduled Payments of interest on the Deposits relating to such
Trust and, subject to the Intercreditor Agreement, of principal or interest on
Equipment Notes held by the Subordination Agent on behalf of such Trust. Each
such distribution of Scheduled Payments will be made by the applicable Paying
Agent or Trustee to the Certificateholders of record of the relevant Trust on
the record date applicable to such Scheduled Payment subject to certain
exceptions. (Sections 4.01 and 4.02; Escrow Agreement, Section 2.03) If a
Scheduled Payment is not received by the applicable Paying Agent or Trustee on
a Regular Distribution Date but is received within five days thereafter, it
will be distributed on the date received to such holders of record. If it is
received after such five-day period, it will be treated as a Special Payment
(as defined below) and distributed as described below.
Any payment in respect of, or any proceeds of, any Equipment Note, Trust
Indenture Estate under (and as defined in) any Leased Aircraft Indenture or
Collateral under (and as defined in) any Owned Aircraft Indenture other than a
Scheduled Payment (each, a "Special Payment") will be distributed on, in the
case of an early redemption or a purchase of any Equipment Note, the date of
such early redemption or purchase (which is a Business Day), and otherwise on
the Business Day specified for distribution of such Special Payment pursuant
to a notice delivered by each Trustee as soon as practicable after the Trustee
has received funds for such Special Payment (each a "Special Distribution
Date", each Special Distribution Date and Regular Distribution Date, a
"Distribution Date"). Any such distribution will be subject to the
Intercreditor Agreement.
Any unused Deposits to be distributed after the Delivery Period Termination
Date or the occurrence of a Triggering Event, together with accrued and unpaid
interest thereon (each, also a "Special Payment"), will be distributed on a
date 15 days after the Paying Agent has received notice of the event requiring
such distribution (also a "Special Distribution Date"). However, if such date
is within ten days before or after a Regular Distribution Date, such Special
Payment will be made on such Regular Distribution Date. Payments made on or
with respect to a Deposit are not subject to the Intercreditor Agreement.
Each Paying Agent, in the case of the Deposits, and each Trustee, in the
case of Trust Property, will mail a notice to the Certificateholders of the
applicable Trust stating the scheduled Special Distribution Date, the related
record date, the amount of the Special Payment and the reason for the Special
Payment. In the case of a redemption or purchase of the Equipment Notes held
in the related Trust or any distribution of unused Deposits after the Delivery
Period Termination Date or the occurrence of a Triggering Event, such notice
will be mailed not less than 15 days prior to the date such Special Payment is
scheduled to be distributed, and in the case of any other Special Payment,
such notice will be mailed as soon as practicable after the Trustee has
confirmed that it has received funds for such Special Payment. (Section
4.02(c); Trust Supplements, Section 3.01; Escrow Agreement, Sections 2.03 and
2.06) Each distribution of a Special Payment, other than a final distribution,
on a Special Distribution Date for any Trust will be made by the Paying Agent
or the Trustee, as applicable, to the Certificateholders of record of such
Trust on the record date applicable to such Special Payment. (Section 4.02(b);
Section 2.03 of the Escrow Agreement) See "--Indenture Defaults and Certain
Rights upon an Indenture Default" and "Description of the Equipment Notes--
Redemption."
Each Pass Through Trust Agreement will require that the Trustee establish
and maintain, for the related Trust and for the benefit of the
Certificateholders of such Trust, one or more non-interest bearing accounts
(the "Certificate Account") for the deposit of payments representing Scheduled
Payments received by such Trustee. Each Pass Through Trust Agreement will
require that the Trustee establish and maintain, for the related Trust and for
the benefit of the Certificateholders of such Trust, one or more accounts (the
"Special Payments Account") for the deposit of payments representing Special
Payments received by such Trustee, which are to be non-interest bearing except
in certain circumstances where the Trustee may invest amounts in such account
in
S-33
<PAGE>
certain permitted investments. Pursuant to the terms of each Pass Through
Trust Agreement, the Trustee will be required to deposit any Scheduled
Payments relating to the applicable Trust received by it in the Certificate
Account of such Trust and to deposit any Special Payments so received by it in
the Special Payments Account of such Trust. (Section 4.01; Trust Supplements,
Section 3.01) All amounts so deposited will be distributed by the Trustee on a
Regular Distribution Date or a Special Distribution Date, as appropriate.
(Section 4.02; Trust Supplements, Section 3.01)
Each Escrow Agreement requires that the Paying Agent establish and maintain,
for the benefit of the Receiptholders, one or more accounts (the "Paying Agent
Account"), which are to be non-interest bearing. Pursuant to the terms of the
Escrow Agreement, the Paying Agent is required to deposit interest on Deposits
relating to such Trust and any unused Deposits withdrawn by the Escrow Agent
in the Paying Agent Account. All amounts so deposited will be distributed by
the Paying Agent on a Regular Distribution Date or Special Distribution Date,
as appropriate.
The final distribution for each Trust will be made only upon presentation
and surrender of the Certificates for such Trust at the office or agency of
the Trustee specified in the notice given by the Trustee of such final
distribution. The Trustee will mail such notice of the final distribution to
the Certificateholders of such Trust, specifying the date set for such final
distribution and the amount of such distribution. (Trust Supplements, Section
7.01) See "--Termination of the Trusts" below. Distributions in respect of
Certificates issued in global form will be made as described in "--Book-Entry;
Delivery and Form" below.
If any Distribution Date is a Saturday, Sunday or other day on which
commercial banks are authorized or required to close in New York, New York,
Boston, Massachusetts, Pittsburgh, Pennsylvania or Salt Lake City, Utah (any
other day being a "Business Day"), distributions scheduled to be made on such
Regular Distribution Date or Special Distribution Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
scheduled date and without additional interest.
POOL FACTORS
The "Pool Balance" for each Trust or for the Certificates issued by any
Trust indicates, as of any date, the original aggregate face amount of the
Certificates of such Trust less the aggregate amount of all payments made in
respect of the Certificates of such Trust or in respect of Deposits relating
to such Trust other than payments made in respect of interest or premium or
reimbursement of any costs or expenses incurred in connection therewith. The
Pool Balance for each Trust or for the Certificates issued by any Trust as of
any Distribution Date will be computed after giving effect to any special
distribution with respect to unused Deposits, payment of principal of the
Equipment Notes or payment with respect to other Trust Property held in such
Trust and the distribution thereof to be made on that date. (Trust
Supplements, Section 2.01)
The "Pool Factor" for each Trust as of any Distribution Date will be the
quotient (rounded to the seventh decimal place) computed by dividing (i) the
Pool Balance of such Trust by (ii) the original aggregate face amount of the
Certificates of such Trust. The Pool Factor for each Trust or for the
Certificates issued by any Trust as of any Distribution Date will be computed
after giving effect to any special distribution with respect to unused
Deposits, payment of principal of the Equipment Notes or payments with respect
to other Trust Property held in such Trust and the distribution thereof to be
made on that date. (Trust Supplements, Section 2.01) The Pool Factor for each
Trust will be 1.0000000 on the date of issuance of the Certificates;
thereafter, the Pool Factor for each Trust will decline as described herein to
reflect reductions in the Pool Balance of such Trust. The amount of a
Certificateholder's pro rata share of the Pool Balance of a Trust can be
determined by multiplying the par value of the holder's Certificate of such
Trust by the Pool Factor for such Trust as of the applicable Distribution
Date. Notice of the Pool Factor and the Pool Balance for each Trust will be
mailed to Certificateholders of such Trust on each Distribution Date. (Trust
Supplements, Section 3.02)
The following table sets forth an illustrative aggregate principal
amortization schedule for the Equipment Notes held in each Trust (the "Assumed
Amortization Schedule") and resulting Pool Factors with respect to such Trust.
The actual aggregate principal amortization schedule applicable to a Trust and
the resulting Pool Factors with respect to such Trust may differ from those
set forth below, since the amortization schedule for the Equipment Notes
issued with respect to an Aircraft may vary from such illustrative
amortization schedule so
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<PAGE>
long as it complies with the Mandatory Economic Terms. The scheduled
distribution of principal payments for any Trust will be affected if any
Equipment Notes held in such Trust are redeemed or purchased or if a default
in payment on such Equipment Notes occurred. Accordingly, the aggregate
principal amortization schedule applicable to a Trust and the resulting Pool
Factors may differ from those set forth in the following table.
<TABLE>
<CAPTION>
CLASS A TRUST CLASS B TRUST CLASS C TRUST
EQUIPMENT CLASS A EQUIPMENT CLASS B EQUIPMENT CLASS C
NOTES TRUST NOTES TRUST NOTES TRUST
SCHEDULED EXPECTED SCHEDULED EXPECTED SCHEDULED EXPECTED
PAYMENTS OF POOL PAYMENTS OF POOL PAYMENTS OF POOL
DATE PRINCIPAL* FACTOR PRINCIPAL* FACTOR PRINCIPAL* FACTOR
- ---- -------------- -------- -------------- -------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
January 30, 1999........ $ 0.00 $ 0.00 $ 0.00
July 30, 1999........... 4,084,480.02 0.00 0.00
January 30, 2000........ 3,395,913.61 2,251,040.87 0.00
July 30, 2000........... 7,598,686.35 228,941.43 0.00
January 30, 2001........ 4,906,327.35 2,265,449.25 0.00
July 30, 2001........... 6,088,272.62 203,814.77 0.00
January 30, 2002........ 7,274,472.74 2,834,435.81 0.00
July 30, 2002........... 3,720,127.23 106,391.09 0.00
January 30, 2003........ 9,133,120.75 4,686,468.66 0.00
July 30, 2003........... 1,861,479.24 101,610.63 0.00
January 30, 2004........ 9,828,116.66 6,821,288.43 71,463.46
July 30, 2004........... 1,166,483.35 36,285.59 0.00
January 30, 2005........ 11,037,596.84 7,798,681.93 110,655.60
July 30, 2005........... 453,790.78 0.00 0.00
January 30, 2006........ 11,573,533.29 7,554,267.83 2,060,016.31
January 30, 2007........ 11,837,881.06 3,987,470.47 6,944,751.02
January 30, 2008........ 12,208,982.70 2,557,936.97 5,773,505.08
January 30, 2009........ 8,392,816.11 2,485,338.83 8,778,001.54
July 30, 2009........... 457,600.00 102,435.11 522.27
January 30, 2010........ 10,642,844.29 2,336,021.83 16,825,465.70
January 30, 2011........ 10,539,279.25 2,438,456.94 24,802,150.44
January 30, 2012........ 11,169,539.18 2,336,252.80 24,769,707.76
July 30, 2012........... 2,668,927.73 102,204.14 2,543,088.92
January 30, 2013........ 26,339,921.99 5,655,405.55 38,228,297.82
July 30, 2013........... 4,927,342.15 190,520.61 2,598,035.36
January 30, 2014........ 46,465,479.79 4,386,926.40 1,632,212.09
July 30, 2014........... 3,162,747.97 585,360.51 2,846,792.17
January 30, 2015........ 20,998,355.67 2,565,297.79 89,265.73
July 30, 2015........... 2,287,529.05 0.00 0.00
January 30, 2016........ 33,712,059.20 0.00 2,629,419.56
July 30, 2016........... 2,771,801.97 0.00 0.00
January 30, 2017........ 54,171,170.80 4,258,859.27 585,885.15
July 30, 2017........... 0.00 76,491.57 0.00
January 30, 2018........ 21,609,985.98 11,300,356.35 77,523.99
July 30, 2018........... 0.00 1,027,886.72 0.00
</TABLE>
- --------
* Indicative only. Subject to change.
The Pool Factor and Pool Balance of each Trust will be recomputed if there
has been an early redemption, purchase, or default in the payment of principal
or interest in respect of one or more of the Equipment Notes
S-35
<PAGE>
held in a Trust, as described in "--Indenture Defaults and Certain Rights Upon
an Indenture Default" and "Description of the Equipment Notes--Redemption," or
a special distribution attributable to unused Deposits after the Delivery
Period Termination Date, the occurrence of a Triggering Event or, in the case
of the Class C Trust, the failure of US Airways to satisfy certain conditions
set forth in the Note Purchase Agreement, as described in "Description of the
Deposit Agreements." If the principal payments scheduled for July 30, 1999 are
changed, notice thereof will be mailed to the Certificateholders by no later
than July 15, 1999. If (i) any other change in the scheduled repayments from
the Assumed Amortization Schedule or (ii) any such redemption, purchase,
default or special distribution, the Pool Factors and the Pool Balances of
each Trust so affected will be recomputed after giving effect thereto and
notice thereof will be mailed to the Certificateholders of such Trust promptly
after the Delivery Period Termination Date in the case of clause (i) and
promptly after the occurrence of any event described in clause (ii).
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the applicable Paying Agent and Trustee will
include with each distribution by it of a Scheduled Payment or Special Payment
to Certificateholders of the related Trust a statement setting forth the
following information (per $1,000 aggregate principal amount of Certificate
for such Trust, except as to the amounts described in items (1) and (6)
below):
(1) The aggregate amount of funds distributed on such Distribution Date under
the Pass Through Trust Agreement and under the Escrow Agreement,
indicating the amount allocable to each source.
(2) The amount of such distribution under the Pass Through Trust Agreement
allocable to principal and the amount allocable to premium, if any.
(3) The amount of such distribution under the Pass Through Trust Agreement
allocable to interest.
(4) The amount of such distribution under the Escrow Agreement allocable to
interest.
(5) The amount of such distribution under the Escrow Agreement allocable to
unused Deposits, if any.
(6) The Pool Balance and the Pool Factor for such Trust. (Trust Supplements,
Section 3.02(a))
So long as the Certificates are registered in the name of The Depository
Trust Company ("DTC"), or its nominee, on the record date prior to each
Distribution Date, the applicable Trustee will request from DTC a securities
position listing setting forth the names of all DTC Participants reflected on
DTC's books as holding interests in the Certificates on such record date. On
each Distribution Date, the applicable Paying Agent and Trustee will mail to
each such DTC Participant the statement described above and will make
available additional copies as requested by such DTC Participant for
forwarding to Certificate Owners. (Trust Supplements, Section 3.02(a))
In addition, after the end of each calendar year, the applicable Trustee and
Paying Agent will furnish to each Certificateholder of each Trust at any time
during the preceding calendar year a report containing the sum of the amounts
determined pursuant to clauses (1), (2), (3), (4) and (5) above with respect
to the Trust for such calendar year or, in the event such person was a
Certificateholder during only a portion of such calendar year, for the
applicable portion of such calendar year, and such other items as are readily
available to such Trustee and which a Certificateholder reasonably requests as
necessary for the purpose of such Certificateholder's preparation of its U.S.
federal income tax returns. (Trust Supplements, Section 3.02(b)) Such report
and such other items will be prepared on the basis of information supplied to
the applicable Trustee by the DTC Participants and will be delivered by such
Trustee to such DTC Participants to be available for forwarding by such DTC
Participants to Certificate Owners in the manner described above. (Trust
Supplements, Section 3.02(b)) At such time, if any, as the Certificates are
issued in the form of definitive certificates, the applicable Paying Agent and
Trustee will prepare and deliver the information described above to each
Certificateholder of
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record of each Trust as the name and period of ownership of such
Certificateholder appears on the records of the registrar of the Certificates.
INDENTURE DEFAULTS AND CERTAIN RIGHTS UPON AN INDENTURE DEFAULT
An event of default under an Indenture (an "Indenture Default") will, with
respect to the Leased Aircraft Indentures, include an event of default under
the related Lease (a "Lease Event of Default"). See "Description of the
Equipment Notes--Indenture Defaults, Notice and Waiver." Since the Equipment
Notes issued under an Indenture will be held in more than one Trust, a
continuing Indenture Default under such Indenture would affect the Equipment
Notes held by each such Trust. There are no cross-default provisions in the
Indentures or in the Leases. Consequently, events resulting in an Indenture
Default under any particular Indenture may or may not result in an Indenture
Default under any other Indenture, and a Lease Event of Default under any
particular Lease may or may not constitute a Lease Event of Default under any
other Lease. If an Indenture Default occurs in fewer than all of the
Indentures, notwithstanding the treatment of Equipment Notes issued under any
Indenture under which an Indenture Default has occurred, payments of principal
and interest on all of the Equipment Notes will continue to be distributed to
the holders of the Certificates as originally scheduled, subject to the
Intercreditor Agreement. See "Description of the Intercreditor Agreement--
Priority of Distributions."
With respect to each Leased Aircraft, the applicable Owner Trustee and Owner
Participant, under the related Leased Aircraft Indenture, will have the right
under certain circumstances to cure Indenture Defaults that result from the
occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee or the Owner Participant exercises any such cure right, the Indenture
Default will be deemed to have been cured.
In the event that the same institution acts as Trustee of multiple Trusts,
in the absence of instructions from the Certificateholders of any such Trust,
such Trustee could be faced with a potential conflict of interest upon an
Indenture Default. In such event, each Trustee has indicated that it would
resign as Trustee of one or all such Trusts, and a successor trustee would be
appointed in accordance with the terms of the applicable Pass Through Trust
Agreement. State Street Bank and Trust Company will be the initial Trustee
under each Trust.
Upon the occurrence and continuation of an Indenture Default, the
Controlling Party will direct the Indenture Trustee under such Indenture in
the exercise of remedies thereunder and may accelerate and sell all (but not
less than all) of the Equipment Notes issued under such Indenture to any
person, subject to certain limitations. See "Description of the Intercreditor
Agreement--Intercreditor Rights--Sale of Equipment Notes or Aircraft." The
proceeds of such sale will be distributed pursuant to the provisions of the
Intercreditor Agreement. Any such proceeds so distributed to any Trustee upon
any such sale will be deposited in the applicable Special Payments Account and
will be distributed to the Certificateholders of the applicable Trust on a
Special Distribution Date. (Sections 4.01 and 4.02) The market for Equipment
Notes at the time of the existence of an Indenture Default may be very limited
and there can be no assurance as to the price at which they could be sold. If
any such Equipment Notes are sold for less than their outstanding principal
amount, certain Certificateholders will receive a smaller amount of principal
distributions than anticipated and will not have any claim for the shortfall
against US Airways, any Liquidity Provider, any Owner Trustee, any Owner
Participant or any Trustee.
Any amount, other than Scheduled Payments received on a Regular Distribution
Date or within five days thereafter, distributed to the Trustee of any Trust
by the Subordination Agent on account of any Equipment Note, Trust Indenture
Estate under (and as defined in) any Leased Aircraft Indenture or Collateral
under (and as defined in) any Owned Aircraft Indenture held in such Trust
following an Indenture Default will be deposited in the Special Payments
Account for such Trust and will be distributed to the Certificateholders of
such Trust on a Special Distribution Date. (Sections 4.01 and 4.02; Trust
Supplements, Section 3.01) In addition, if, following an Indenture Default
under any Leased Aircraft Indenture, the applicable Owner Participant or Owner
Trustee exercises its option to redeem or purchase the outstanding Equipment
Notes issued under such Leased Aircraft Indenture, the price paid by such
Owner Participant or Owner Trustee for the Equipment Notes issued under
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such Leased Aircraft Indenture and distributed to such Trust by the
Subordination Agent will be deposited in the Special Payments Account for such
Trust and will be distributed to the Certificateholders of such Trust on a
Special Distribution Date. (Sections 4.01 and 4.02)
Any funds representing payments received with respect to any defaulted
Equipment Notes, or the proceeds from the sale of any Equipment Notes, held by
the Trustee in the Special Payments Account for such Trust will, to the extent
practicable, be invested and reinvested by such Trustee in certain permitted
investments pending the distribution of such funds on a Special Distribution
Date. (Section 4.04) Such permitted investments will be defined as obligations
of the United States or agencies or instrumentalities thereof for the payment
of which the full faith and credit of the United States is pledged and which
mature in not more than 60 days after the date of acquisition thereof or such
lesser time as is required for the distribution of any such funds on a Special
Distribution Date. (Section 1.01)
Each Pass Through Trust Agreement will provide that the Trustee of the
related Trust will, within 90 days after the occurrence of any default known
to the Trustee, give to the Certificateholders of such Trust notice,
transmitted by mail, of such uncured or unwaived default with respect to such
Trust known to it, provided that, except in the case of default in a payment
of principal, premium, if any, or interest on any of the Equipment Notes held
in such Trust, the applicable Trustee will be protected in withholding such
notice if it in good faith determines that the withholding of such notice is
in the interests of such Certificateholders. (Section 7.02) The term "default"
as used in this paragraph only with respect to any Trust means the occurrence
of an Indenture Default under any Indenture pursuant to which Equipment Notes
held by such Trust were issued, as described above, except that in determining
whether any such Indenture Default has occurred, any grace period or notice in
connection therewith will be disregarded.
Each Pass Through Trust Agreement contains a provision entitling the Trustee
of the related Trust, subject to the duty of such Trustee during a default to
act with the required standard of care, to be offered reasonable security or
indemnity by the holders of the Certificates of such Trust before proceeding
to exercise any right or power under such Pass Through Trust Agreement at the
request of such Certificateholders. (Section 7.03(e))
Subject to certain qualifications set forth in each Pass Through Trust
Agreement and to the Intercreditor Agreement, the Certificateholders of each
Trust holding Certificates evidencing fractional undivided interests
aggregating not less than a majority in interest in such Trust will have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee with respect to such Trust or pursuant to
the terms of the Intercreditor Agreement, or exercising any trust or power
conferred on such Trustee under such Pass Through Trust Agreement or the
Intercreditor Agreement, including any right of such Trustee as Controlling
Party under the Intercreditor Agreement or as holder of the Equipment Notes.
(Section 6.04)
In certain cases, the Certificateholders of a Trust evidencing fractional
undivided interests aggregating not less than a majority in interest of such
Trust may on behalf of the holders of all the Certificates of such Trust waive
any past "event of default" under such Trust (i.e., any Indenture Default
under any Indenture pursuant to which Equipment Notes held by such Trust were
issued) and its consequences or, if the Trustee of such Trust is the
Controlling Party, may direct the Trustee to instruct the applicable Loan
Trustee to waive any past Indenture Default and its consequences, except (i) a
default in the deposit of any Scheduled Payment or Special Payment or in the
distribution thereof, (ii) a default in payment of the principal, premium, if
any, or interest with respect to any of the Equipment Notes and (iii) a
default in respect of any covenant or provision of the Pass Through Trust
Agreement that cannot be modified or amended without the consent of each
Certificateholder of such Trust affected thereby. (Section 6.05) Each
Indenture will provide that, with certain exceptions, the holders of the
majority in aggregate unpaid principal amount of the Equipment Notes issued
thereunder may on behalf of all such holders waive any past default or
Indenture Default thereunder. Notwithstanding such provisions of the
Indentures, pursuant to the Intercreditor Agreement only the Controlling Party
will be entitled to waive any such past default or Indenture Default.
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PURCHASE RIGHTS OF CERTIFICATEHOLDERS
Upon the occurrence and during the continuation of a Triggering Event, with
ten days' written notice to the Trustee and each Certificateholder of the same
Class:
. The Class B Certificateholders will have the right to purchase all, but
not less than all, of the Class A Certificates; and
. The Class C Certificateholders will have the right to purchase all, but
not less than all, of the Class A and B Certificates.
In each case, the purchase price will be equal to the Pool Balance of the
relevant Class or Classes of Certificates plus accrued and unpaid interest
thereon to the date of purchase, without premium, but including any other
amounts due to the Certificateholders of such Class or Classes. Such purchase
right may be exercised by any Certificateholder of the Class or Classes
entitled to such right. In each case, if prior to the end of the ten-day
period, any other Certificateholder of the same Class notifies the purchasing
Certificateholder that the other Certificateholder wants to participate in
such purchase, then such other Certificateholder may join with the purchasing
Certificateholder to purchase the Certificates pro rata based on the interest
in the Trust held by each Certificateholder. (Trust Supplements, Section 4.01)
PTC EVENT OF DEFAULT
A Pass Through Certificate Event of Default (a "PTC Event of Default") under
each Pass Through Trust Agreement means the failure to pay:
. The outstanding Pool Balance of the applicable Class of Certificates
within ten Business Days of the Final Maturity Date for such Class.
. Interest due on such Class of Certificates within ten Business Days of
any Distribution Date (unless the Subordination Agent has made Interest
Drawings, or withdrawals from the Cash Collateral Account for such Class
of Certificates, with respect thereto in an aggregate amount sufficient
to pay such interest and has distributed such amount to the Trustee
entitled thereto). (Section 1.01)
Any failure to make expected principal distributions with respect to any
Class of Certificates on any Regular Distribution Date (other than the Final
Maturity Date) will not constitute a PTC Event of Default with respect to such
Certificates. A PTC Event of Default with respect to the most senior
outstanding Class of Certificates resulting from an Indenture Default under
all Indentures will constitute a "Triggering Event." See "Description of the
Intercreditor Agreement--Priority of Distributions--After a Triggering Event"
for a discussion of the consequences of the occurrence of a Triggering Event.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
US Airways will be prohibited from consolidating with or merging into any
other corporation or transferring substantially all of its assets as an
entirety to any other entity unless:
. The surviving successor corporation or transferee is validly existing
under the laws of the United States or any state thereof or the District
of Columbia.
. The surviving successor corporation or transferee is a "citizen of the
United States" (as defined in Title 49 of the United States Code relating
to aviation (the "Transportation Code")) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to Chapter
447 of Title 49, United States Code, if, and so long as, such status is a
condition of entitlement to the benefits of Section 1110 of the U.S.
Bankruptcy Code.
. The surviving successor corporation or transferee expressly assumes all
of the obligations of US Airways contained in the Basic Agreement and any
Trust Supplement, the Note Purchase Agreement, the Indentures, the
Participation Agreements and the Leases, and any other operative
documents.
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. US Airways delivers a certificate and an opinion or opinions of counsel
indicating that such transaction, in effect, complies with such
conditions.
In addition, after giving effect to such transaction, no Lease Event of
Default, in the case of a Leased Aircraft, or Indenture Default, in the case
of an Owned Aircraft, will have occurred and be continuing. (Section 5.02;
Leased Aircraft Participation Agreement, Section 7(v); Owned Aircraft
Participation Agreement, Section 7(i))
The Basic Agreement, the Trust Supplements, the Note Purchase Agreement, the
Indentures, the Participation Agreements and the Leases will not contain any
covenants or provisions which may afford the applicable Trustee or
Certificateholders protection in the event of a highly leveraged transaction,
including transactions effected by management or affiliates, which may or may
not result in a change in control of US Airways.
MODIFICATIONS OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER
AGREEMENTS
Each Pass Through Trust Agreement will contain provisions permitting, at the
request of the Company, the execution of amendments or supplements to such
Pass Through Trust Agreement or, if applicable, to the Deposit Agreements, the
Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement or
any Liquidity Facility, without the consent of the holders of any of the
Certificates of such Trust:
. To provide for the formation of a Trust, to issue an additional series of
Certificates and to enter into Trust Supplements setting forth the terms
of any series of Certificates.
. To evidence the succession of another corporation to US Airways and the
assumption by such corporation of US Airways' obligations under such Pass
Through Trust Agreement, the Note Purchase Agreement or any Liquidity
Facility.
. To add to the covenants of US Airways for the benefit of holders of such
Certificates or to surrender any right or power conferred upon US Airways
in such Pass Through Trust Agreement, the Intercreditor Agreement, the
Note Purchase Agreement or any Liquidity Facility.
. To correct or supplement any provision of such Pass Through Trust
Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Note Purchase Agreement or any Liquidity
Facility which may be defective or inconsistent with any other provision
in such Pass Through Trust Agreement, the Intercreditor Agreement, the
Note Purchase Agreement or any Liquidity Facility, as applicable, or to
cure any ambiguity or to modify any other provision with respect to
matters or questions arising under such Pass Through Trust Agreement, the
Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement,
the Note Purchase Agreement or any Liquidity Facility, provided that such
action will not materially adversely affect the interests of the holders
of such Certificates; to correct any mistake in such Pass Through Trust
Agreement, the Intercreditor Agreement, the Note Purchase Agreement or
any Liquidity Facility; or, as provided in the Intercreditor Agreement,
to give effect to or provide for a Replacement Facility.
. To comply with any requirement of the Commission, any applicable law,
rules or regulations of any exchange or quotation system on which the
Certificates are listed, or any regulatory body.
. To modify, eliminate or add to the provisions of such Pass Through Trust
Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Note Purchase Agreement or any Liquidity
Facility to such extent as is necessary to continue the qualification of
such Pass Through Trust Agreement (including any supplemental agreement)
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), or any similar federal statute enacted after the execution of such
Pass Through Trust Agreement, and to add to such Pass Through Trust
Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Note Purchase Agreement or any Liquidity
Facility such other provisions as may be expressly permitted by the Trust
Indenture Act.
. To evidence and provide for the acceptance of appointment under such Pass
Through Trust Agreement, the Deposit Agreements, the Escrow Agreements,
the Intercreditor Agreement, the Note Purchase
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Agreement or any Liquidity Facility by a successor Trustee and to add to
or change any of the provisions of such Pass Through Trust Agreement, the
Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement,
the Note Purchase Agreement or any Liquidity Facility as is necessary to
provide for or facilitate the administration of the Trusts under the Basic
Agreement by more than one Trustee.
In each case, such modification or supplement may not adversely affect the
status of the Trust as a grantor trust under Subpart E, Part I of Subchapter J
of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended
(the "Code"), for U.S. federal income tax purposes. (Section 9.01; Trust
Supplements, Section 6.01)
Each Pass Through Trust Agreement also contains provisions permitting the
execution, with the consent of the holders of the Certificates of the related
Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust, of amendments or supplements adding any
provisions to or changing or eliminating any of the provisions of such Pass
Through Trust Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Note Purchase Agreement or any Liquidity Facility
to the extent applicable to such Certificateholders or of modifying the rights
and obligations of such Certificateholders under such Pass Through Trust
Agreement, the Deposit Agreements, the Escrow Agreements, the Intercreditor
Agreement, the Note Purchase Agreement or any Liquidity Facility. No such
amendment or supplement may, without the consent of the holder of each
Certificate so affected thereby:
. Reduce in any manner the amount of, or delay the timing of, any receipt
by the Trustee (or, with respect to the Deposits, the Receiptholders) of
payments with respect to the Equipment Notes held in such Trust or
distributions in respect of any Certificate related to such Trust (or,
with respect to the Deposits, payments to be made to Receiptholders), or
change the date or place of any payment in respect of any Certificate, or
make distributions payable in coin or currency other than that provided
for in such Certificates, or impair the right of any Certificateholder of
such Trust to institute suit for the enforcement of any such payment when
due.
. Permit the disposition of any Equipment Note held in such Trust, except
as provided in such Pass Through Trust Agreement, or otherwise deprive
such Certificateholder of the benefit of the ownership of the applicable
Equipment Notes.
. Alter the priority of distributions specified in the Intercreditor
Agreement in a manner materially adverse to such Certificateholders.
. Reduce the percentage of the aggregate fractional undivided interests of
the Trust provided for in such Pass Through Trust Agreement, the consent
of the holders of which is required for any such supplemental trust
agreement or for any waiver provided for in such Pass Through Trust
Agreement.
. Modify any of the provisions relating to the rights of the
Certificateholders in respect of the waiver of events of default or
receipt of payment except to increase any percentage of
Certificateholders required to effect a waiver or to add to the list of
provisions that may not be altered without the consent of each
Certificateholder affected thereby.
In the event that a Trustee, as holder (or beneficial owner through the
Subordination Agent) of any Equipment Note in trust for the benefit of the
Certificateholders of the relevant Trust or as Controlling Party under the
Intercreditor Agreement, receives (directly or indirectly through the
Subordination Agent) a request for a consent to any amendment, modification,
waiver or supplement under any Indenture, any Participation Agreement, any
Lease, any Equipment Note or any other related document, the Trustee will
forthwith send a
notice of such proposed amendment, modification, waiver or supplement to each
Certificateholder of the relevant Trust registered on the register of such
Trust as of the date of such notice. The Trustee will request from the
Certificateholders a direction as to:
. Whether or not to take or refrain from taking (or direct the
Subordination Agent to take or refrain from taking) any action which a
holder of such Equipment Note or the Controlling Party has the option to
direct.
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. Whether or not to give or execute (or direct the Subordination Agent to
give or execute) any waivers, consents, amendments, modifications or
supplements as a holder of such Equipment Note or as Controlling Party.
. How to vote (or direct the Subordination Agent to vote) any Equipment
Note if a vote has been called for with respect thereto.
Provided such a request for Certificateholder direction has been made, in
directing any action or casting any vote or giving any consent as the holder
of any Equipment Note (or in directing the Subordination Agent in any of the
foregoing):
. Other than as Controlling Party, the Trustee will vote for or give
consent to any such action with respect to such Equipment Note in the
same proportion as that of (x) the aggregate face amount of all
Certificates actually voted in favor of or for giving consent to such
action by such direction of Certificateholders to (y) the aggregate face
amount of all outstanding Certificates of the relevant Trust.
. As the Controlling Party, the Trustee will vote as directed in such
Certificateholder direction by the Certificateholders evidencing
fractional undivided interests aggregating not less than a majority in
interest in the relevant Trust.
For purposes of the second preceding sentence, a Certificate is deemed
"actually voted" if the Certificateholder has delivered to the Trustee an
instrument evidencing such Certificateholder's consent to such direction prior
to one Business Day before the Trustee directs such action or casts such vote
or gives such consent. Notwithstanding the foregoing, but subject to certain
rights of the Certificateholders under the relevant Pass Through Trust
Agreement and subject to the Intercreditor Agreement, the Trustee may, in its
own discretion and at its own direction, consent and notify the relevant Loan
Trustee of such consent (or direct the Subordination Agent to consent and
notify the relevant Loan Trustee of such consent) to any amendment,
modification, waiver or supplement under the relevant Indenture, Participation
Agreement or Lease, any relevant Equipment Note or any other related document,
if an Indenture Default under any Indenture has occurred and is continuing, or
if such amendment, modification, waiver or supplement does not materially
adversely affect the interests of the Certificateholders. (Section 10.01)
OBLIGATION TO PURCHASE EQUIPMENT NOTES
Each Trustee will be obligated to purchase the Equipment Notes issued with
respect to the Aircraft during the Delivery Period, subject to the terms and
conditions of a note purchase agreement (the "Note Purchase Agreement") and
the applicable Participation Agreement. Under the Note Purchase Agreement, US
Airways agrees to finance each Aircraft in the manner provided therein. US
Airways will have the option of entering into a leveraged lease financing or a
secured debt financing with respect to each Aircraft.
. If US Airways chooses to enter into a leveraged lease financing with
respect to an Aircraft (such Aircraft, a "Leased Aircraft"), the Note
Purchase Agreement provides for the relevant parties to enter into a
participation agreement (each, a "Participation Agreement"), a Lease and
an indenture (each, a "Leased Aircraft Indenture") relating to the
financing of such Leased Aircraft.
. If US Airways chooses to enter into a secured debt financing with respect
to an Aircraft (such Aircraft, an "Owned Aircraft"), the Note Purchase
Agreement provides for the relevant parties to enter into a participation
agreement (each, a "Participation Agreement") and an indenture (each, an
"Owned Aircraft Indenture," and together with the other Owned Aircraft
Indentures and the Leased Aircraft Indentures, the "Indentures") relating
to the financing of such Owned Aircraft.
The description of such agreements in this Prospectus Supplement is based on
the agreements expected to be entered into on or shortly after the Issuance
Date with respect to the Delivered Aircraft and forms of such agreements to be
utilized pursuant to the Note Purchase Agreement. In the case of a Leased
Aircraft, the terms
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of the agreements actually entered into may differ from the forms of such
agreements and, consequently, may differ from the description of such
agreements contained in this Prospectus Supplement. See "Description of the
Equipment Notes." However, under the Note Purchase Agreement, the terms of
such agreements are required to (a) contain the Mandatory Document Terms (as
such Mandatory Document Terms are permitted to vary in accordance with the
terms of the Note Purchase Agreement) and (b) not vary the Mandatory Economic
Terms except as expressly provided therein. In addition, US Airways is
obligated (a) to certify to the Trustees that any such modifications do not
materially and adversely affect the Certificateholders and (b) to obtain
written confirmation from each Rating Agency that the use of versions of such
agreements modified in any material respect will not result in a withdrawal,
suspension or downgrading of the rating of any Class of Certificates. Under
the Note Purchase Agreement, it is a condition precedent to the obligation of
each Trustee to purchase the Equipment Notes related to the financing of an
Aircraft that no Triggering Event has occurred. The Trustees have no right or
obligation to purchase Equipment Notes after the Delivery Period Termination
Date. So long as AIFS is the registered or beneficial owner of any of the
Class C Certificates, the Class C Trustee's obligation to purchase Series C
Equipment Notes relating to the financing of an Aircraft will be subject to
the satisfaction of certain additional conditions precedent. The conditions to
the Class C Trustee's obligation to purchase Series C Equipment Notes to be
issued in any financing include (i) the absence of a material payment default
by US Airways Group under its purchase agreement with an affiliate of Airbus,
(ii) the absence of a material payment default under other financing
arrangements with Airbus or its affiliates, (iii) the failure of US Airways to
hold an air carrier operating certificate required for lessors and lenders to
US Airways to be entitled to the benefits of Section 1110 of the U.S.
Bankruptcy Code, (iv) the absence of a Note Purchase Termination Event, and
(v) the satisfaction of certain liquidity conditions. "Note Purchase
Termination Events" include certain bankruptcy-related events or other
material events that result, or could result, in the termination of the
Aircraft purchase agreement between US Airways Group and an affiliate of
Airbus.
US Airways expects that the foregoing conditions will be satisfied at all
times. However, no assurances can be given and if the conditions are not
satisfied with respect to any Aircraft, such Aircraft will be an Owned
Aircraft and no Series C Notes will be issued with respect thereto.
The "Mandatory Economic Terms," as defined in the Note Purchase Agreement,
will require, among other things, that:
. The principal amount of the Series A and Series B Equipment Notes issued
with respect to an Aircraft equals the principal amount of Series A and
Series B Equipment Notes indicated for each such Aircraft as set forth in
"Prospectus Supplement Summary--Equipment Notes and the Aircraft" under
the columns "Principal Amount of Series A Equipment Notes" and "Principal
Amount of Series B Equipment Notes," respectively.
. The maximum principal amount of the Series C Equipment Notes issued with
respect to an Aircraft not exceed the principal amount of Series C
Equipment Notes indicated for each Aircraft as set forth in "Prospectus
Supplement Summary--Equipment Notes and Aircraft" under the column
"Maximum Principal Amount of Series C Equipment Notes."
. The initial loan to aircraft value with respect to an Aircraft (with the
value of any Aircraft for these purposes to equal the value (the "Assumed
Appraised Value") for such Aircraft set forth in "Prospectus Supplement
Summary--Equipment Notes and the Aircraft" under the column "Appraised
Base Value"), not exceed 40.5% in the case of the Series A Equipment
Notes, 51.0% in the case of Series B Equipment Notes and 67.0% in the
case of Series C Equipment Notes.
. The loan to aircraft value for each series of Equipment Notes issued in
respect of each Aircraft (computed as of the date of issuance thereof on
the basis of the Assumed Appraised Value of such Aircraft and the
Depreciation Assumption) not exceed as of any Regular Distribution Date
thereafter (assuming no default in the payment of the Equipment Notes)
40.5% in the case of the Series A Equipment Notes, 51.0% in the case of
the Series B Equipment Notes and 69.5% in the case of the Series C
Equipment Notes.
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. The initial average life of the Series A Equipment Notes, the Series B
Equipment Notes and the Series C Equipment Notes on any Aircraft will not
extend beyond 13.5 years, 12.5 years and 13.5 years, respectively, from
the Issuance Date.
. As of the Delivery Period Termination Date the average life of the Class
A Certificates, the Class B Certificates and the Class C Certificates not
be more than 13.0 years, 11.0 years and 12.5 years, respectively, from
the Issuance Date (computed without regard to the acceleration of any
Equipment Notes and after giving effect to any special distribution on
the Certificates thereafter required in respect of unused Deposits).
. The final expected distribution date of each Class of Certificates be as
set forth in the "Prospectus Supplement Summary--Summary of Terms of
Certificates".
. The original aggregate principal amount of all of the Equipment Notes of
each Series not exceed the original aggregate face amount of the
Certificates issued by the corresponding Trust.
. The interest rate applicable to each Series of Equipment Notes must be
equal to the rate applicable to the Certificates issued by the
corresponding Trust.
. The payment dates for the Equipment Notes and basic rent under the Leases
must be January 30 and July 30.
. Basic rent and termination values under the Leases must be sufficient to
pay amounts due with respect to the related Equipment Notes.
. The amounts payable under the all-risk aircraft hull insurance maintained
with respect to each Aircraft must be sufficient to pay the applicable
termination value, subject to certain rights of self-insurance.
. (a) The past due rate in the Indentures and the Leases, (b) the Make-
Whole Premium payable under the Indentures, (c) the provisions relating
to the redemption and purchase of Equipment Notes in the Indentures, (d)
the minimum liability insurance amount on Aircraft in the Leases, (e) the
interest rate payable with respect to termination value in the Leases,
and (f) the indemnification of the Loan Trustees, Subordination Agent,
Liquidity Provider, Trustees, Escrow Agents and registered holders of the
Equipment Notes (in such capacity, the "Note Holders") with respect to
certain taxes and expenses, in each case must be no less favorable to the
Loan Trustees, Subordination Agent, the Liquidity Provider, the Trustees,
the Escrow Agents and the Note Holders than as set forth in the form of
Participation Agreements, Lease and Indentures (collectively, the
"Aircraft Operative Agreements").
The Mandatory Economic Terms are indicative only and subject to change prior
to delivery of the Prospectus Supplement.
The "Mandatory Document Terms" prohibit modifications in any material
adverse respect to certain specified provisions of the Aircraft Operative
Agreements annexed to the Note Purchase Agreement, as follows:
.In the case of the Indentures, the following modifications are prohibited:
(i) modifications to the Granting Clause of the Indentures so as to
deprive the Note Holders of a first priority security interest in the
Aircraft, certain of US Airways' rights under its aircraft purchase
agreement with an affiliate of the Aircraft manufacturer and, in the
case of a Leased Aircraft, the Lease or to eliminate the obligations
intended to be secured thereby.
(ii) modifications to certain provisions relating to the issuance,
redemption, purchase, payments, and ranking of the Equipment Notes
(including the obligation to pay the Make-Whole Premium in certain
circumstances).
(iii) modifications to certain provisions regarding Indenture Defaults,
remedies relating thereto and rights of the Owner Trustee and Owner
Participant in such circumstances.
(iv) modifications to certain provisions relating to any replaced
airframe or engines with respect to an Aircraft.
(v) modifications to the provision that New York law will govern the
Indentures.
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.In the case of the Lease, the following modifications are prohibited:
(i) modifications to certain provisions regarding the unconditional
obligation of US Airways to pay basic rent and termination value to the
Leased Aircraft Trustee.
(ii) modification of the obligations of US Airways to record the Leased
Aircraft Indenture with the Federal Aviation Administration and to
maintain such Indenture as a first-priority perfected mortgage on the
related Aircraft.
(iii) modification of the obligations of US Airways to furnish certain
opinions with respect to a replacement airframe.
(iv) modification of the obligations of US Airways to consent to the
assignment of the Lease by the Owner Trustee as collateral under the
Leased Aircraft Indenture, as well as modifications which would either
alter the provision that New York law will govern the Lease or would
deprive the Loan Trustee of rights expressly granted to it under the
Leases.
. In the case of the Participation Agreement, the following modifications
are prohibited:
(i) modifications to certain conditions to the obligations of the
Trustees to purchase the Equipment Notes issued with respect to an
Aircraft involving obtaining a certificate of airworthiness with
respect to such Aircraft, delivery of an opinion of outside counsel
with respect to the entitlement to the benefits of Section 1110 with
respect to such Aircraft and filings of certain documents with the
Federal Aviation Administration.
(ii) modifications to the provisions restricting the Note Holder's
ability to transfer such Equipment Notes.
(iii) modifications to certain provisions requiring the delivery of
legal opinions.
(iv) modifications to the provision that New York law will govern the
Participation Agreement.
. In the case of all of the Aircraft Operative Agreements, modifications
are prohibited in any material adverse respect as regards the interest of
the Note Holders, the Subordination Agent, the Liquidity Provider or the
Loan Trustee in the definition of "Make-Whole Premium."
Notwithstanding the foregoing, any such Mandatory Document Term may be
modified to correct or supplement any such provision which may be defective or
to cure any ambiguity or correct any mistake, provided that any such action
does not materially adversely affect the interests of the Note Holders, the
Subordination Agent, the Liquidity Provider, Loan Trustees or the
Certificateholders.
TERMINATION OF THE TRUSTS
The obligations of US Airways and the applicable Trustee with respect to a
Trust will terminate upon the distribution to Certificateholders of such Trust
of all amounts required to be distributed to them pursuant to the applicable
Pass Through Trust Agreement and the disposition of all property held in such
Trust. The applicable Trustee will send to each Certificateholder of such
Trust notice of the termination of such Trust, the amount of the proposed
final payment and the proposed date for the distribution of such final payment
for such Trust. The final distribution to any Certificateholder of such Trust
will be made only upon surrender of such Certificateholder's Certificates at
the office or agency of the applicable Trustee specified in such notice of
termination. (Trust Supplements, Section 7.01)
THE TRUSTEES
The Trustee for each Trust will be State Street Bank and Trust Company.
BOOK-ENTRY; DELIVERY AND FORM
Upon issuance, each Class of Certificates will be represented by one or more
fully registered global certificates. Each global certificate will be
deposited with, or on behalf of, DTC and registered in the name of Cede & Co.
("Cede"), the nominee of DTC. DTC was created to hold securities for its
participants ("DTC Participants") and facilitate the clearance and settlement
of securities transactions between DTC Participants through electronic book-
entry changes in accounts of the DTC Participants, thereby eliminating the
need for
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physical movement of certificates. DTC Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and certain
other organizations. Indirect access to the DTC system is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a DTC Participant, either directly or
indirectly. Interests in a global certificate may also be held through the
Euroclear System and Cedel Bank societe anonyme. See "Description of the
Certificates--Book-Entry; Delivery and Form" in the Prospectus for a
discussion of the book-entry procedures applicable to the Certificates and the
limited circumstances under which definitive certificates may be issued for
the Certificates.
So long as such book-entry procedures are applicable, no person acquiring an
interest in such Certificates ("Certificate Owner") will be entitled to
receive a certificate representing such person's interest in such
Certificates. Unless and until definitive certificates are issued under the
limited circumstances described in the Prospectus, all references to actions
by Certificateholders refers to actions taken by DTC upon instructions from
DTC Participants, and all references herein to distributions, notices, reports
and statements to Certificateholders refers, as the case may be, to
distributions, notices, reports and statements to DTC or Cede, as the
registered holder of such Certificates, or to DTC Participants for
distribution to Certificate Owners in accordance with DTC procedures.
DESCRIPTION OF THE DEPOSIT AGREEMENTS
The following is a description of the particular terms of the Deposit
Agreements. The statements under this caption are summaries and do not purport
to be complete and are qualified in their entirety by reference to all of the
provisions of the Deposit Agreements, each of which will be filed as an
exhibit to an Annual Report on Form 10-K, a Quarterly Report on Form 10-Q, or
to a Current Report on Form 8-K to be filed by US Airways with the Commission.
The provisions of the Deposit Agreements are substantially identical except as
otherwise indicated.
GENERAL
Pursuant to the Escrow Agreements, the Escrow Agent with respect to each
Trust will enter into a separate Deposit Agreement with the applicable
Depositary. Pursuant to the deposit agreements between the Escrow Agent and
the applicable Depositary (the "Deposit Agreements"), the Depositaries will
establish separate accounts in the name of the Escrow Agent (each such
account, a "Deposit Account"). On the Issuance Date, that portion of the
proceeds not paid to the Trustees to be used for the purchase of Equipment
Notes relating to Delivered Aircraft will be deposited (each, a "Deposit")
into the Deposit Accounts by the Underwriters (or, in the case of the Class C
Certificates, by the initial purchaser of such Certificates), in each case, on
behalf of such Escrow Agent.
On each Regular Distribution Date the applicable Depositary will pay to the
Paying Agent on behalf of the applicable Escrow Agent, for distribution to the
holders of Escrow Receipts relating to the applicable Trust, an amount equal
to interest accrued on the Deposits relating to such Trust during the relevant
interest period at a rate per annum equal to the interest rate applicable to
the Certificates issued by such Trust.
In connection with the financing of each delivered Aircraft during the
Delivery Period, the Trustee for each of the Trusts will request that the
Escrow Agent relating to the applicable Trust withdraw from the Deposits
relating to the applicable Trust funds sufficient to enable the Trustee of
such Trust to purchase the Equipment Note of the series applicable to such
Trust issued with respect to such Aircraft. Accrued but unpaid interest on all
such Deposits withdrawn will be paid on the next Regular Distribution Date.
Any portion of any Deposit withdrawn which is not used to purchase such
Equipment Note will be re-deposited by each Trustee into an account relating
to the applicable Trust.
The Deposits relating to the Trusts and interest paid thereon will not be
subject to the subordination provisions of the Intercreditor Agreement and
will not be available to pay any other amount in respect of the Certificates.
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UNUSED DEPOSITS
The Trustees' obligations to purchase the Equipment Notes issued with
respect to each Aircraft are subject to satisfaction of certain conditions at
the time of delivery, as set forth in the Note Purchase Agreement and the
Participation Agreements. See "Description of the Certificates--Obligation to
Purchase Equipment Notes." Since the Aircraft are scheduled for delivery from
time to time during the Delivery Period, no assurance can be given that all
such conditions will be satisfied at the time of delivery for each Aircraft.
Moreover, since the Aircraft will be newly manufactured, their delivery as
scheduled is subject to delays in the manufacturing process and to the
Aircraft manufacturer's right to postpone deliveries under the purchase
agreement between its affiliate and US Airways. See "Description of the
Aircraft and Appraisals--Deliveries of Aircraft." Depending on the
circumstances of the financing of each Aircraft, the maximum aggregate
principal amount of Equipment Notes may not be issued. In addition, so long as
AIFS holds any Class C Certificates the conditions to the obligations of the
Class C Trustee to purchase the Series C Equipment Notes differ from those
applicable to the Series A and Series B Equipment Notes. See "Description of
the Certificates--Obligation to Purchase Equipment Notes." If for any Aircraft
the conditions to the Class A and Class B Trustees' obligation to purchase
Series A and Series B Equipment Notes are satisfied, but the conditions to the
Class C Trustee's purchase of Series C Equipment Notes are not, US Airways
will be obligated to finance such Aircraft, but such financing may not include
Series C Equipment Notes.
If any funds remain as Deposits with respect to any Trust at the end of the
Delivery Period or, if earlier, upon the acquisition by such Trusts of the
Equipment Notes with respect to all of the Aircraft (the "Delivery Period
Termination Date"), such funds will be withdrawn by the Escrow Agent and
distributed, with accrued and unpaid interest thereon to the holders of Escrow
Receipts relating to the respective Trust after at least 15 days' prior
written notice. Such distribution will include, in the case of Deposits
relating to the Class A and Class B Certificates, a premium payable by US
Airways equal to the Deposit Make-Whole Premium with respect to the remaining
Deposits applicable to each such Trust, provided that no Deposit Make-Whole
Premium will be payable with respect to unused Deposits attributable to the
failure of an Aircraft to be delivered prior to the Delivery Period
Termination Date due to any reason not occasioned by US Airways' fault or
negligence.
"Deposit Make-Whole Premium" means, with respect to the distribution of unused
Deposits to holders of the Class A Certificates and the Class B Certificates,
as of any date of determination, an amount equal to the excess, if any, of
(a) the present value of the excess of (i) the scheduled payment of principal
and interest to maturity of the Equipment Notes, assuming the maximum
principal amount thereof (the "Maximum Amount") was issued on each remaining
Regular Distribution Date for such Class under the Assumed Amortization
Schedule over (ii) the scheduled payment of principal and interest to maturity
of the Equipment Notes actually received by the Trustee for such Class on each
such Regular Distribution Date, such present value computed by discounting
such excess on a semiannual basis on each Regular Distribution Date (assuming
a 360-day year of twelve 30-day months) using a discount rate equal to the
Treasury Yield plus basis points in the case of the Class A Certificates,
and basis points in the case of the Class B Certificates over (b) the
amount of such unused Deposits to be distributed to the holders of such
Certificates, plus accrued and unpaid interest on such net amount to but
excluding the date of determination from and including the preceding Regular
Distribution Date (or if such date of determination precedes the first Regular
Distribution Date, the date of issuance of the Certificates).
DISTRIBUTION UPON OCCURRENCE OF A TRIGGERING EVENT
If a Triggering Event occurs prior to the Delivery Period Termination Date,
the Escrow Agent for the Trusts will withdraw any funds then held as Deposits
with respect to such Trusts and cause such funds, with accrued and unpaid
interest thereon but without any premium, to be distributed to the holders of
Escrow Receipts relating to such Trusts by the Paying Agent on behalf of the
Escrow Agent, after at least 15 days' prior written notice. Accordingly, if a
Triggering Event occurs prior to the Delivery Period Termination Date, the
Trusts will not acquire Equipment Notes issued with respect to Aircraft
delivered after the occurrence of such Triggering Event.
DISTRIBUTION UPON OCCURRENCE OF A TERMINATION EVENT
If an event occurs that entitles the Airbus affiliate that is a party to the
Airbus Financing Commitment to terminate its commitment to US Airways (an
"Airbus Financing Termination Event") at a time when AIFS
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holds any of the Class C Certificates, the Escrow Agent for the Class C Trust
will withdraw funds then held as Deposits with respect to the Class C Trust
and cause such funds, with accrued and unpaid interest thereon but without any
premium, to be distributed to the holders of Escrow Receipts relating to such
Trust by the Paying Agent, on behalf of the Escrow Agent, after at least 15
days' prior written notice. So long as no Triggering Event has occurred,
Aircraft delivered from and after the time an Airbus Financing Termination
Event has occurred may still be financed but no Series C Equipment Notes will
be issued in respect of such Aircraft.
DEPOSITARIES
Credit Suisse First Boston ("CSFB"), New York branch, will act as
"Depositary" for each of the Class A and Class B Certificates. Citibank, N.A.
("Citibank"), will act as "Depositary" for the Class C Certificates.
CREDIT SUISSE FIRST BOSTON
Credit Suisse First Boston, part of the Credit Suisse Group, has total
consolidated assets of approximately Sfr 453 billion ($315 billion) and total
consolidated shareholders' equity of approximately Sfr 11.3 billion
($7.8 billion), in each case as of December 31, 1997. Credit Suisse First
Boston's registered head office is in Zurich, Switzerland.
CSFB has long-term unsecured debt ratings of Aa3 from Moody's and AA from
Standard & Poor's and short-term unsecured debt ratings of P-1 from Moody's
and A-1+ from Standard & Poor's.
CSFB's New York branch has executive offices at Eleven Madison Avenue, New
York, New York 10010, (212) 325-9000. A copy of the Annual Report of CSFB for
the year ended December 31, 1997 may be obtained from CSFB by delivery of a
written request to its New York branch, Attention: Corporate Affairs.
CITIBANK
Citibank is a wholly-owned subsidiary of Citicorp (a Delaware corporation)
and is Citicorp's principal subsidiary. (Citicorp has been a wholly-owned
subsidiary of Citigroup Inc., a Delaware holding company formerly known as
Travelers Group Inc. ("Travelers"), since October 8, 1998, when Citicorp
merged with a wholly-owned subsidiary of Travelers.) As of September 30, 1998,
the total assets of Citibank and its consolidated subsidiaries represented
more than 80% of the total assets of Citicorp and its consolidated
subsidiaries.
Citibank has long-term unsecured debt ratings of Aa2 from Moody's and AA-
from Standard & Poor's and short-term unsecured debt ratings of P-1 from
Moody's and A-1+ from Standard & Poor's.
The Consolidated Balance Sheets of Citibank as of December 31, 1997 and as
of December 31, 1996 are set forth in the Annual Report and Form 10-K of
Citicorp and its subsidiaries for the year ended December 31, 1997 and as of
September 30, 1998 and December 31, 1997 are set forth in the Financial Review
and Form 10-Q for the quarter ended September 30, 1998. Copies of such reports
are available upon request, without charge, by writing or calling Citicorp
Corporate Affairs Distribution, 850 Third Avenue, 13th Floor, New York, New
York, 10043, (212) 559-0233.
DESCRIPTION OF THE ESCROW AGREEMENTS
The following is a description of the particular terms of the escrow and
paying agent agreements (the "Escrow Agreements"). The statements under this
caption are summaries only and do not purport to be complete and are qualified
in their entirety by reference to all of the provisions of the Escrow
Agreements, each of which will be filed as an exhibit to an Annual Report on
Form 10-K, a Quarterly Report on Form 10-Q, or to a Current Report on Form 8-K
to be filed by US Airways with the Commission. The provisions of the Escrow
Agreements are substantially identical except as otherwise indicated.
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First Security Bank, National Association, as escrow agent in respect of the
Trusts (the "Escrow Agent"), State Street Bank and Trust Company, as paying
agent on behalf of the Escrow Agent in respect of each such Trust (the "Paying
Agent"), the Trustee of each of the Trusts and the Underwriters (in the case
of the Class A and Class B Trusts) or the initial purchaser of the Class C
Certificates (in the case of the Class C Trust) will enter into a separate
Escrow Agreement for the benefit of the Certificateholders of each such Trust
as holders of the Escrow Receipts affixed thereto (in such capacity, a
"Receiptholder"). That portion of the cash proceeds of the offering of
Certificates not paid to the Trustees for the purchase of Equipment Notes
relating to Delivered Aircraft will be deposited by the Underwriters or the
initial purchaser of the Class C Trust Certificates, as applicable, on behalf
of the Escrow Agent (for the benefit of Receiptholders) with the applicable
Depositary as Deposits relating to such Trusts.
Each Escrow Agent will permit the Trustee of the related Trust to cause
funds to be withdrawn from such Deposits on or prior to the Delivery Period
Termination Date to such Trustee to purchase the related Equipment Notes
pursuant to the Note Purchase Agreement. In addition, the Escrow Agent will
direct the applicable Depositary to pay interest on the Deposits accrued in
accordance with the Deposit Agreement to the Paying Agent for distribution to
the Receiptholders.
Each Escrow Agreement requires that the Paying Agent establish and maintain,
for the benefit of the related Receiptholders, one or more Paying Agent
Account(s), which are non-interest-bearing. The Paying Agent will deposit
interest on Deposits and any unused Deposits withdrawn by the Escrow Agent in
the related Paying Agent Account. The Paying Agent will distribute these
amounts on a Regular Distribution Date or Special Distribution Date, as
appropriate.
Upon receipt by the applicable Depositary of a portion of the cash proceeds
from this Offering, the Escrow Agent will issue one or more escrow receipts
("Escrow Receipts") which will be affixed by the relevant Trustee to each
Certificate. Each Escrow Receipt evidences a fractional undivided interest in
amounts from time to time deposited into the Paying Agent Account and is
limited in recourse to amounts deposited into such account. An Escrow Receipt
may not be assigned or transferred except in connection with the assignment or
transfer of the Certificate to which it is affixed. Each Escrow Receipt will
be registered by the Escrow Agent in the same name and manner as the
Certificate to which it is affixed.
DESCRIPTION OF THE LIQUIDITY FACILITIES
The following description of the particular terms of the Liquidity
Facilities and certain provisions of the Intercreditor Agreement supplements
(and, to the extent inconsistent therewith, replaces) the description of the
general terms and provisions relating to the Liquidity Facilities and the
Intercreditor Agreement set forth in the Prospectus.
The statements under this caption are summaries and do not purport to be
complete and are qualified in their entirety by reference to all of the
provisions of the Liquidity Facilities and the Intercreditor Agreement, each
of which will be filed as an exhibit to an Annual Report on Form 10-K, a
Quarterly Report on Form 10-Q, or a Current Report on Form 8-K to be filed by
US Airways with the Commission. The provisions of the Liquidity Facilities are
substantially identical except as otherwise indicated.
GENERAL
The Liquidity Provider will enter into a separate revolving credit agreement
with the Subordination Agent (each, a "Liquidity Facility") with respect to
the Certificates of each Trust pursuant to which the Liquidity Provider will
make one or more advances to the Subordination Agent that will be used solely
to pay interest on such Certificates when due, subject to certain limitations.
The Liquidity Facility for each Trust is intended to enhance the likelihood of
timely receipt by the Certificateholders of such Trust of the interest payable
on the Certificates of such Trust at the Stated Interest Rate therefor on up
to three consecutive semiannual Regular Distribution Dates. If interest
payment defaults occur which exceed the amount covered by or available under
the Liquidity Facility for a Trust, the Certificateholders of such Trust will
bear their allocable share of the deficiencies to the extent that there are no
other sources of funds. Although ABN AMRO is the initial Liquidity Provider
for each Trust, ABN AMRO may be replaced by one or more other entities with
respect to the Trusts under certain circumstances. Therefore, the liquidity
providers for the Trusts may differ.
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DRAWINGS
The aggregate amount available under the Liquidity Facilities for each Trust
at January 30, 2000, the first Regular Distribution Date after the scheduled
Delivery Period Termination Date, assuming that Equipment Notes in the maximum
principal amount with respect to all Aircraft are acquired by the Trusts and
that all interest and principal due on or prior to January 30, 2000, is paid,
will be $ , $ , and $ , respectively.
Except as otherwise provided below, the Liquidity Facility for each Trust
will enable the Subordination Agent to make interest drawings ("Interest
Drawings") thereunder on any Regular Distribution Date to pay interest then
due and payable on the Certificates of such Trust at the Stated Interest Rate
for such Trust to the extent that the amount, if any, available to the
Subordination Agent on such Regular Distribution Date is not sufficient to pay
such interest. The maximum amount available to be drawn under a Liquidity
Facility with respect to any Trust on any Regular Distribution Date to fund
any shortfall of interest on Certificates of such Trust will not exceed the
then Maximum Available Commitment under such Liquidity Facility. The "Maximum
Available Commitment" at any time under each Liquidity Facility is an amount
equal to the then Required Amount of such Liquidity Facility less the
aggregate amount of each Interest Drawing outstanding under such Liquidity
Facility at such time, provided that following a Downgrade Drawing, a Final
Drawing or a Non-Extension Drawing under a Liquidity Facility, the Maximum
Available Commitment under such Liquidity Facility will be zero.
"Required Amount" means, for any day and with respect to any Trust, the sum
of the aggregate amount of interest, calculated at the Stated Interest Rate
applicable to the Certificates issued by such Trust, that would be payable on
such Certificates on each of the three successive semiannual Regular
Distribution Dates immediately following such day or, if such day is a Regular
Distribution Date, on such day and the succeeding two Regular Distribution
Dates, in each case calculated based on the Pool Balance for such Class on
such day and without regard to payments of principal on such Certificates.
The Liquidity Facility for any Class of Certificates will not provide for
drawings thereunder to pay for principal of or premium on the Certificates of
such Class or any interest on the Certificates of such Class in excess of the
Stated Interest Rate for such Class or more than three semiannual installments
of interest thereon or principal of or interest or premium on the Certificates
of any other Class. (Liquidity Facilities, Section 2.02; Intercreditor
Agreement, Section 3.6) In addition, the Liquidity Facility with respect to
each Trust will not provide for drawings thereunder to pay any amounts payable
with respect to the Deposits relating to such Trust.
Each payment by the Liquidity Provider will reduce by the same amount the
Maximum Available Commitment under such Liquidity Facility, subject to
reinstatement as hereinafter described. With respect to any Interest Drawings
under a Liquidity Facility, upon reimbursement of the Liquidity Provider in
full for the amount of such Interest Drawings plus interest thereon, the
Maximum Available Commitment under such Liquidity Facility will be reinstated
to an amount not to exceed the then Required Amount of such Liquidity
Facility; provided, however, that such Liquidity Facility will not be so
reinstated at any time if (i) a Liquidity Event of Default has occurred and is
continuing and (ii) less than 65% of the then aggregate outstanding principal
amount of all Equipment Notes are Performing Equipment Notes. With respect to
any other drawings under such Liquidity Facility, amounts available to be
drawn thereunder are not subject to reinstatement. Following the reduction of
the Pool Balance for the applicable Trust, the Maximum Commitment of the
Liquidity Facility for such Trust will be automatically reduced from time to
time to an amount equal to the Required Amount for such Trust. (Liquidity
Facilities, Section 2.04(a))
"Performing Equipment Note" means an Equipment Note with respect to which no
payment default has occurred and is continuing (without giving effect to any
acceleration); provided that if a bankruptcy proceeding is commenced involving
US Airways under the U.S. Bankruptcy Code, (a) any payment default existing
during the 60-day period under Section 1110(a)(1)(A) of the U.S. Bankruptcy
Code (or such longer period as may apply under Section 1110(b) of the U.S.
Bankruptcy Code) (the "Section 1110 Period") will not be taken into
consideration, unless during the Section 1110 Period the trustee in such
proceeding or US Airways refuses to assume or agree to perform its obligations
under the Lease related to such Equipment Note (in the case of a Leased
Aircraft) or under the Owned Aircraft Indenture related to such Equipment Note
(in the case of an Owned
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Aircraft), and (b) any payment default occurring after the date of the order
of relief in such proceeding will not be taken into consideration if such
payment default is cured under Section 1110(a)(1)(B) of the U.S. Bankruptcy
Code before the later of 30 days after the date of such default or the
expiration of the Section 1110 Period.
If at any time the short-term unsecured debt rating of the Liquidity
Provider for any Trust then issued by either Rating Agency is lower than the
Threshold Rating applicable to such Trust, the Liquidity Facility provided by
such Liquidity Provider may be replaced by a Replacement Facility. If such
Liquidity Facility is not replaced with a Replacement Facility within 10 days
after notice of the downgrading and as otherwise provided in the Intercreditor
Agreement, the Subordination Agent will draw the then Maximum Available
Commitment under such Liquidity Facility (the "Downgrade Drawing"). The
Subordination Agent will deposit the proceeds of any Downgrade Drawing in a
cash collateral account (the "Cash Collateral Account") for such Class of
Certificates and will use these proceeds for the same purposes and under the
same circumstances and subject to the same conditions as cash payments of
Interest Drawings under such Liquidity Facility would be used. (Liquidity
Facilities, Section 2.02(c); Intercreditor Agreement, Section 3.6(c))
A "Replacement Facility" for any Liquidity Facility means an irrevocable
liquidity facility (or liquidity facilities) in substantially the form of the
replaced Liquidity Facility, including reinstatement provisions, or in such
other form (which may include a letter of credit) as will permit the Rating
Agencies to confirm in writing their respective ratings then in effect for the
Certificates (before downgrading of such ratings, if any, as a result of the
downgrading of the applicable Liquidity Provider), in a face amount (or in an
aggregate face amount) equal to the amount of interest payable on the
Certificates of such Trust (at the Stated Interest Rate for such Trust, and
without regard to expected future principal payments) on the three Regular
Distribution Dates following the date of replacement of such Liquidity
Facility and issued by a person (or persons) having unsecured short-term debt
ratings issued by both Rating Agencies that are equal to or higher than the
Threshold Rating for the relevant Class. (Intercreditor Agreement, Section
1.1) The provider of any Replacement Facility will have the same rights
(including, without limitation, priority distribution rights and rights as
"Controlling Party") under the Intercreditor Agreement as the replaced initial
Liquidity Provider.
"Threshold Rating" means the short-term unsecured debt rating of P-1 by
Moody's and A-1+ by Standard & Poor's, in the case of the Class A Liquidity
Provider, and the short-term unsecured debt rating of P-1 by Moody's and A-1
by Standard & Poor's, in the case of the Class B Liquidity Provider and the
Class C Liquidity Provider.
The Liquidity Facility for each Trust will provide that the relevant
Liquidity Provider's obligations thereunder will expire on the earliest of:
. 364 days after the initial issuance date of the Certificates ("Issuance
Date").
. The date on which the Subordination Agent delivers to such Liquidity
Provider a certification that all of the Certificates of such Trust have
been paid in full.
. The date on which the Subordination Agent delivers to such Liquidity
Provider a certification that a Replacement Facility has been substituted
for such Liquidity Facility.
. The fifth Business Day following receipt by the Subordination Agent of a
Termination Notice from such Liquidity Provider (see "--Liquidity Events
of Default").
. The date on which no amount is or may (by reason of reinstatement) become
available for drawing under such Liquidity Facility.
. The date on which the Liquidity Provider honors a Downgrade Drawing, a
Non-Extension Drawing or a Final Drawing. (Liquidity Facilities, Sections
1.01 and 2.04(b)).
Each Liquidity Facility provides that the scheduled expiration date thereof
may be extended for additional 364-day periods by mutual agreement.
The Intercreditor Agreement will provide for the replacement of any
Liquidity Facility for any Trust if it is scheduled to expire earlier than 15
days after the Final Maturity Date for the Certificates of such Trust if such
Liquidity Facility is not extended at least 25 days prior to its then
scheduled expiration date. If such Liquidity
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Facility is not so extended or replaced by the 25th day prior to its then
scheduled expiration date, the Subordination Agent will draw its then Maximum
Available Commitment (the "Non-Extension Drawing"). The Subordination Agent
will deposit the proceeds of the Non-Extension Drawing in the Cash Collateral
Account for the related Class of Certificates as cash collateral to be used
for the same purposes and under the same circumstances, and subject to the
same conditions, as cash payments of Interest Drawings under such Liquidity
Facility would be used. (Liquidity Facilities, Section 2.02(b); Intercreditor
Agreement, Section 3.6(d))
Subject to certain limitations, US Airways may, at its option, arrange for a
Replacement Facility at any time to replace any Liquidity Facility for any
Trust (including without limitation any Replacement Facility described in the
following sentence). In addition, any Liquidity Provider may, at its option,
arrange for a Replacement Facility (i) to replace a non-extended Liquidity
Facility during the period no earlier than 40 days and no later than 25 days
prior to the then scheduled expiration date of such Liquidity Facility or (ii)
after the short-term unsecured debt rating of the Liquidity Provider is
downgraded below the applicable Threshold Rating (Intercreditor Agreement,
Section 3.6(c) and (e)). If any Replacement Facility is provided at any time
after a Downgrade Drawing or a Non-Extension Drawing under any Liquidity
Facility, the funds with respect to such Liquidity Facility on deposit in the
Cash Collateral Account for such Trust will be returned to the Liquidity
Provider being replaced. (Intercreditor Agreement, Section 3.6(f))
Upon receipt by the Subordination Agent of a Termination Notice with respect
to any Liquidity Facility from the applicable Liquidity Provider, the
Subordination Agent will request a final drawing ("Final Drawing") under such
Liquidity Facility in an amount equal to the then Maximum Available Commitment
thereunder. The Subordination Agent will hold the proceeds of such Final
Drawing in the Cash Collateral Account for the related Trust as cash
collateral to be used for the same purposes and under the same circumstances,
and subject to the same conditions, as cash payments of Interest Drawings
under such Liquidity Facility would be used. (Liquidity Facilities, Section
2.02(d); Intercreditor Agreement, Section 3.6(i))
REIMBURSEMENT OF DRAWINGS
The Subordination Agent must reimburse amounts drawn under any Liquidity
Facility by reason of an Interest Drawing, Final Drawing, Downgrade Drawing or
Non-Extension Drawing and interest thereon, but only to the extent that the
Subordination Agent has funds available therefor.
INTEREST DRAWINGS AND FINAL DRAWINGS
Amounts drawn by reason of an Interest Drawing or Final Drawing will be
immediately due and payable, together with interest on the amount of such
drawing. From the date of each such drawing to (but excluding) the third
business day following the applicable Liquidity Provider's receipt of the
notice of such Interest Drawing, interest will accrue at the Base Rate plus
2.00% per annum. Thereafter, interest will accrue at LIBOR for the applicable
interest period plus 2.00% per annum. In the case of the Final Drawing,
however, the Subordination Agent may (x) convert the Final Drawing into a
drawing bearing interest at the Base Rate plus 2.00% per annum on the last day
of an Interest Period for such Drawing or (y) elect to maintain the Final
Drawing as a drawing bearing interest at the Base Rate plus 2.00% per annum.
"Base Rate" means a fluctuating interest rate per annum in effect from time
to time, which rate per annum is at all times be equal to (a) the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a business day, for the next preceding
business day) by the Federal Reserve Bank of New York, or if such rate is not
so published for any day that is a business day, the average of the quotations
for such day for such transactions received by the applicable Liquidity
Provider from three Federal funds brokers of recognized standing selected by
it, plus (b) one quarter of one percent (0.25%) per annum.
"LIBOR" means, with respect to any interest period, (i) the rate per annum
appearing on display page 3750 (British Bankers Association--LIBOR) of the Dow
Jones Markets Service (or any successor or substitute therefor) at
approximately 11:00 A.M. (London time) two business days before the first day
of such interest period, as the rate for dollar deposits with a maturity
comparable to such interest period, or (ii) if the rate calculated pursuant to
clause (i) above is not available, the average (rounded upwards, if necessary,
to the next 1/16 of 1%) of the rates per annum at which deposits in dollars
are offered for the relevant interest period by
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<PAGE>
three banks of recognized standing selected by the applicable Liquidity
Provider in the London interbank market at approximately 11:00 A.M. (London
time) two business days before the first day of such interest period in an
amount approximately equal to the principal amount of the LIBOR Advance to
which such interest period is to apply and for a period comparable to such
interest period.
DOWNGRADE DRAWINGS AND NON-EXTENSION DRAWINGS
The amount drawn under any Liquidity Facility by reason of a Downgrade
Drawing or a Non-Extension Drawing will be treated as follows:
. Such amount will be released on any Distribution Date to the applicable
Liquidity Provider to the extent that such amount exceeds the Required
Amount.
. Any portion of such amount withdrawn from the Cash Collateral Account for
such Certificates to pay interest on such Certificates will be treated in
the same way as Interest Drawings.
. The balance of such amount will be invested in Eligible Investments.
Any Downgrade Drawing or Non-Extension Drawing under any of the Liquidity
Facilities, other than any portion thereof applied to the payment of interest
on the Certificates, will bear interest as follows: (x) for any Non-Extension
Drawing at a rate equal to LIBOR for the applicable Interest Period plus 0.45%
per annum; and (y) for any Downgrade Drawing at a rate equal to LIBOR for the
applicable Interest Period plus (i) 0.45% per annum for the first year after
such drawing and (ii) 1.00% per annum thereafter in the case of the Class A
Liquidity Facility or 0.75% per annum thereafter in the case of the Class B
and Class C Liquidity Facilities.
LIQUIDITY EVENTS OF DEFAULT
Events of Default under each Liquidity Facility (each, a "Liquidity Event of
Default") consists of:
. The acceleration of all the Equipment Notes (provided, that if such
acceleration occurs during the Delivery Period, the aggregate principal
amount thereof exceeds $300 million).
. Certain bankruptcy or similar events involving US Airways. (Liquidity
Facilities, Section 1.01)
If any Liquidity Event of Default under any Liquidity Facility has occurred
and is continuing and less than 65% of the aggregate outstanding principal
amount of all Equipment Notes are Performing Equipment Notes, the applicable
Liquidity Provider may, in its discretion, give a notice of termination of
such Liquidity Facility (a "Termination Notice"). The Termination Notice will
have the following consequences:
. The related Liquidity Facility will expire on the fifth Business Day
after the date on which such Termination Notice is received by the
Subordination Agent.
. The Subordination Agent will promptly request, and the applicable
Liquidity Provider will make, a Final Drawing thereunder in an amount
equal to the then Maximum Available Commitment thereunder.
. Any Drawing remaining unreimbursed as of the date of termination will be
automatically converted into a Final Drawing under such Liquidity
Facility.
. All amounts owing to the applicable Liquidity Provider automatically will
be accelerated.
Notwithstanding the foregoing, the Subordination Agent will be obligated to
pay amounts owing to the applicable Liquidity Provider only to the extent of
funds available therefor after giving effect to the payments in accordance
with the provisions set forth under "Description of the Intercreditor
Agreement--Priority of Distributions." (Liquidity Facilities, Section 6.01)
Upon the circumstances described below under "Description of the Intercreditor
Agreement--Intercreditor Rights--Controlling Party," a Liquidity Provider may
become the Controlling Party with respect to the exercise of remedies under
the Indentures. (Intercreditor Agreement, Section 2.6(c))
LIQUIDITY PROVIDER
The initial liquidity provider (the "Liquidity Provider") will be ABN AMRO
Bank N.V., a bank organized under the laws of the Netherlands, acting through
its Chicago branch ("ABN AMRO"). ABN AMRO Bank N.V. has short-term debt
ratings of P-1 from Moody's and A-1+ from Standard & Poor's.
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DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following description of the particular terms of the Intercreditor
Agreement supplements (and, to the extent inconsistent therewith, replaces)
the description of the general terms and provisions relating to the
Intercreditor Agreement set forth in the Prospectus. The statements made under
the caption are summaries and do not purport to be complete and are qualified
in their entirety by reference to all of the provisions of the Intercreditor
Agreement, which will be filed as an exhibit to an Annual Report on Form 10-K,
a Quarterly Report on Form 10-Q, or a Current Report on Form 8-K to be filed
by US Airways with the Commission.
INTERCREDITOR RIGHTS
GENERAL
The Intercreditor Agreement will be among each Trustee, the Liquidity
Provider and the Subordination Agent (the "Intercreditor Agreement"). The
Equipment Notes will be registered in the name of the Subordination Agent or
its nominee as agent and trustee for the applicable Trustee solely for the
purpose of facilitating the enforcement of the other provisions of the
Intercreditor Agreement.
CONTROLLING PARTY
With respect to any Indenture at any given time, the Loan Trustee under such
Indenture will be directed in taking, or refraining from taking, any action
under such Indenture or with respect to the Equipment Notes issued under such
Indenture, by the holders of at least a majority of the outstanding principal
amount of the Equipment Notes issued under such Indenture, so long as no
Indenture Default (which, with respect to Leased Aircraft, has not been cured
by the applicable Owner Trustee or Owner Participant) has occurred and is
continuing under such Indenture. For so long as the Subordination Agent is the
registered holder of the Equipment Notes, the Subordination Agent will act
with respect to the preceding sentence in accordance with the directions of
the Trustees for whom the Equipment Notes issued under such Indenture are held
as Trust Property, to the extent constituting, in the aggregate, directions
with respect to the required principal amount of Equipment Notes.
(Intercreditor Agreement, Section 2.6(a))
At any time an Indenture Default has occurred and is continuing under an
Indenture (which, with respect to Leased Aircraft, has not been cured by the
applicable Owner Trustee or Owner Participant), the Loan Trustee under such
Indenture will be directed in taking, or refraining from taking, any action
thereunder or with respect to the Equipment Notes issued under the related
Indenture, including acceleration of such Equipment Notes or foreclosing the
lien on the related Aircraft, by the Controlling Party, subject to the
limitations described below. (Intercreditor Agreement, Section 2.6(a))
Notwithstanding the foregoing, no amendment, modification, consent or waiver
will, without the consent of each Liquidity Provider, reduce the amount of
rent, supplemental rent or termination values payable by US Airways under any
Lease or reduce the amount of principal or interest payable by US Airways
under any Equipment Note issued under any Owned Aircraft Indenture.
(Intercreditor Agreement, Section 9.1(b)). See "Description of the
Certificates--Indenture Defaults and Certain Rights Upon an Indenture Default"
for a description of the rights of the Certificateholders of each Trust to
direct the respective Trustees.
The "Controlling Party" will be:
. The Class A Trustee.
. Upon payment of Final Distributions to the holders of Class A
Certificates, the Class B Trustee.
. Upon payment of Final Distributions to the holders of Class B
Certificates, the Class C Trustee.
. Under certain circumstances, and notwithstanding the foregoing, the
Liquidity Providers holding a majority in interest of unreimbursed
Liquidity Obligations, as discussed in the next paragraph. (Intercreditor
Agreement, Section 2.6(b))
At any time after 18 months from the earliest to occur of (x) the date on
which the entire available amount under any Liquidity Facility has been drawn
(for any reason other than a Downgrade Drawing or a Non-Extension
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Drawing) and remains unreimbursed, (y) the date on which the entire amount of
any Downgrade Drawing or Non-Extension Drawing has been withdrawn from the
relevant Cash Collateral Account to pay interest on the relevant Class of
Certificates and remains unreimbursed and (z) the date on which all Equipment
Notes have been accelerated (provided that if such acceleration occurs prior
to the Delivery Period Termination Date, the aggregate principal amount
thereof exceeds $300 million), the Liquidity Providers holding a majority in
interest of the unreimbursed Liquidity Obligations will have the right to
become the Controlling Party with respect to any Indenture. (Intercreditor
Agreement, Section 2.6(c))
For purposes of giving effect to the rights of the Controlling Party, the
Trustees (other than the Controlling Party) will irrevocably agree, and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) will be deemed to agree by virtue of their purchase of
Certificates, that the Subordination Agent, as record holder of the Equipment
Notes, will exercise its voting rights in respect of the Equipment Notes as
directed by the Controlling Party. (Intercreditor Agreement, Section 2.6(b))
For a description of certain limitations on the Controlling Party's rights to
exercise remedies, see "Description of the Equipment Notes--Remedies."
"Final Distributions" means, with respect to the Certificates of any Trust
on any Distribution Date, the sum of (x) the aggregate amount of all accrued
and unpaid interest on such Certificates (excluding interest payable, if any,
on the Deposits relating to such Trust) and (y) the Pool Balance of such
Certificates as of the immediately preceding Distribution Date (less the
amount of the Deposits for such Class of Certificates as of such preceding
Distribution Date other than any portion of such Deposits thereafter used to
acquire Equipment Notes pursuant to the Note Purchase Agreement). For purposes
of calculating Final Distributions with respect to the Certificates of any
Trust, any premium paid on the Equipment Notes held in such Trust that has not
been distributed to the Certificateholders of such Trust (other than such
premium or a portion thereof applied to the payment of interest on the
Certificates of such Trust or the reduction of the Pool Balance of such Trust)
will be added to the amount of such Final Distributions. (Intercreditor
Agreement, Section 1.1)
SALE OF EQUIPMENT NOTES OR AIRCRAFT
Upon the occurrence and during the continuation of any Indenture Default
under any Indenture, the Controlling Party will be entitled to accelerate and,
subject to the provisions of the immediately following sentence, sell all (but
not less than all) of the Equipment Notes issued under such Indenture to any
person. So long as any Certificates are outstanding, during nine months after
the earlier of (x) the acceleration of the Equipment Notes under any Indenture
or (y) the bankruptcy or insolvency of US Airways, without the consent of each
Trustee, no Aircraft subject to the lien of such Indenture or such Equipment
Notes may be sold, if the net proceeds from such sale would be less than the
Minimum Sale Price for such Aircraft or such Equipment Notes. In addition,
with respect to any Leased Aircraft, the amount and payment dates of rentals
payable by US Airways under the Lease for such Leased Aircraft may not be
adjusted, if, as a result of such adjustment, the discounted present value of
all such rentals would be less than 75% of the discounted present value of the
rentals payable by US Airways under such Lease before giving effect to such
adjustment. (Intercreditor Agreement, Section 4.1)
"Minimum Sale Price" means, with respect to any Aircraft or the Equipment
Notes issued in respect of such Aircraft, at any time, the lesser of (x) 75%
of the Appraised Current Market Value of such Aircraft and (y) the aggregate
outstanding principal amount of such Equipment Notes, plus accrued and unpaid
interest thereon.
PRIORITY OF DISTRIBUTIONS
BEFORE A TRIGGERING EVENT
So long as no Triggering Event has occurred, the payments in respect of the
Equipment Notes and certain other payments received on any Distribution Date
will be promptly distributed by the Subordination Agent on such Distribution
Date in the following order of priority:
. to the Liquidity Provider to the extent required to pay the Liquidity
Expenses;
. to the Liquidity Provider to the extent required to pay interest accrued
on the Liquidity Obligations;
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. to the Liquidity Provider to the extent required to pay or reimburse the
Liquidity Provider for the Liquidity Obligations (other than amounts
payable pursuant to the two preceding clauses) and/or, if applicable, to
replenish each Cash Collateral Account up to the Required Amount;
. to the Class A Trustee to the extent required to pay Expected
Distributions on the Class A Certificates;
. to the Class B Trustee to the extent required to pay Expected
Distributions on the Class B Certificates;
. to the Class C Trustee to the extent required to pay Expected
Distributions on the Class C Certificates; and
. to the Subordination Agent and each Trustee for the payment of certain
fees and expenses.
"Liquidity Expenses" means the Liquidity Obligations other than any interest
accrued thereon or the principal amount of any drawing under the Liquidity
Facilities.
"Liquidity Obligations" means all principal, interest, fees and other
amounts owing to the Liquidity Providers under the Liquidity Facilities or
certain other agreements.
"Expected Distributions" means, with respect to the Certificates of any
Trust on any Distribution Date (the "Current Distribution Date"), the sum of
(1) accrued and unpaid interest on such Certificates (excluding interest, if
any, payable with respect to the Deposits relating to such Trust) and (2) the
difference between:
(A) the Pool Balance of such Certificates as of the immediately preceding
Distribution Date (or, if the Current Distribution Date is the first
Distribution Date, the original aggregate face amount of the Certificates
of such Trust); and
(B) the Pool Balance of such Certificates as of the Current Distribution
Date calculated on the basis that (i) the principal of the Equipment Notes
held in such Trust has been paid when due (whether at stated maturity, upon
redemption, prepayment, purchase, acceleration or otherwise) and such
payments have been distributed to the holders of such Certificates and (ii)
the principal of any Equipment Notes formerly held in such Trust that have
been sold pursuant to the Intercreditor Agreement has been paid in full and
such payments have been distributed to the holders of such Certificates,
but without giving effect to any reduction in the Pool Balance as a result
of any distribution attributable to Deposits occurring after the
immediately preceding Distribution Date (or, if the Current Distribution
Date is the first Distribution Date, occurring after the initial issuance
of the Certificates of such Trust).
For purposes of calculating Expected Distributions with respect to the
Certificates of any Trust, any premium paid on the Equipment Notes held in
such Trust that has not been distributed to the Certificateholders of such
Trust (other than such premium or a portion thereof applied to the payment of
interest on the Certificates of such Trust or the reduction of the Pool
Balance of such Trust) shall be added to the amount of such Expected
Distributions.
For purposes of determining the priority of distributions on account of the
redemption, purchase or prepayment of all of the Equipment Notes issued
pursuant to an Indenture, clause (1) of the definition of Expected
Distributions is deemed to read as follows: "(1) accrued, due and unpaid
interest on such Certificates (excluding interest, if any, payable with
respect to the Deposits relating to such Trust) together with (without
duplication) accrued and unpaid interest on a portion of such Certificates
equal to the outstanding principal amount of the Equipment Notes being
redeemed, purchased or prepaid (immediately prior to such redemption, purchase
or prepayment)."
AFTER A TRIGGERING EVENT
Subject to the terms of the Intercreditor Agreement, upon the occurrence of
a Triggering Event and at all times thereafter, all funds received by the
Subordination Agent in respect of the Equipment Notes and certain other
payments will be promptly distributed by the Subordination Agent in the
following order of priority:
. to the Subordination Agent, any Trustee, any Certificateholder and the
Liquidity Provider to the extent required to pay certain out-of-pocket
costs and expenses actually incurred by the Subordination
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Agent or any Trustee or to reimburse any Certificateholder or the
Liquidity Provider in respect of payments made to the Subordination Agent
or any Trustee in connection with the protection or realization of the
value of the Equipment Notes or any Trust Indenture Estate (collectively,
the "Administration Expenses");
. to the Liquidity Provider to the extent required to pay the Liquidity
Expenses;
. to the Liquidity Provider to the extent required to pay interest accrued
on the Liquidity Obligations;
. to the Liquidity Provider to the extent required to pay the outstanding
amount of all Liquidity Obligations and/or, if applicable, with respect
to any particular Liquidity Facility, unless (x) less than 65% of the
aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes and a Liquidity Event of Default has occurred
and is continuing under such Liquidity Facility or (y) a Final Drawing
has occurred under such Liquidity Facility, to replenish the Cash
Collateral Account with respect to such Liquidity Facility up to the
Required Amount for the related Class of Certificates (less the amount of
any repayments of Interest Drawings under such Liquidity Facility while
sub-clause (x) of this clause is applicable);
. to the Subordination Agent, any Trustee or any Certificateholder to the
extent required to pay certain fees, taxes, charges and other amounts
payable;
. to the Class A Trustee to the extent required to pay Adjusted Expected
Distributions on the Class A Certificates;
. to the Class B Trustee to the extent required to pay Adjusted Expected
Distributions on the Class B Certificates; and
. to the Class C Trustee to the extent required to pay Adjusted Expected
Distributions on the Class C Certificates.
"Adjusted Expected Distributions" means, with respect to the Certificates of
any Trust on any Current Distribution Date, the sum of (1) accrued and unpaid
interest on such Certificates (excluding interest, if any, payable with respect
to the Deposits relating to such Trust) and (2) the greater of:
(A) the difference between (x) the Pool Balance of such Certificates as
of the immediately preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date, the original aggregate
face amount of the Certificates of such Trust) and (y) the Pool Balance of
such Certificates as of the Current Distribution Date calculated on the
basis that (i) the principal of the Non-Performing Equipment Notes held in
such Trust has been paid in full and such payments have been distributed to
the holders of such Certificates, (ii) the principal of the Performing
Equipment Notes held in such Trust has been paid when due (but without
giving effect to any acceleration of Performing Equipment Notes) and such
payments have been distributed to the holders of such Certificates and
(iii) the principal of any Equipment Notes formerly held in such Trust that
have been sold pursuant to the Intercreditor Agreement has been paid in
full and such payments have been distributed to the holders of such
Certificates, but without giving effect to any reduction in the Pool
Balance as a result of any distribution attributable to Deposits occurring
after the immediately preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date, occurring after the
initial issuance of the Certificates of such Trust), and
(B) the amount of the excess, if any, of (i) the Pool Balance of such
Class of Certificates as of the immediately preceding Distribution Date
(or, if the Current Distribution Date is the first Distribution Date, the
original aggregate face amount of the Certificates of such Trust), less the
amount of the Deposits for such Class of Certificates as of such preceding
Distribution Date (or, if the Current Distribution Date is the first
Distribution Date, the original aggregate amount of the Deposits for such
Class of Certificates) other than any portion of such Deposits thereafter
used to acquire Equipment Notes pursuant to the Note Purchase Agreement,
over (ii) the Aggregate LTV Collateral Amount for such Class of
Certificates for the Current Distribution Date;
provided that, until the date of the initial LTV Appraisals, clause (B) will
not apply.
For purposes of calculating Expected Distributions or Adjusted Expected
Distributions with respect to the Certificates of any Trust, any premium paid
on the Equipment Notes held in such Trust that has not been
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distributed to the Certificateholders of such Trust (other than such premium
or a portion thereof applied to the payment of interest on the Certificates of
such Trust or the reduction of the Pool Balance of such Trust) will be added
to the amount of Expected Distributions or Adjusted Expected Distributions.
"Aggregate LTV Collateral Amount" for any Class of Certificates for any
Distribution Date means (i) the sum of the applicable LTV Collateral Amounts
for each Aircraft, minus (ii) the Pool Balance for each Class of Certificates,
if any, senior to such Class, after giving effect to any distribution of
principal on such Distribution Date with respect to such senior Class or
Classes.
"LTV Collateral Amount" of any Aircraft for any Class of Certificates means,
as of any Distribution Date, the lesser of (i) the LTV Ratio for such Class of
Certificates multiplied by the Appraised Current Market Value of such Aircraft
(or with respect to any such Aircraft which has suffered an Event of Loss
under and as defined in the relevant Lease, in the case of a Leased Aircraft,
or relevant Indenture, in the case of an Owned Aircraft, the amount of the
insurance proceeds paid to the related Loan Trustee in respect thereof to the
extent then held by such Loan Trustee (and/or on deposit in the Special
Payments Account) or payable to such Loan Trustee in respect thereof) and (ii)
the outstanding principal amount of the Equipment Notes secured by such
Aircraft after giving effect to any principal payments of such Equipment Notes
on or before such Distribution Date.
"LTV Ratio" means for the Class A Certificates %, for the Class B
Certificates % and for the Class C Certificates %.
"Appraised Current Market Value" of any Aircraft means the lower of the
average and the median of the most recent three LTV Appraisals of such
Aircraft. After a Triggering Event occurs and any Equipment Note becomes a
Non-Performing Equipment Note, the Subordination Agent will obtain LTV
Appraisals of the Aircraft securing such Equipment Note as soon as practicable
and additional LTV Appraisals on or prior to each anniversary of the date of
such initial LTV Appraisals; provided that if the Controlling Party reasonably
objects to the appraised value of the Aircraft shown in such LTV Appraisals,
the Controlling Party has the right to obtain or cause to be obtained
substitute LTV Appraisals (including LTV Appraisals based upon physical
inspection of such Aircraft).
"LTV Appraisal" means a current fair market value appraisal (which may be a
"desk-top" appraisal) performed by any Appraiser or any other nationally
recognized appraiser on the basis of an arm's-length transaction between an
informed and willing purchaser under no compulsion to buy and an informed and
willing seller under no compulsion to sell and both having knowledge of all
relevant facts.
"Non-Performing Equipment Note" means an Equipment Note that is not a
Performing Equipment Note.
Interest Drawings under the Liquidity Facility and withdrawals from the Cash
Collateral Account, in each case in respect of interest on the Certificates of
any Trust, will be distributed to the Trustee for such Trust, notwithstanding
the priority of distributions set forth in the Intercreditor Agreement and
otherwise described herein.
THE SUBORDINATION AGENT
State Street Bank and Trust Company will be the "Subordination Agent" under
the Intercreditor Agreement. US Airways and its affiliates may from time to
time enter into banking and trustee relationships with the Subordination Agent
and its affiliates. The Subordination Agent's address is State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110.
The Subordination Agent may resign at any time, in which event a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. The Controlling Party may remove the Subordination Agent for cause
as provided in the Intercreditor Agreement. In such circumstances, a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. Any resignation or removal of the Subordination Agent and
appointment of a successor Subordination Agent does not become effective until
acceptance of the appointment by the successor Subordination Agent.
(Intercreditor Agreement, Section 8.1)
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DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
THE AIRCRAFT
The Aircraft consist of 17 Airbus Model A319 aircraft, and six Airbus Model
A320 aircraft (the "Aircraft"), four of which have been delivered by the
manufacturer to US Airways and the remaining 19 of which are scheduled for
delivery from December 1998 to July 1999 (the "Delivery Period"). The Aircraft
have been designed to be in compliance with Stage 3 noise level standards,
which are the most restrictive regulatory standards currently in effect in the
United States for aircraft noise abatement.
The Airbus Model A319 and Airbus Model A320 aircraft both are capable of
flying from US Airways' major Northeast United States hubs to its West Coast
markets. The seating capacity of the A319 aircraft is approximately 120
passengers. The engine type utilized on the Airbus Model A319 aircraft will be
CFM International, Inc. CFM-56-5B6. The seating capacity of the Airbus Model
A320 aircraft is approximately 142 passengers. The engine type utilized on the
Airbus Model A320 aircraft will be CFM International, Inc. CFM-56-5B4.
THE APPRAISALS
The table below sets forth the appraised base values of the Aircraft, as
determined by AVITAS, Inc. ("AVITAS"), AvSolutions, Inc. ("AvSolutions"), and
Morton Beyer and Agnew, Inc. ("MBA"), independent aircraft appraisal and
consulting firms (the "Appraisers").
<TABLE>
<CAPTION>
EXPECTED MANUFACTURER'S SCHEDULED APPRAISED BASE VALUE
AIRCRAFT REGISTRATION SERIAL DELIVERY ---------------------------------
TYPE NUMBER NUMBER MONTH* AVITAS AVSOLUTIONS MBA
- -------- ------------ -------------- ----------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Airbus A319............. N700UW 0885 October 15, 1998 37,700,000 38,140,000 37,060,000
Airbus A319............. N701UW 0890 October 20, 1998 37,700,000 38,140,000 37,060,000
Airbus A319............. N702UW 0896 November 2, 1998 37,700,000 38,140,000 37,130,000
Airbus A319............. N703UW 0904 November 10, 1998 37,700,000 38,140,000 37,130,000
Airbus A319............. N704US 0922 December 1998 37,700,000 38,140,000 37,210,000
Airbus A319............. N705UW 0929 December 1998 37,700,000 38,140,000 37,210,000
Airbus A320............. N101UW 0936 January 1999 44,600,000 44,390,000 42,970,000
Airbus A319............. N706US 0946 January 1999 38,700,000 38,420,000 37,280,000
Airbus A319............. N707UW 0949 January 1999 38,700,000 38,420,000 37,280,000
Airbus A319............. N708UW 0972 February 1999 38,700,000 38,420,000 37,360,000
Airbus A319............. N709UW 0997 March 1999 38,700,000 38,420,000 37,430,000
Airbus A320............. N102UW 0844 May 1999 45,300,000 44,710,000 43,320,000
Airbus A320............. N103US 0861 May 1999 45,300,000 44,710,000 43,320,000
Airbus A319............. N710UW 1019 May 1999 39,300,000 38,700,000 37,590,000
Airbus A320............. N104UW 0863 June 1999 45,300,000 44,710,000 43,410,000
Airbus A320............. N105UW 0868 June 1999 45,300,000 44,710,000 43,410,000
Airbus A319............. N711UW 1033 June 1999 39,300,000 38,700,000 37,660,000
Airbus A319............. N712US 1038 June 1999 39,300,000 38,700,000 37,660,000
Airbus A320............. N106US 1044 July 1999 46,000,000 45,030,000 43,500,000
Airbus A319............. N713UW 1040 July 1999 39,800,000 38,980,000 37,740,000
Airbus A319............. N714US 1046 July 1999 39,800,000 38,980,000 37,740,000
Airbus A319............. N715UW 1051 July 1999 39,800,000 38,980,000 37,740,000
Airbus A319............. N716UW 1055 July 1999 39,800,000 38,980,000 37,740,000
</TABLE>
* The actual delivery dates for the first four aircraft are set forth. The
actual delivery date for any other Aircraft may be subject to delay or
acceleration. See "--Deliveries of Aircraft."
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<PAGE>
For purposes of the foregoing chart, AVITAS, AvSolutions and MBA were asked
to provide their respective opinion as to the appraised base value of each
Aircraft as of November 16, 1998 and projected as of the scheduled delivery
month of each such Aircraft. As part of this process, all three Appraisers
performed "desk-top" appraisals without any physical inspection of the
Aircraft. The appraisals are based on various assumptions and methodologies,
which vary among the appraisers and may not reflect current market conditions
that could affect the fair market value of the Aircraft. The Appraisers have
delivered letters summarizing their respective appraisals, copies of which are
annexed to this Prospectus Supplement as Appendix II. For the definition of
appraised base value and a discussion of the assumptions and methodologies
used in each of the appraisals, reference is hereby made to such summaries.
An appraisal is only an estimate of value, is not indicative of the price at
which an aircraft may be purchased from the manufacturer and should not be
relied upon as a measure of realizable value; the proceeds realized upon a
sale of any Aircraft may be less than the appraised value thereof. The value
of the Aircraft upon the exercise of remedies under the applicable Indenture
will depend on market and economic conditions, the availability of buyers, the
condition of the Aircraft and other similar factors. Accordingly, there can be
no assurance that the proceeds realized upon any such exercise with respect to
the Equipment Notes and the Aircraft pursuant to the applicable Indenture
would equal the appraised value of such Aircraft or be sufficient to satisfy
in full payments due on the Equipment Notes issued thereunder or the
Certificates.
DELIVERIES OF AIRCRAFT
Four Aircraft have been delivered and the remaining Aircraft are scheduled
for delivery from December 1998 through July 1999 under a purchase agreement
between US Airways Group and AVSA, S.A.R.L., an affiliate of Airbus. See the
table under "--The Appraisals" for the scheduled month of delivery of each
Aircraft. Under such purchase agreement, delivery of an Aircraft may be
delayed due to "Excusable Delay," which is defined to include delays in
delivery or failure to deliver or perform due to causes reasonably beyond
Airbus' or any associated contractor's control or not occasioned by Airbus' or
any associated contractor's fault, misconduct or negligence. US Airways cannot
predict whether adjustments in such schedule will be required.
The Note Purchase Agreement provides that the Delivery Period will expire on
October 31, 1999.
If delivery of any Aircraft is delayed by more than 30 days after the month
scheduled for delivery or beyond October 31, 1999, US Airways has the right to
replace such Aircraft with a Substitute Aircraft, subject to certain
conditions. See "--Substitute Aircraft." If delivery of any Aircraft is
delayed beyond the Delivery Period Termination Date and US Airways does not
exercise its right to replace such Aircraft with a Substitute Aircraft, there
will be unused Deposits that will be distributed to Certificateholders
together with accrued and unpaid interest thereon and, in certain
circumstances, a Deposit Make-Whole Premium with respect to the Class A and
the Class B Certificates. See "Description of the Deposit Agreements--Unused
Deposits."
SUBSTITUTE AIRCRAFT
If the delivery date for any Aircraft is delayed (i) more than 30 days after
the month scheduled for delivery, or (ii) beyond October 31, 1999, US Airways
may identify for delivery a substitute aircraft (each, a "Substitute
Aircraft") therefor meeting the following conditions:
. a Substitute Aircraft must be the same model (either A319 or A320) as the
Aircraft for which delivery was delayed and manufactured after October 1,
1998.
. US Airways will be obligated to obtain written confirmation from each
Rating Agency that substituting such Substitute Aircraft for the replaced
Aircraft will not result in a withdrawal, suspension or downgrading of
the ratings of any Class of Certificates.
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<PAGE>
DESCRIPTION OF THE EQUIPMENT NOTES
The following description of the terms of the Equipment Notes supplements
(and, to the extent inconsistent therewith, replaces) the description of the
general terms and provisions relating to the Equipment Notes, the Indentures,
the Leases, the Participation Agreements, the trust agreements under which the
Owner Trustees act on behalf of the Owner Participants (the "Trust
Agreements") and the Note Purchase Agreement set forth in the Prospectus. The
summaries make use of terms defined in and are qualified in their entirety by
reference to all of the provisions of the Equipment Notes, the Indentures, the
Leases, the Participation Agreements, the Trust Agreements and the Note
Purchase Agreement, which will be filed as exhibits to an Annual Report on
Form 10-K, a Quarterly Report on Form 10-Q, or a Current Report on Form 8-K to
be filed by US Airways with the Commission. Except as otherwise indicated, the
following summaries relate to the Equipment Notes, the Indenture, the Lease,
the Participation Agreement and the Trust Agreement that may be applicable to
each Aircraft.
GENERAL
The Equipment Notes will be issued in three series: the "Series A Equipment
Notes," the "Series B Equipment Notes" and the "Series C Equipment Notes,"
together the "Equipment Notes" with respect to each Aircraft. The Equipment
Notes with respect to each Leased Aircraft will be issued under a separate
Leased Aircraft Indenture between First Security Bank, National Association,
as Owner Trustee of a trust for the benefit of the owner participant that will
be the beneficial owner of such Aircraft (the "Owner Participant"), and State
Street Bank and Trust Company, as Leased Aircraft Trustee. The Equipment Notes
with respect to each Owned Aircraft will be issued under a separate Owned
Aircraft Indenture between US Airways and State Street Bank and Trust Company,
as Owned Aircraft Trustee. US Airways currently intends for all 23 of the
Aircraft to be Leased Aircraft. The Indentures will not provide for
defeasance, or discharge upon deposit of cash or certain obligations of the
United States, notwithstanding the description of defeasance in the
Prospectus.
The related Owner Trustee will lease each Leased Aircraft to US Airways
pursuant to a separate Lease between such Owner Trustee and US Airways with
respect to such Leased Aircraft. Under each Lease, US Airways will be
obligated to make or cause to be made rental and other payments to the related
Leased Aircraft Trustee on behalf of the related Owner Trustee, which rental
and other payments will be at least sufficient to pay in full when due all
payments required to be made on the Equipment Notes issued with respect to
such Leased Aircraft. The Equipment Notes issued with respect to the Leased
Aircraft are not, however, direct obligations of, or guaranteed by, US
Airways. US Airways' rental obligations under each Lease and US Airways'
obligations under the Equipment Notes issued with respect to each Owned
Aircraft will be general obligations of US Airways.
SUBORDINATION
Series B Equipment Notes issued in respect of an Aircraft will be
subordinated in right of payment to Series A Equipment Notes issued in respect
of such Aircraft; Series C Equipment Notes issued in respect of such Aircraft
will be subordinated in right of payment to such Series B Equipment Notes.
(Leased Aircraft Indentures, Section 2.15; Owned Aircraft Indentures, Section
2.15) On each Equipment Note payment date, (i) payments of interest and
principal due on Series A Equipment Notes issued in respect of an Aircraft
will be made prior to payments of interest and principal due on Series B
Equipment Notes issued in respect of such Aircraft; and (ii) payments of
interest and principal due on Series B Equipment Notes issued in respect of an
Aircraft will be made prior to payments of interest and principal due on
Series C Equipment Notes issued in respect of such Aircraft. (Leased Aircraft
Indentures, Article III; Owned Aircraft Indentures, Article III)
PRINCIPAL AND INTEREST PAYMENTS
Subject to the provisions of the Intercreditor Agreement, interest paid on
the Equipment Notes held in each Trust will be passed through to the
Certificateholders of each such Trust on the dates and at the rate per annum
set forth on the cover page of this Prospectus Supplement with respect to the
Class A and Class B Trusts and set forth under "Purchase of Class C
Certificates" with respect to the Class C Certificates until the final
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<PAGE>
expected Regular Distribution Date for such Trust. Subject to the provisions
of the Intercreditor Agreement, principal paid on the Equipment Notes held in
each Trust will be passed through to the Certificateholders of such Trust in
scheduled amounts on the dates set forth herein until the final expected
Regular Distribution Date for such Trust.
Interest will be payable on the unpaid principal amount of each Equipment
Note at the rate applicable to such Equipment Note on January 30, and July 30,
of each year, commencing on the first such date to occur after initial
issuance thereof. Such interest will be computed on the basis of a 360-day
year of twelve 30-day months. Overdue amounts of principal, Make-Whole Premium
and interest on such Series of Equipment Notes will bear interest at a rate
equal to at least 1.00% per annum over the applicable rate on such Series of
Equipment Notes.
Scheduled principal payments on the Equipment Notes will be made on January
30 and July 30 in certain years, commencing on July 30, 1999 in the case of
the Class A Certificates and January 30, 2000 in the case of the Class B
Certificates. See "Description of the Certificates--Pool Factors" for a
discussion of the scheduled payments of principal of the Equipment Notes and
possible revisions thereto.
The final payment made under each Equipment Note will be in an amount
sufficient to discharge in full the unpaid principal amount, Make-Whole
Premium (if any) and to the extent permitted by law, interest and any other
amounts payable but unpaid.
If any date scheduled for a payment of principal, premium (if any) or
interest with respect to the Equipment Notes is not a Business Day, such
payment will be made on the next succeeding Business Day with the same force
and effect as if made on such scheduled payment date and without any
additional interest.
REDEMPTION
If an Event of Loss occurs with respect to an Aircraft and such Aircraft is
not replaced by US Airways under the related Lease (in the case of a Leased
Aircraft) or under the related Owned Aircraft Indenture (in the case of an
Owned Aircraft), the Equipment Notes issued with respect to such Aircraft will
be redeemed, in whole, in each case at a price equal to the aggregate unpaid
principal amount thereof, together with accrued interest thereon, to the date
of redemption and other amounts payable to the holders of the Equipment Notes
under the applicable Indenture and Participation Agreement, but without
premium, on a Special Distribution Date. (Indentures, Section 2.10(a)) If US
Airways exercises its right to terminate a Lease under its voluntary
termination, early buyout or burdensome buyout options under such Lease, the
Equipment Notes relating to the applicable Leased Aircraft will be redeemed
(unless US Airways elects to assume the Equipment Notes on a full recourse
basis), in whole, on a Special Distribution Date at a price equal to the
aggregate unpaid principal amount thereof, together with accrued interest
thereon to, but not including, the date of redemption, plus a Make-Whole
Premium. (Leased Aircraft Indentures, Section 2.10(b)) See "--The Leases--
Lease Termination."
All of the Equipment Notes issued with respect to a Leased Aircraft may be
redeemed prior to maturity as part of a refunding or refinancing thereof under
Section 16 of the applicable Participation Agreement or otherwise with the
consent of US Airways, and all of the Equipment Notes issued with respect to
the Owned Aircraft may be redeemed prior to maturity at any time at the option
of US Airways, in each case at a price equal to 100% of the unpaid principal
thereof, together with accrued interest thereon to, but not including, the
date of redemption, plus, a Make-Whole Premium. (Indentures, Section 2.11) If
notice of such a redemption is given in connection with a refinancing of
Equipment Notes with respect to a Leased Aircraft, such notice may be revoked
not later than three days prior to the proposed redemption date. (Leased
Aircraft Indentures, Section 2.12).
If, with respect to a Leased Aircraft, (i) one or more Lease Events of
Default have occurred and are continuing or (ii) the Equipment Notes with
respect to such Aircraft have been accelerated or the Leased Aircraft Trustee
with respect to such Equipment Notes takes action or notifies the applicable
Owner Trustee that it intends to take action to foreclose the lien of the
related Leased Aircraft Indenture or otherwise commence the exercise of any
significant remedy under such Indenture or the related Lease or if certain
events occur in a bankruptcy
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<PAGE>
proceeding involving US Airways, then in each case all, but not less than all,
of the Equipment Notes issued with respect to such Leased Aircraft may be
purchased by the related Owner Trustee or Owner Participant on the applicable
purchase date at a price equal to the aggregate unpaid principal thereof,
together with accrued and unpaid interest thereon to, but not including, the
date of purchase, but without any premium (provided that a Make-Whole Premium
is payable if such Equipment Notes are to be purchased pursuant to clause (i)
when a Lease Event of Default has occurred and has been continuing for less
than 180 days). (Leased Aircraft Indentures, Section 2.14) US Airways as owner
of the Owned Aircraft has no comparable right under the Owned Aircraft
Indentures to purchase the Equipment Notes under such circumstances. (Leased
Aircraft Indenture, Section 2.14)
"Make-Whole Premium" means, with respect to any Equipment Note, the amount
(as determined by an independent investment banker selected by Lessee and
reasonably acceptable to the relevant Loan Trustees and related Owner
Participants) by which (a) the present value of the remaining scheduled
payments of principal and interest from the redemption date to maturity of
such Equipment Note computed by discounting each payment on a semiannual basis
from each payment date under the applicable Indenture (assuming a 360-day year
of twelve 30-day months) using a discount rate equal to the Treasury Yield
exceeds (b) the outstanding principal amount of such Equipment Note plus
accrued interest to the date of determination.
For purposes of determining the Make-Whole Premium and the Deposit Make-
Whole Premium, "Treasury Yield" means, at the time of determination with
respect to any Equipment Note, the interest rate (expressed as a semiannual
equivalent and as a decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield) determined to be the per annum rate
equal to the semiannual yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note and
trading in the public securities markets either as determined by interpolation
between the most recent weekly average yield to maturity for two series of
United States Treasury securities trading in the public securities markets,
(A) one maturing as close as possible to, but earlier than, the Average Life
Date of such Equipment Note and (B) the other maturing as close as possible
to, but later than, the Average Life Date of such Equipment Note, in each case
as published in the most recent H.15(519) or, if a weekly average yield to
maturity for United States Treasury securities maturing on the Average Life
Date of such Equipment Note is reported in the most recent H.15(519), such
weekly average yield to maturity as published in such H.15(519). "H.15(519)"
means the weekly statistical release designated as such, or any successor
publication, published by the Board of Governors of the Federal Reserve
System. The date of determination of a Make-Whole Premium will be the third
Business Day prior to the applicable payment or redemption date and the "most
recent H.15(519)" means the H.15(519) published prior to the close of business
on the third Business Day prior to the applicable payment or redemption date.
"Average Life Date" for any Equipment Note to be redeemed means the date
which follows the redemption date by a period equal to the Remaining Weighted
Average Life at the redemption date of such Equipment Note. "Remaining
Weighted Average Life" of an Equipment Note, at the redemption date of such
Equipment Note, means the number of days equal to the quotient obtained by
dividing (a) the sum of the products obtained by multiplying (i) the amount of
each then remaining installment of principal of such Equipment Note, including
the payment due on the maturity date of such Equipment Note, by (ii) the
number of days from and including the redemption date to but excluding the
scheduled payment date of such principal installment, by (b) the then unpaid
principal amount of such Equipment Note.
SECURITY
The Equipment Notes issued with respect to each Aircraft will be secured by
a first priority security interest in the Aircraft, the related Lease and all
rent thereunder (with respect to Leased Aircraft), as well as all rents,
profits and other income of such Aircraft, certain rights under the aircraft
purchase agreement between US Airways and an affiliate of the Aircraft
manufacturer, all requisition proceeds with respect to such Aircraft, all
insurance proceeds with respect to the Aircraft (other than proceeds under
third party liability policies and under policies maintained by the Owner
Participant), all monies and securities deposited with the related Loan
Trustee, and all proceeds of the foregoing. (Indentures, Granting Clause)
Unless an Indenture Default with respect to an
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<PAGE>
Aircraft has occurred and is continuing, the related Loan Trustee may not
exercise the Owner Trustee's rights under the related Lease except such Owner
Trustee's right to receive rent. The assignment by the Owner Trustee to the
Loan Trustee of its rights under the related Lease excludes the rights of the
Owner Trustee and the Owner Participant relating to the indemnification by US
Airways for certain matters, certain insurance proceeds payable to the Owner
Trustee in its individual and trust capacities and to the Owner Participant
under liability insurance maintained by US Airways under the Lease or by the
Owner Trustee or such Owner Participant, and certain reimbursement payments
made by US Airways to the Owner Trustee and the Owner Participant. (Indenture,
Granting Clause).
The Equipment Notes will not be cross-collateralized and, consequently, the
Equipment Notes issued in respect of any one Aircraft will not be secured by
any of the other Aircraft, replacement aircraft (as described in "--The
Leases--Events of Loss") or the Leases related thereto. There will not be any
cross-default provisions in the Indentures or Leases and, consequently, events
resulting in an event of default under any particular Indenture or Lease may
or may not result in an event of default occurring under any other Indenture
or Lease. If the Equipment Notes issued with respect to one or more Aircraft
are in default and the Equipment Notes issued with respect to the remaining
Aircraft are not in default, no remedies will be exercisable under the
Indentures with respect to such remaining Aircraft.
Although the Leased Aircraft Notes are not obligations of, or guaranteed by,
US Airways, the amounts unconditionally payable by US Airways for lease of the
Aircraft will be sufficient to pay in full when due all amounts required to be
paid on the Equipment Notes. See "Description of the Equipment Notes--
General."
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
The following tables set forth illustrative loan to Aircraft value ratios
for the Equipment Notes issued in respect of Aircraft as of the July Regular
Distribution Dates that occur after the scheduled date of original issuance of
such Equipment Notes, assuming that the Equipment Notes in the maximum
principal amount are issued in respect of each such Aircraft. The following
tables apply both to Leased Aircraft and Owned Aircraft. These examples were
utilized by US Airways in preparing the Assumed Amortization Schedule,
although the amortization schedule for the Equipment Notes issued with respect
to an Aircraft may vary from such assumed schedule so long as it complies with
the Mandatory Economic Terms. Accordingly, the schedules set forth below may
not be applicable in the case of any particular Aircraft. See "Description of
the Certificates--Pool Factors." The LTV was obtained by dividing (i) the
outstanding balance (assuming no payment default) of such Equipment Notes
determined immediately after giving effect to the payments scheduled to be
made on each such Regular Distribution Date by (ii) the assumed value (the
"Assumed Aircraft Value") of the Aircraft securing such Equipment Notes.
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<PAGE>
The following tables are based on the assumption (the "Depreciation
Assumption") that the value of each Aircraft set forth opposite the initial
Regular Distribution Date included in each table depreciates by 3% of the
initial appraised value per year until the fifteenth year after the year of
delivery of such Aircraft and by 4% of the initial appraised value per year
for the next five years. Other rates or methods of depreciation would result
in materially different loan to Aircraft value ratios, and no assurance can be
given (i) that the depreciation rates and method assumed for the purposes of
the tables are the ones most likely to occur or (ii) as to the actual future
value of any Aircraft. Thus the tables should not be considered a forecast or
prediction of expected or likely loan to Aircraft value ratios, but simply a
mathematical calculation based on one set of assumptions.
<TABLE>
<CAPTION>
AIRBUS MODEL A319-100 AIRBUS MODEL A320-200
---------------------------- ----------------------------
EQUIPMENT LOAN EQUIPMENT LOAN
NOTE ASSUMED TO NOTE ASSUMED TO
OUTSTANDING AIRCRAFT VALUE OUTSTANDING AIRCRAFT VALUE
DATE BALANCE VALUE RATIO BALANCE VALUE RATIO
- ---- ----------- ---------- ----- ----------- ---------- -----
(MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
January 30, 2000..... $22.94 $36.50 62.8% $28.65 $43.99 65.1%
July 30, 2000........ 22.56 35.38 63.8 28.65 42.67 67.2
July 30, 2001........ 22.03 34.25 64.3 27.98 41.35 67.7
July 30, 2002........ 21.45 33.12 64.8 27.24 40.03 68.0
July 30, 2003........ 20.62 31.99 64.5 26.45 38.71 68.3
July 30, 2004........ 19.78 30.86 64.1 25.60 37.39 68.5
July 30, 2005........ 18.87 29.73 63.5 24.69 36.07 68.4
July 30, 2006........ 17.90 28.60 62.6 23.71 34.75 68.2
July 30, 2007........ 16.85 27.47 61.3 22.66 33.43 67.8
July 30, 2008........ 15.96 26.34 60.6 21.64 32.11 67.4
July 30, 2009........ 15.30 25.21 60.7 20.89 30.79 67.8
July 30, 2010........ 14.19 24.09 58.9 19.59 29.47 66.5
July 30, 2011........ 13.14 22.96 57.2 16.32 28.15 58.0
July 30, 2012........ 10.36 21.83 47.5 14.47 26.83 53.9
July 30, 2013........ 8.64 20.70 41.7 12.77 25.51 50.1
July 30, 2014........ 6.56 19.19 34.2 10.26 24.19 42.4
July 30, 2015........ 6.56 17.69 37.1 7.56 22.43 33.7
July 30, 2016........ 3.58 16.18 22.1 6.75 20.67 32.7
July 30, 2017........ 0.93 14.68 6.3 2.55 18.91 13.5
July 30, 2018........ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
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<PAGE>
LIMITATION OF LIABILITY
The Equipment Notes issued with respect to the Leased Aircraft are not
direct obligations of, or guaranteed by, US Airways, any Owner Participant or
the Leased Aircraft Trustees or the Owner Trustees in their individual
capacities. None of the Owner Trustees, the Owner Participants or the Leased
Aircraft Trustees, or any affiliates thereof, will be personally liable to any
holder of an Equipment Note or, in the case of the Owner Trustees and the
Owner Participants, to the Leased Aircraft Trustees for any amounts payable
under the Equipment Notes or, except as provided in each Leased Aircraft
Indenture, for any liability under such Leased Aircraft Indenture. All
payments of principal of, premium, if any, and interest on the Equipment Notes
issued with respect to any Leased Aircraft (other than payments made in
connection with an optional redemption or purchase of Equipment Notes issued
with respect to a Leased Aircraft by the related Owner Trustee or the related
Owner Participant) will be made only from the assets subject to the lien of
the Indenture with respect to such Leased Aircraft or the income and proceeds
received by the related Leased Aircraft Trustee therefrom (including rent
payable by US Airways under the Lease with respect to such Leased Aircraft).
The Equipment Notes issued with respect to any Owned Aircraft will be direct
obligations of US Airways.
Except as otherwise provided in the Indentures, no Owner Trustee or Loan
Trustee, in its individual capacity, will be answerable or accountable under
the Indentures or under the Equipment Notes under any circumstances except,
among other things, for its own willful misconduct or gross negligence. None
of the Owner Participants will have any duty or responsibility under any of
the Leased Aircraft Indentures or the Equipment Notes to the Leased Aircraft
Trustees or to any holder of any Equipment Note.
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Defaults under each Indenture include: (a) in the case of a Leased
Aircraft Indenture, the occurrence of any Lease Event of Default under the
related Lease (other than the failure to make certain indemnity payments and
other payments to the related Owner Trustee or Owner Participant unless a
notice is given by such Owner Trustee to the Indenture Trustee that such
failure will constitute an Indenture Default), (b) the failure by the related
Owner Trustee (other than as a result of a Lease Default or Lease Event of
Default) in the case of a Leased Aircraft Indenture, or US Airways, in the
case of an Owned Aircraft Indenture, to pay any interest or principal or
premium, if any, when due, under such Indenture or under any Equipment Note
issued thereunder that continues for more than 10 Business Days, in the case
of principal, interest or Make-Whole Premium, and, in all other cases, 10
Business Days after the relevant Owner Trustee or Owner Participant receives
written demand from the related Loan Trustee or holder of an Equipment Note,
(c) the failure by the related Owner Participant or the related Owner Trustee
(in its individual capacity), in the case of a Leased Aircraft Indenture, or
US Airways, in the case of an Owned Aircraft Indenture, to discharge certain
liens that continue after notice and specified cure periods, (d) any
representation or warranty made by the related Owner Trustee or Owner
Participant in such Indenture, the related Participation Agreement, or certain
related documents furnished to the Loan Trustee or any holder of an Equipment
Note pursuant thereto being false or incorrect when made in any material
respect that continues to be material and adverse to the interests of the Loan
Trustee or Note Holders and remains unremedied after notice and specified cure
periods, (e) failure by the related Owner Trustee or Owner Participant (in the
case if Leased Aircraft) or US Airways (in the case of Owned Aircraft) to
perform or observe any covenant or obligation for the benefit of the Loan
Trustee or holders of Equipment Notes under such Indenture or certain related
documents that continues after notice and specified cure periods, (f) the
registration of the related Aircraft ceasing to be effective as a result of
the Owner Participant (in the case of a Leased Aircraft) or US Airways (in the
case of an Owned Aircraft) not being a citizen of the United States, as
defined in the Transportation Code (subject to a cure period), or (g) the
occurrence of certain events of bankruptcy, reorganization or insolvency of
the related Owner Trustee or Owner Participant (in the case of a Leased
Aircraft) or US Airways (in the case of the Owned Aircraft). (Indentures,
Section 4.02) There will not be any cross-default provisions in the Indentures
or in the Leases. Consequently, events resulting in an Indenture
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<PAGE>
Default under any particular Indenture may or may not result in an Indenture
Default occurring under any other Indenture, and a Lease Event of Default
under any particular Lease may or may not constitute a Lease Event of Default
under any other Lease.
If US Airways fails to make any semiannual basic rental payment due under
any Lease, within a specified period after such failure the applicable Owner
Trustee may furnish to the Leased Aircraft Trustee the amount due on the
Equipment Notes issued with respect to the related Leased Aircraft, together
with any interest thereon on account of the delayed payment thereof, in which
event the Leased Aircraft Trustee and the holders of outstanding Equipment
Notes issued under such Indenture may not exercise any remedies otherwise
available under such Indenture or such Lease as the result of such failure to
make such rental payment, unless such Owner Trustee has previously cured each
of the three immediately preceding semiannual basic rental payment defaults or
the Owner Trustee has cured an aggregate of six previous semiannual basic
rental payment defaults. The applicable Owner Trustee also may cure any other
default by US Airways in the performance of its obligations under any Lease
that can be cured by the payment of money. (Leased Aircraft Indenture, Section
4.03)
The holders of a majority in aggregate unpaid principal amount of the
Equipment Notes outstanding on such date issued with respect to any Aircraft,
by notice to the Loan Trustee, may on behalf of all the holders waive,
together under certain circumstances with the applicable Owner Trustee and
applicable Owner Participant, any existing default and its consequences under
the Indenture with respect to such Aircraft, except a default in the payment
of the principal of, or premium or interest on any such Equipment Notes or a
default in respect of any covenant or provision of such Indenture that cannot
be modified or amended without the consent of each holder of Equipment Notes.
(Indentures, Section 4.08)
REMEDIES
Each Indenture provides that if an Indenture Default occurs and is
continuing, the related Loan Trustee may, and upon receipt of written demand
from the holders of a majority in principal amount of the Equipment Notes
outstanding under such Indenture will, subject to the applicable Owner
Participant's or Owner Trustee's right to cure in the case of Leased Aircraft
Indentures, as discussed above, declare the principal of all such Equipment
Notes issued thereunder immediately due and payable, together with all accrued
but unpaid interest thereon (without the Make-Whole Premium). The holders of a
majority in principal amount of Equipment Notes outstanding under such
Indenture may rescind any such declaration at any time before the judgment or
decree for the payment of the money so due is entered if (i) there has been
paid to the related Loan Trustee an amount sufficient to pay all principal and
interest on any such Equipment Notes, to the extent such amounts have become
due otherwise than by such declaration of acceleration and (ii) all other
Indenture Defaults and events which with the giving of notice or lapse of time
or both would become Indenture Defaults under such Indenture have been cured
or waived. (Indentures, Section 4.04(b))
Each Indenture provides that if an Indenture Default under such Indenture
has occurred and is continuing, the related Loan Trustee may exercise certain
rights or remedies available to it under such Indenture or under applicable
law, including (if, in the case of a Leased Aircraft, the corresponding Lease
has been declared in default) one or more of the remedies under such Indenture
or such Lease with respect to the Aircraft subject to such Lease. If an Event
of Default has occurred and is continuing under the corresponding Lease in the
case of Leased Aircraft Indentures, the related Loan Trustee's right to
exercise remedies under such Indenture is subject, with certain exceptions, to
its having proceeded to exercise one or more of the remedies under the Lease
to terminate the Lease (in the event that it is not commercially reasonable to
take possession of the Aircraft) or take possession of and/or sell the
Aircraft; provided that the requirement to exercise such remedies under such
Lease does not apply in circumstances where such exercise has been
involuntarily stayed or prohibited by applicable law or court order for a
continuous period in excess of 60 days subsequent to an entry for an order for
relief or such other period as may be specified in Section 1110(a)(1)(A) of
the U.S. Bankruptcy Code (the "Section 1110 Period") (plus an additional
period if any resulting from (i) US Airways or its trustee in such proceeding
assuming, or agreeing to perform its obligations under, such Lease with the
approval of the applicable court, (ii) such Loan Trustee's consent to an
extension of such 60-day period, (iii) Lessee's assumption of the Lease during
the Section 1110 Period with the approval of the applicable court, or (iv)
such Loan Trustee's
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failure to give any requisite notice). See "--The Leases--Events of Default
under the Leases." Such remedies may be exercised by the related Loan Trustee
to the exclusion of the related Owner Trustee, subject to certain conditions
specified in such Indenture, and US Airways, subject to the terms of such
Lease. Any Aircraft sold in the exercise of such remedies will be free and
clear of any rights of those parties, including, if a Lease Event of Default
has occurred and is continuing, the rights of US Airways under the Lease with
respect to such Aircraft. No exercise of any remedies by the related Loan
Trustee may affect the rights of US Airways under any Lease unless a Lease
Event of Default has occurred and is continuing. The Owned Aircraft Indenture
will not contain such limitations on the Loan Trustee's ability to exercise
remedies upon an Indenture Event of Default under an Owned Aircraft Indenture.
(Indentures, Section 4.04; Leases, Section 15)
If a bankruptcy proceeding involving US Airways under the U.S. Bankruptcy
Code occurs, all of the rights of the Owner Trustee as lessor under a
particular Lease will be exercised by the Owner Trustee in accordance with the
terms thereof unless (i) during the Section 1110 Period the trustee in such
proceeding or US Airways does not assume or agree to perform its obligations
under such Lease, (ii) at any time after assuming or agreeing to perform such
obligations, such trustee or US Airways ceases to perform such obligations or
(iii) the related Loan Trustee takes action, or notifies the Owner Trustee
that such Loan Trustee intends to take action, to foreclose the lien of the
related Leased Aircraft Indenture or otherwise commence the exercise of any
significant remedy in accordance with the Leased Aircraft Indenture. The Owner
Trustee's exercise of such rights shall be subject to certain limitations and,
in no event, reduce the amount or change the time of any payment in respect of
the Equipment Notes or adversely affect the validity or enforceability of the
lien under the Leased Aircraft Indenture by depriving the holder of the
Equipment Notes of the benefits thereof.
If the Equipment Notes issued in respect of one Aircraft are in default, the
Equipment Notes issued in respect of the other Aircraft may not be in default,
and, if not, no remedies will be exercisable under the applicable Indentures
with respect to such other Aircraft.
Section 1110 of the U.S. Bankruptcy Code provides that the right of lessors,
conditional vendors and holders of security interests with respect to
"equipment" (as defined in Section 1110 of the U.S. Bankruptcy Code) to take
possession of such equipment in compliance with the provisions of a lease,
conditional sale contract or security agreement, as the case may be, is not
affected after 60 days after the filing of petition under Chapter 11 of the
U.S. Bankruptcy Code by (a) the automatic stay provision of the U.S.
Bankruptcy Code, which provision enjoins repossessions by creditors for the
duration of the reorganization period, (b) the provision of the U.S.
Bankruptcy Code allowing the trustee in reorganization to use property of the
debtor during the reorganization period, (c) Section 1129 of the U.S.
Bankruptcy Code (which governs the confirmation of plans of reorganization in
Chapter 11 cases) and (d) any power of the bankruptcy court to enjoin a
repossession. Section 1110 of the U.S. Bankruptcy Code provides that the right
to take possession of an aircraft may not be exercised for 60 days following
the date of commencement of the reorganization proceedings and may not be
exercised at all after such 60-day period (or such longer period consented to
by the lessor, conditional vendor or holder of a security interest), if the
trustee in reorganization agrees to perform the debtor's obligations that
become due on or after such date and cures all existing defaults (other than
defaults that are a breach of a provision relating to the financial condition,
bankruptcy, insolvency or reorganization of the debtor). "Equipment" is
defined in Section 1110 of the U.S. Bankruptcy Code, in part, as "an aircraft,
aircraft engine, propeller, appliance, or spare part (as defined in section
40102 of title 49) that is subject to a security interest granted by, leased
to, or conditionally sold to a debtor that is a citizen of the U.S. (as
defined in section 40102 of title 49) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to chapter 447
of title 49 for aircraft capable of carrying 10 or more individuals or 6,000
pounds or more of cargo."
Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel to US
Airways, has advised the Loan Trustees that, if US Airways were to become a
debtor under Chapter 11 of the U.S. Bankruptcy Code, (x) if such Aircraft is a
Leased Aircraft, the Owner Trustee, as lessor under each of the Leases, and
the Loan Trustee, as assignee of such Owner Trustee's rights under each of the
Leases pursuant to each of the related Indentures, would be entitled to the
benefits of Section 1110 of the U.S. Bankruptcy Code with respect to the
airframe and engines comprising the related Aircraft, or (y) if such Aircraft
is an Owned Aircraft, the Loan Trustee would
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be entitled to the benefits of Section 1110 of the U.S. Bankruptcy Code with
respect to the airframe and engines comprising the related Aircraft, but in
each case may not be entitled to such benefits with respect to any replacement
of an Aircraft after an Event of Loss in the future. The replacement of any
Aircraft is conditioned upon the contemporaneous delivery of an opinion of
counsel to the effect that the related Loan Trustee's entitlement to benefits
of Section 1110 of the U.S. Bankruptcy Code would not be diminished as a
result of such replacement. This opinion is subject to certain qualifications
and assumptions, including the assumptions that US Airways is and will
continue to be a citizen of the U.S. holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to chapter 447
of title 49 of the U.S. Code for aircraft capable of carrying 10 or more
individuals or 6,000 pounds or more of cargo. See "--The Leases--Events of
Loss." The opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois) does not
address the availability of Section 1110 with respect to the bankruptcy
proceedings of any possible sublessee of an Aircraft, or to any possible
lessee of an Owned Aircraft if it is leased by US Airways. For a description
of certain limitations on the Loan Trustee's exercise of rights contained in
the Indenture, see "--Indenture Defaults, Notice and Waiver."
A recent decision, Western Pacific Airlines, Inc. v. GATX (In re Western
Pacific Airlines, Inc.), 219 B.R. 305, on rehearing, 221 B.R. 1 (D. Colo.
1998), ruled that Section 1110 of the U.S. Bankruptcy Code does not apply in a
case after the trustee timely makes the agreement specified in Section
1110(a)(1)(A) of the U.S. Bankruptcy Code and timely cures defaults
outstanding as of the date of the Chapter 11 petition or that occur during the
first sixty days of the case, with the result, among others, that the ability
of a lessor to exercise remedies based on a default that occurs after the
first 60 days of the Chapter 11 case would be subject to the automatic stay.
US Airways has been advised by its counsel, Skadden Arps, Slate, Meagher &
Flom (Illinois) to the effect that, and accordingly believes that, this
decision construes Section 1110 of the U.S. Bankruptcy Code in a manner that
is inconsistent with both the language of Section 1110 of the U.S. Bankruptcy
Code and the legislative history explaining the purpose and operation of
Section 1110 of the U.S. Bankruptcy Code and accordingly believes that the
decision is an incorrect interpretation of Section 1110 of the U.S. Bankruptcy
Code. US Airways has been advised that the decision is currently on appeal,
but that the Chapter 11 case of Western Pacific Airlines, Inc. has been
converted to a case under Chapter 7, under which Section 1110 of the U.S.
Bankruptcy Code by its terms does not apply, and that the parties have filed
suggestions of mootness with the Court of Appeals.
If a bankruptcy, insolvency, receivership or like proceedings is commenced
involving an Owner Participant, it is possible that, notwithstanding that the
applicable Leased Aircraft is owned by the related Owner Trustee in trust,
such Leased Aircraft and the related Lease and Equipment Notes might become
part of such proceeding. In such event, payments under such Lease or on such
Equipment Notes may be interrupted and the ability of the related Loan Trustee
to exercise its remedies under the related Leased Aircraft Indenture might be
restricted, although such Loan Trustee would retain its status as a secured
creditor in respect of the related Lease and the related Leased Aircraft.
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority in principal amount of the
Equipment Notes outstanding under any Indenture, the provisions of such
Indenture and any related Lease, Participation Agreement or Trust Agreement
may not be amended or modified, except to the extent indicated below.
Subject to certain limitations, certain provisions of any Leased Aircraft
Indenture, and of the Lease, the Participation Agreement, and the Trust
Agreement related thereto, may be amended or modified by the parties thereto
without the consent of any holders of the Equipment Notes outstanding under
such Indenture. In the case of each Lease, such provisions include, among
others, provisions relating to (i) the return to the related Owner Trustee of
the related Leased Aircraft pursuant to the terms of such Lease (except to the
extent that such amendment would affect the rights or exercise of remedies
under the Lease) and (ii) the renewal of such Lease and the option of US
Airways pursuant to the terms of such Lease to terminate the Lease or to
purchase the related Leased Aircraft so long as the same would not adversely
affect the Note Holders. (Leased Aircraft Indentures, Section 9.01(a)) In
addition, any Indenture may be amended without the consent of the holders of
Equipment Notes to, among other things, cure any defect or inconsistency in
such Indenture or the Equipment
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Notes issued thereunder, provided that such change does not adversely affect
the interests of any such holder. (Indentures, Section 9.01(c))
Without the consent of each Liquidity Provider and the holder of each
Equipment Note outstanding under any Indenture affected thereby, no amendment
or modification of such Indenture may among other things (a) reduce the
principal amount of, or premium, if any, or interest payable on, any Equipment
Notes issued under such Indenture or change the date on which any principal,
premium, if any, or interest is due and payable, (b) permit the creation of
any security interest with respect to the property subject to the lien of such
Indenture, except as permitted by such Indenture, or deprive any holder of an
Equipment Note issued under such Indenture of the benefit of the lien of such
Indenture upon the property subject thereto or (c) reduce the percentage in
principal amount of outstanding Equipment Notes issued under such Indenture
necessary to modify or amend any provision of such Indenture or to waive
compliance therewith. (Indentures, Section 9.01(b))
INDEMNIFICATION
US Airways is required to indemnify each Loan Trustee, each Owner
Participant, each Owner Trustee, each Liquidity Provider, the Subordination
Agent, the Escrow Agent and each Trustee, but not the holders of Certificates
(unless otherwise expressly agreed by US Airways), for certain losses, claims
and other matters. US Airways is required under certain circumstances to
indemnify each Owner Participant against the loss of depreciation deductions
and certain other benefits allowable for certain income tax purposes with
respect to the related Leased Aircraft.
THE LEASES
Each Leased Aircraft will be leased to US Airways by the relevant Owner
Trustee under the relevant lease agreement (each, a "Lease"). Each Owned
Aircraft will be owned by US Airways.
LEASE TERM RENTALS AND PAYMENTS
Each Leased Aircraft will be leased separately by the relevant Owner Trustee
to US Airways for a term commencing on the Delivery Date and expiring on a
date not earlier than the latest maturity date of the relevant Equipment Notes
issued pursuant to the related Indenture, unless terminated prior to the
originally scheduled expiration date as permitted by the applicable Lease. The
semiannual basic rent payment under each Lease is payable by US Airways on
each related Lease Period Date (or, if such day is not a Business Day, on the
next Business Day), and will be assigned by the Owner Trustee to the Loan
Trustee under the corresponding Leased Aircraft Indenture to provide the funds
necessary to make scheduled payments of principal and interest due from the
Owner Trustee on the Equipment Notes issued under such Indenture. In certain
cases, the semiannual basic rent payments under the Leases may be adjusted,
but each Lease provides that under no circumstances will rent payments by US
Airways be less than the scheduled payments on the related Equipment Notes.
Any balance of each such semiannual basic rent payment under each Lease, after
payment of amounts due on the Equipment Notes issued under the Indenture
corresponding to such Lease, will be paid over to the Owner Trustee. (Leases,
Section 3)
"Lease Period Date" means, with respect to each Lease, January 30 or July 30
during the term of such Lease.
Semiannual payments of interest on the Equipment Notes issued by US Airways
under an Owned Aircraft Indenture are payable January 30 and July 30 of each
year, commencing on the first such date after issuance thereof. Payments of
principal of the Equipment Notes issued by US Airways under an Owned Aircraft
Indenture are payable January 30 and July 30 in certain years or in full on
final maturity.
NET LEASE; MAINTENANCE
Under the terms of each Lease, US Airways' obligations in respect of each
Leased Aircraft will be those of a lessee under a "net lease." Accordingly, US
Airways is obligated under each Lease, among other things and at its expense,
to keep each Aircraft duly registered and insured, to pay all costs of
operating the Aircraft and to
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maintain, service, repair and overhaul the Aircraft so as to keep it in as
good an operating condition as when delivered to US Airways, ordinary wear and
tear excepted, and in such condition as required to maintain the applicable
airworthiness certificate for the Aircraft in good standing at all times
(other than during temporary periods of storage or during certain periods of
permitted maintenance or modification). (Leases, Section 7(a)(1))
POSSESSION, SUBLEASE AND TRANSFER
Each Aircraft may be operated by US Airways or, subject to certain
restrictions, by certain other persons. Normal interchange, pooling and
similar agreements customary in the commercial airline industry with respect
to any airframe or engine are permitted. Subleases are also permitted to be
entered into with United States entities and foreign entities that have their
principal executive office in certain specified countries. (Leases, Section
7(b)(x)) It is uncertain to what extent the relevant Loan Trustee's security
interest would be recognized if an Aircraft is registered or located in a
jurisdiction not a party to the Convention on the International Recognition of
Rights in Aircraft (Geneva 1948) (the "Convention"). Moreover, in the case of
an Indenture Default, the ability of the related Loan Trustee to realize upon
its security interest in an Aircraft could be adversely affected as a legal or
practical matter if such Aircraft were registered or located outside the
United States.
REGISTRATION
US Airways is required to keep each Aircraft duly registered under the
Transportation Code with the FAA except (in the case of a Leased Aircraft) if
the relevant Owner Trustee or the relevant Owner Participant fails to meet the
applicable citizenship requirements, and to record each Lease (in the case of
a Leased Aircraft) and Indenture and certain other documents under the
Transportation Code. (Leases, Section 7(a)(1); Owned Aircraft Indenture,
Section 7.02) Such recordation of the Indenture and certain other documents
with respect to each Aircraft will give the relevant Loan Trustee a first-
priority, perfected security interest in such Aircraft whenever it is located
in the United States or any of its territories and possessions. The Convention
provides that such security interest will also be recognized, with certain
limited exceptions, in those jurisdictions that have ratified or adhere to the
Convention.
So long as no Lease Event of Default exists, US Airways has the right to
register the Aircraft subject to such Lease in a country other than the United
States at its own expense, subject to certain conditions set forth in the
related Participation Agreement. These conditions include a requirement that
the lien of the applicable Indenture will continue as a first priority
security interest in the applicable Aircraft. (Leases, Section 7(a)(1);
Participation Agreements, Section 7(d)). The Owned Aircraft Indentures contain
comparable provisions with respect to registration of the Owned Aircraft.
(Owned Aircraft Participation Agreement, Section 7(b)).
LIENS
US Airways is required to maintain each Aircraft free of any liens, other
than the rights of the relevant Loan Trustee, the holders of the related
Equipment Notes, US Airways and the Owner Participant and Owner Trustee
arising under the applicable Indenture, the Lease (in the case of Leased
Aircraft) or the other operative documents related thereto, and other than
certain limited liens permitted under such documents, including but not
limited to (i) liens for taxes either not yet due or being contested in good
faith by appropriate proceedings; (ii) materialmen's, mechanics' and other
similar liens arising in the ordinary course of business and securing
obligations that either are not yet delinquent for more than sixty (60) days
or are being contested in good faith by appropriate proceedings;
(iii) judgment liens so long as such judgment is discharged or vacated within
sixty (60) days or the execution of such judgment is stayed pending appeal or
discharged, vacated or reversed within sixty (60) days after expiration of
such stay; and (iv) any other lien as to which US Airways has provided a bond
or other security adequate in the reasonable opinion of the Owner Trustee;
provided that in the case of each of the liens described in the foregoing
clauses (i) and (ii) such liens and proceedings do not involve any material
danger of the sale, forfeiture or loss of such Aircraft or the interest of any
Owner Participant therein. (Leases, Section 6; Owned Aircraft Indenture,
Section 7.01)
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REPLACEMENT OF PARTS; ALTERATIONS
US Airways is obligated to replace all parts at its expense that may from
time to time be incorporated or installed in or attached to any Aircraft and
that may become lost, damaged beyond repair, worn out, destroyed, stolen,
seized, confiscated or permanently rendered unfit for use. US Airways or any
permitted sublessee has the right, at its own expense, to add further parts
and accessories and make such alterations, modifications and additions with
respect to each Aircraft as it deems desirable in the proper conduct of its
business and to remove parts which it deems to be obsolete or no longer
suitable or appropriate for use, so long as such alteration, modification,
addition or removal does not materially diminish the value, utility or
remaining useful life of the related aircraft or engine. (Leases, Sections
8(a) and 8(c); Owned Aircraft Indenture, Sections 7.03(a) and 7.03(c))
INSURANCE
US Airways is required to maintain, at its expense (or at the expense of a
permitted lessee, in the case of the Owned Aircraft, or a permitted sublessee
in the case of a Leased Aircraft), all-risk aircraft hull insurance covering
each Aircraft, at all times in an amount (taking into account any permitted
self-insurance) not less than the termination value for the Aircraft. However,
after giving effect to self-insurance permitted as described below, the amount
payable under such insurance may be less than such amounts payable with
respect to the Equipment Notes. (Leases, Section 11; Owned Aircraft Indenture,
Section 7.04)
In addition, US Airways is obligated to maintain (or cause to be maintained)
comprehensive airline liability insurance at its expense, including, without
limitation, passenger liability, bodily injury and property damage damage
liability, cargo liability and contractual liability insurance with respect to
each Aircraft. Such liability insurance must be underwritten by insurers of
nationally or internationally recognized responsibility. The amount of such
liability insurance coverage per occurrence may not be less than the amount of
comprehensive airline liability insurance from time to time applicable to
aircraft owned or leased and operated by US Airways of the same type and
operating on similar routes as such Aircraft.
US Airways is also required to maintain war-risk, hijacking or allied perils
insurance if it (or any permitted sublessee) operates any Aircraft, airframe
or engine in any area of recognized hostilities or if US Airways (or any
permitted sublessee) maintains such insurance with respect to other aircraft
operated on the same international routes or areas on or in which the Aircraft
is operated. (Leases, Section 11; Owned Aircraft Indenture, Section 7.04)
US Airways may self-insure under a program applicable to all aircraft in its
fleet, but the amount of such self-insurance in the aggregate may not exceed
50% of the highest replacement value of any single aircraft in US Airways'
fleet or 1 1/2% of the average aggregate insurable value (during the preceding
policy year) of all aircraft on which US Airways carries insurance, whichever
is less, unless an insurance broker of national standing shall certify that
the standard among all other major U.S. airlines is a higher level of self-
insurance, in which case, US Airways may self-insure the Aircraft to such
higher level. In addition, US Airways may self-insure to the extent of any
applicable deductible per Aircraft that does not exceed industry standards for
major U.S. airlines. (Leases, Section 11; Owned Aircraft Indenture, Section
7.04)
In respect of each Aircraft, US Airways is required to name as additional
insured parties the relevant Loan Trustee and holders of the Equipment Notes
and (in the case of a Leased Aircraft) the relevant Owner Participant and
Owner Trustee, in its individual capacity and as owner of such Aircraft, and
the Liquidity Provider under all liability, hull and property and war risk,
hijacking and allied perils insurance policies required with respect to such
Aircraft. In addition, the insurance policies will be required to provide
that, in respect of the interests of such additional insured persons, the
insurance will not be invalidated or impaired by any act or omission of
US Airways, any permitted sublessees, or any other person. (Leases, Section
11; Owned Aircraft Indenture, Section 7.04)
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LEASE TERMINATION
US Airways may terminate any Lease (i) on any Lease Period Date occurring
after the end of the calendar year in which the seventh (7th) anniversary
occurred of the date on which such Lease commenced, if it makes a good faith
determination that the Aircraft subject to such Lease is obsolete or surplus
to US Airways' needs or (ii) on the tenth, thirteenth or sixteenth
anniversaries of the date on which the Lease commenced. US Airways is required
to give notice of its intention to exercise its right of termination described
in this paragraph at least one hundred twenty (120) days prior to the proposed
date of termination, which notice may be withdrawn up to fifteen (15) days
prior to such proposed date; provided that US Airways may give only two (2)
such termination notices. In such a situation, unless the Owner Trustee elects
to retain title to such Aircraft or, in the case of clause (ii) above, US
Airways elects to purchase the Aircraft at a purchase price equal to the
greater of Termination Value or fair market value, US Airways is required to
use commercially reasonable efforts to sell such Aircraft as an agent for such
Owner Trustee, and the Owner Trustee will sell such Aircraft on the date of
termination to the highest cash bidder. If such sale occurs, the Equipment
Notes related thereto are required to be prepaid. If the net proceeds to be
received from such sale are less than the "Termination Value" for such
Aircraft (which is set forth in a schedule to each Lease), US Airways is
required to pay to the applicable Owner Trustee an amount equal to the excess,
if any, of the applicable Termination Value for such Aircraft over such net
proceeds. If US Airways elects to purchase the Aircraft, either (i) the
Equipment Notes related thereto will be prepaid or (ii) subject to receipt of
the tax opinion described under "--Renewal and Purchase Options," US Airways
will assume such Equipment Notes on a full recourse basis. Upon payment of the
Termination Value or, in the case of a purchase by US Airways, the payment of
the applicable purchase price, and an amount equal to the Make-Whole Premium,
if any, payable on such date of payment, together with certain additional
amounts, the lien of the relevant Indenture will be released, the relevant
Lease will terminate, and the obligation of US Airways thereafter to make
scheduled rent payments under such Lease will cease. (Leases, Section 9;
Leased Aircraft Indentures, Section 2.10)
The Owner Trustee has the option to retain title to the Aircraft if US
Airways has given a notice of termination under the Lease. In such event, such
Owner Trustee will pay to the applicable Loan Trustee an amount sufficient to
prepay the outstanding Equipment Notes issued with respect to such Aircraft
(including accrued interest) and the Loan Trustee will be paid the Make-Whole
Premium, in which case the lien of the relevant Indenture will be released,
the relevant Lease will terminate and the obligation of US Airways thereafter
to make scheduled rent payments under such Lease will cease. (Leases, Section
9; Leased Aircraft Indentures, Section 2.10)
EVENTS OF LOSS
If an "Event of Loss" occurs with respect to the airframe or the airframe
and engines of an Aircraft, US Airways must elect within sixty (60) days after
such occurrence either to make payment with respect to such Event of Loss or
to replace such airframe and any such engines. Not later than the earlier of
(i) the first Business Day following the 120th day following the date of
occurrence of such Event of Loss and (ii) an earlier Business Day irrevocably
specified fifteen (15) days in advance by notice from US Airways to the Owner
Trustee (in the case of a Leased Aircraft) and the Loan Trustee (the "Loss
Payment Date"), US Airways must either (i) pay to the applicable Owner Trustee
the Termination Value of such Aircraft (or, in the case of an Owned Aircraft,
pay to the applicable Loan Trustee the outstanding principal amount of the
Equipment Notes relating to such Aircraft plus accrued and unpaid interest
thereon), together with certain additional amounts, but, in any case, without
any Make-Whole Premium or (ii) substitute an airframe (or airframe and one or
more engines, as the case may be) for the airframe, or airframe and engine(s),
that suffered such Event of Loss. (Leases, Section 10(a); Leased Aircraft
Indentures, Section 2.10; Owned Aircraft Indentures, Section 5.06)
If US Airways elects to replace an airframe (or airframe and one or more
engines, as the case may be) that suffered such Event of Loss, it will, in the
case of a Leased Aircraft, convey to the related Owner Trustee title to an
airframe (or airframe and one or more engines, as the case may be) or, in the
case of an Owned Aircraft Indenture, subject such airframe (or airframe and
one or more engines) to the lien of the Owned Aircraft Indenture, and such
replacement airframe or airframe and engines must be the same model as the
airframe or
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airframe and engines to be replaced or an improved model, with a value,
utility and remaining useful life at least equal to the airframe or airframe
and engines to be replaced, assuming that such airframe and such engines had
been maintained in accordance with the related Lease or Owned Aircraft
Indenture, as the case may be. US Airways is also required to provide to the
relevant Loan Trustee and (in the case of a Leased Aircraft) the relevant
Owner Trustee and Owner Participant reasonably acceptable opinions of counsel
to the effect, among other things, that (i) certain specified documents have
been duly filed under the Transportation Code and (ii) such Owner Trustee and
Loan Trustee (as assignee of the Owner Trustee's rights and interests under
the Lease), will be entitled to receive the benefits of Section 1110 of the
U.S. Bankruptcy Code with respect to any such replacement airframe (unless, as
a result of a change in law or court interpretation, such benefits are not
then available. (Leases, Section 10(a); Owned Aircraft Indenture,
Section 5.06)
If US Airways elects not to replace such airframe, or airframe and
engine(s), then upon payment of the outstanding principal amount of the
Equipment Notes issued with respect to such Aircraft (in the case of an Owned
Aircraft) or the Termination Value for such Aircraft (in the case of a Leased
Aircraft), together with all additional amounts then due and unpaid with
respect to such Aircraft, which must be at least sufficient to pay in full as
of the date of payment thereof the aggregate unpaid principal amount under
such Equipment Notes together with accrued but unpaid interest thereon and all
other amounts due and owing in respect of such Equipment Notes, the lien of
the Indenture and (in the case of a Leased Aircraft) the Lease relating to
such Aircraft will terminate with respect to such Aircraft, the obligation of
US Airways thereafter to make the scheduled rent payments (in the case of a
Leased Aircraft) or interest and principal payments (in the case of an Owned
Aircraft) with respect thereto will cease and (in the case of a Leased
Aircraft) the related Owner Trustee will transfer all of its right, title and
interest in and to the related Aircraft to US Airways. The Termination Value
and other payments made under the Leases by US Airways will be deposited with
the applicable Loan Trustee. Amounts in excess of the amounts due and owing
under the Equipment Notes issued with respect to such Aircraft will be
distributed by such Loan Trustee to the applicable Owner Trustee or to US
Airways, as the case may be. (Leases, Section 10; Leased Aircraft Indentures,
Section 3.02; Owned Aircraft Indentures, Sections 3.02 and 5.06)
If an Event of Loss occurs with respect to an engine alone, US Airways will
be required to replace such engine within one hundred twenty (120) days after
the occurrence of such Event of Loss with another engine, free and clear of
all liens (other than certain permitted liens). Such replacement engine will
be the same make and model as the engine to be replaced, or an improved model,
suitable for installation and use on the airframe, and having a value and
utility at least equal to the engine to be replaced, assuming that such engine
had been maintained in accordance with the relevant Lease. (Leases, Section
10(b); Owned Aircraft Indenture, Section 5.06(b))
An Event of Loss with respect to an Aircraft, airframe or any engine means
any of the following events with respect to such property:
. The destruction of such property, damage to such property beyond economic
repair or rendition of such property permanently unfit for normal use.
. Any damage to such property which results in an insurance settlement with
respect to such property on the basis of a total loss or a constructive
or compromised total loss.
. Any theft or disappearance of such property for a period of 180
consecutive days or more (or, if earlier, the expiration of the term).
. The requisition for use of such property by any governmental entity
(other than a requisition for use by the U.S. government or any
government of registry of the aircraft) for a period exceeding 180
consecutive days (or, if earlier, the expiration of the term).
. The requisition for use by the U.S. government (or any government of
registry of the aircraft) that continues until the 30th day after the
last day of the term of the relevant Lease (unless the Owner Trustee has
elected not to treat such event as an Event of Loss).
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. The condemnation, confiscation, requisition or taking of title to such
property for more than 30 days (or, if earlier, the expiration of the
term).
. As a result of any law, rule, regulation, order or other action by the
Federal Aviation Administration or any governmental body of the
government of registry of the aircraft, the use of such property in the
normal course of business of air transportation is prohibited for a
period of one hundred eighty (180) consecutive days, unless US Airways
(or any sublessee), prior to the expiration of such one hundred eighty
(180) day period, has undertaken and is diligently carrying forward steps
which are necessary or desirable to permit the normal use of such
property by US Airways (or any sublessee), but in any event if such use
is prohibited for a period of one (1) year, provided that no Event of
Loss is deemed to have occurred if such prohibition has been applicable
to the entire U.S. registered fleet of similar property and US Airways,
prior to the expiration of such one (1) year period, has conformed at
least one such aircraft in its fleet to the requirements of any such law,
rule, regulation, order or other action and commenced regular commercial
use of the same in such jurisdiction and is diligently carrying forward,
in a manner which does not discriminate against applicable property in so
conforming such property, steps which are necessary or desirable to
permit the normal use of such property by US Airways, but in any event if
such use is prohibited for a period of two (2) years or such use is
prohibited at the expiration of the relevant Lease.
. Any divestiture of title to or interest in an engine in connection with
pooling or certain other arrangements will be treated as an Event of Loss
with respect to such engine. (Leases, Section 10; Owned Aircraft
Indenture, Section 5.06)
RENEWAL AND PURCHASE OPTIONS
At the end of the term of each Lease after final maturity of the related
Equipment Notes and subject to certain conditions, US Airways has certain
options to renew such Lease for additional limited periods. In addition, US
Airways has the right at the end of the term of each Lease to purchase the
Aircraft subject thereto for an amount to be calculated in accordance with the
terms of such Lease. (Leases, Section 19)
In addition, US Airways may have the right to purchase an Aircraft from the
applicable Owner Trustee prior to the expiration of the term of such Lease and
assume, as direct obligations of US Airways, the Equipment Notes issued with
respect to such Aircraft. Such assumption may occur only if, among other
things, US Airways has provided an opinion of counsel to the effect that
holders of such Equipment Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such assumption and will be subject
to federal income tax on the same amount and in the same manner and at the
same time as would have been the case if such assumption had not occurred.
(Leases, Section 19(b) and Section 20; Participation Agreements, Section 7(u))
EVENTS OF DEFAULT UNDER THE LEASES
The following events constitute Lease Events of Default under each Lease:
. Failure by US Airways to make any payment of basic rent within five (5)
Business Days after the same has become due or Termination Value within
ten (10) Business Days after receipt by US Airways of written notice that
the same is past due.
. Failure by US Airways to make a payment of supplemental rent (other than
Termination Value) when the same has become due and for thirty (30) days
after US Airways' receipt of written demand therefor (provided that
failure to pay any amount that is excluded from the lien of the Indenture
shall not constitute an event of default unless notice is given by the
Owner Participant).
. Failure by US Airways to carry and maintain insurance on and in respect
of the Aircraft, airframe and engines, in accordance with the provisions
of such Lease.
. Failure by US Airways to perform or observe in any material respect any
other covenant or agreement to be performed or observed by it under such
Lease or the related Participation Agreement or certain other related
operative documents (other than the related tax indemnity agreement
between US Airways and the Owner Participant), and such failure
continuing unremedied for a period of thirty (30) days after written
notice of such failure by the applicable Owner Trustee or Loan Trustee
unless such failure is capable of being corrected and US Airways is
diligently proceeding to correct such failure, in which case there is no
Lease Event of Default unless and until such failure continues unremedied
for a period of three hundred sixty (360) days after the receipt of such
notice.
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. Any representation or warranty made by US Airways in such Lease or the
related Participation Agreement or in certain other related operative
documents (other than in the related tax indemnity agreement between US
Airways and the Owner Participant) proves to have been untrue or
inaccurate in any material respect at the time made, such representation
or warranty is material at the time in question and the same remains
uncured (to the extent of the adverse impact thereof) for more than
thirty (30) days after the date of written notice thereof to US Airways.
. The occurrence of certain voluntary events of bankruptcy, reorganization
or insolvency of US Airways or the occurrence of involuntary events of
bankruptcy, reorganization or insolvency which continues undismissed,
unvacated or unstayed for a period of ninety (90) days. (Leases, Section
14)
Indenture Events of Default under the Owned Aircraft Indenture are discussed
above under "--Indenture Defaults, Notice and Waiver."
REMEDIES EXERCISABLE UPON EVENTS OF DEFAULT UNDER THE LEASE
If a Lease Event of Default has occurred and is continuing, the applicable
Owner Trustee may (or, so long as the Indenture is in effect, the applicable
Loan Trustee may, subject to the terms of the Indenture) exercise one or more
of the remedies provided in such Lease with respect to the related Aircraft.
These remedies include the right to repossess and use or operate such
Aircraft, to rescind or terminate such Lease, to sell or re-lease such
Aircraft free and clear of US Airway's rights, except as set forth in the
Lease, and retain the proceeds, and to require US Airways to pay, as
liquidated damages any due and unpaid basic rent plus an amount equal to, at
such Owner Trustee's (or, subject to the terms of the relevant Leased Aircraft
Indenture, the Leased Aircraft Trustee's) option, either (i) the excess of the
present value of all unpaid rent during the remainder of the term of such
Lease over the present value of the fair market rental value of such Aircraft
for the remainder of the term of such Lease or, (ii) the excess of the
Termination Value of such Aircraft over the fair market sales value of such
Aircraft or, if such aircraft has been sold, the net sales proceeds from the
sale of such Aircraft. If the Loan Trustee has validly terminated such Lease,
the Loan Trustee may not sell or lease or otherwise afford the use of such
Aircraft to US Airways or any of its affiliates. (Leased Aircraft Indentures,
Section 4.04)
TRANSFER OF OWNER PARTICIPANT INTERESTS
Subject to certain restrictions, each Owner Participant may transfer all or
any part of its interest in the related Leased Aircraft. (Participation
Agreements, Section 7(k))
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary describes the principal U.S. federal income tax
consequences to Certificateholders of the purchase, ownership and disposition
of the Certificates offered hereby and in the opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, special tax counsel to US Airways ("Tax Counsel"), is
accurate in all material respects with respect to the matters discussed
herein. This summary restates and supplements the summary of U.S. federal
income tax consequences set forth in the Prospectus. Except as otherwise
specified, the summary is addressed to the initial beneficial owners of
Certificates ("U.S. Certificateholders") that are citizens or residents of the
United States, corporations, partnerships or other entities created or
organized in or under the laws of the United States or any state therein, or
estates, the income of which is subject to U.S. federal income taxation
regardless of its source, or trusts if a court within the U.S. is able to
exercise primary jurisdiction over the administration of the trust and one or
more U.S. persons have the authority to control all substantial decisions of
the trust ("U.S. Persons") that will hold the Certificates as capital assets.
This summary does not address the tax treatment of U.S. Certificateholders
that may be subject to special tax rules, such as banks, insurance companies,
dealers in securities or commodities, tax-exempt entities, holders that will
hold Certificates as part of a straddle or holders that have a "functional
currency" other than the U.S. Dollar, nor does it address the tax treatment of
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U.S. Certificateholders that do not acquire Certificates at the initial
offering price as part of the initial offering thereof. This summary does not
purport to be a comprehensive description of all of the tax considerations
that may be relevant to a decision to purchase Certificates. This summary does
not describe any tax consequences arising under the laws of any state,
locality or taxing jurisdiction other than the United States.
The summary is based upon the tax laws and practice of the United States as
in effect on the date of this Prospectus Supplement, as well as judicial and
administrative interpretations thereof (in final or proposed form) available
on or before such date. All of the foregoing are subject to change, which
change could apply retroactively. Prospective investors should note that no
rulings have been sought from the Internal Revenue Service (the "IRS") with
respect to the federal income tax consequences, discussed below, and no
assurances can be given that the IRS will not take contrary positions. The
Trusts are not indemnified for any federal income taxes that may be imposed
upon them, and the imposition of any such taxes on a Trust could result in a
reduction in the amounts available for distribution to the Certificateholders
of such Trust. Prospective investors should consult their own tax advisors
with respect to the federal, state, local and foreign tax consequences to them
of the purchase, ownership and disposition of the Certificates.
TAX TREATMENT OF THE TRUSTS AND CERTIFICATEHOLDERS
Each Trust will not itself be subject to U.S. federal income taxation. Each
U.S. Certificateholder will be required to report on its federal income tax
return its pro rata share of the entire income from the Equipment Notes and
any other property held in the related Trust, in accordance with the U.S.
Certificateholder's method of accounting. Accordingly, each U.S.
Certificateholder's share of interest paid on the Equipment Notes will be
taxable as ordinary income, as it is paid or accrued, and a U.S.
Certificateholder's share of premium, if any, paid on redemption of an
Equipment Note will be treated as capital gain. The Deposits may be subject to
the original issue discount rules, with the result that a U.S.
Certificateholder may be required to include interest income from a Deposit
using the accrual method of accounting regardless of its normal method. In the
event that a Trust is supported by a Liquidity Facility, any amounts received
by the Trust under the Liquidity Facility with respect to unpaid interest will
be treated for U.S. federal income tax purposes as having the same
characteristics as the payments they replace.
Each U.S. Certificateholder will be entitled to deduct, consistent with its
method of accounting, its pro rata share of fees and expenses paid or incurred
by the corresponding Trust as provided in Section 162 or 212 of the Code.
Certain fees and expenses, including fees paid to the Trustee and the provider
of the Liquidity Facility (if applicable), will be borne by parties other than
the Certificateholders. It is possible that such fees and expenses will be
treated as constructively received by the Trust, in which event a U.S.
Certificateholder will be required to include in income and will be entitled
to deduct its pro rata share of such fees and expenses. If a U.S.
Certificateholder is an individual, estate or trust, the deduction for such
holder's share of such fees or expenses will be allowed only to the extent
that all of such holder's miscellaneous itemized deductions, including such
holder's share of such fees and expenses, exceed 2% of such holder's adjusted
gross income. In addition, in the case of U.S. Certificateholders who are
individuals, certain otherwise allowable itemized deductions will be subject
generally to additional limitations on itemized deductions under applicable
provisions of the Code.
EFFECT OF SUBORDINATION ON SUBORDINATED CERTIFICATEHOLDERS
In the event that a Trust that is subordinated in right of payment to any
other Trust (such Trust being a "Subordinated Trust" and the related
Certificates being "Subordinated Certificates") receives less than the full
amount of the receipts of interest, principal or premium paid with respect to
the Equipment Notes held by it (any shortfall in such receipts being the
"Shortfall Amounts") because of the subordination of such Trust, the
corresponding owners of beneficial interests in the Subordinated Certificates
(the "Subordinated Certificateholders") would probably be treated for federal
income tax purposes as if they had (1) received as
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distributions their full share of such receipts, (2) paid over to the relevant
preferred class of Certificateholders an amount equal to their share of such
Shortfall Amount, and (3) retained the right to reimbursement of such amounts
to the extent of future amounts payable to such Subordinated
Certificateholders with respect to such Shortfall Amount.
Under this analysis, (1) Subordinated Certificateholders incurring a
Shortfall Amount would be required to include as current income any interest
or other income of the corresponding Subordinated Trust that was a component
of the Shortfall Amount, even though such amount was in fact paid to the
relevant preferred class of Certificateholders, (2) a loss would only be
allowed to such Subordinated Certificateholders when their right to receive
reimbursement of such Shortfall Amount becomes worthless (i.e., when it
becomes clear that funds will not be available from any source to reimburse
such loss), and (3) reimbursement of such Shortfall Amount prior to such a
claim of worthlessness would not be taxable income to Subordinated
Certificateholders because such amount was previously included in income.
These results should not significantly affect the inclusion of income for
Subordinated Certificateholders on the accrual method of accounting, but could
accelerate inclusion of income to Subordinated Certificateholders on the cash
method of accounting by, in effect, placing them on the accrual method.
SALE OR OTHER DISPOSITION OF THE CERTIFICATES
Upon the sale, exchange or other disposition of a Certificate, a U.S.
Certificateholder generally will recognize capital gain or loss equal to the
difference between the amount realized on the disposition (other than any
amount attributable to accrued interest which will be taxable as ordinary
income) and the U.S. Certificateholder's adjusted tax basis in the related
Equipment Notes and any other property held by the corresponding Trust. Any
gain or loss will be long-term capital gain or loss to the extent attributable
to property held by the Trust for more than one year. In the case of
individuals, estates, and trusts, the maximum U.S. federal income tax rate on
long-term capital gains generally is 20%. Any gain with respect to an interest
in a Deposit likely will be treated as ordinary income.
FOREIGN CERTIFICATEHOLDERS
Under present U.S. federal income tax law, assuming certain certification
requirements are satisfied (which include identification of the beneficial
owner of a Certificate), and subject to the discussion of backup withholding
below:
(a) payments of interest (including any OID) on a Certificate to, or on
behalf of, any beneficial owner of a Certificate that is not a U.S. Person
(a "Non-U.S. Certificateholder") will not be subject to U.S. federal income
tax or withholding tax provided that (1) such Non-U.S. Certificateholder
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of an Owner Participant or US Airways,
(2) such Non-U.S. Certificateholder is not (i) a bank receiving interest
pursuant to a loan agreement entered into in the ordinary course of its
trade or business, or (ii) a controlled foreign corporation for U.S. tax
purposes that is related to an Owner Participant or US Airways, and (3)
such interest payments are not effectively connected with the conduct of a
U.S. trade or business of such Non-U.S. Certificateholder; and
(b) a Non-U.S. Certificateholder will not be subject to U.S. federal
income tax on any capital gain realized on the sale, exchange, retirement
or other disposition of a Certificate, unless (1) such Non-U.S.
Certificateholder is an individual who is present in the United States for
183 days or more during the taxable year of the sale, exchange, retirement
or other disposition and certain other requirements are met or (2) such
gain is effectively connected with the conduct of a U.S. trade or business
of such Non-U.S. Certificateholder.
The certification referred to above may be made on an IRS Form W-8 or
substantially similar substitute form.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments within the United States of principal, interest, OID and premium on
the Certificates, and to payments of the proceeds of certain sales of
Certificates made to U.S. Certificateholders other than certain exempt
recipients (such as corporations). A 31% "backup withholding" tax may apply to
such payments if the holder fails or has failed to provide an accurate
taxpayer identification number or otherwise establish an exemption or fails to
report in full interest income. With respect to Non-U.S. Certificateholders,
payments made on a Certificate and proceeds from the sale of a Certificate
owned by a Non-U.S. Certificateholder will generally not be subject to such
information reporting requirements or backup withholding tax if such Non-U.S.
Certificateholder provides the applicable statement as to its non-U.S. status
or otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be allowed as a refund or credit against such
holder's U.S. federal income tax liability, if any, provided the required
information is furnished to the IRS.
The Treasury Department recently issued final Treasury Regulations (the
"Final Regulations") governing backup withholding and information reporting
requirements. The Final Regulations do not significantly alter the substantive
withholding and information reporting requirements discussed herein; they
unify current certification procedures and forms and clarify reliance
standards. The Final Regulations will generally become effective for payments
made after December 31, 1999.
CERTAIN MASSACHUSETTS TAXES
The Trustee is a Massachusetts trust company with its corporate trust office
in Massachusetts. In the opinion of Bingham Dana LLP, counsel to the Trustee,
under currently applicable law, assuming that the Trusts will not be taxable
as corporations, but, rather, will be classified as grantor trusts under
subpart E, Part I of Subchapter J of the Code or as partnerships under
Subchapter K of the Code, (i) the Trusts will not be subject to any tax
(including, without limitation, net or gross income, tangible or intangible
property, net worth, capital, franchise or doing business tax), fee or other
governmental charge under the laws of the Commonwealth of Massachusetts or any
political subdivision thereof and (ii) Certificateholders that are not
residents of or otherwise subject to tax in Massachusetts will not be subject
to any tax (including, without limitation, net or gross income, tangible or
intangible property, net worth, capital, franchise or doing business tax), fee
or other governmental charge under the laws of the Commonwealth of
Massachusetts or any political subdivision thereof as a result of purchasing,
holding (including receiving payments with respect to) or selling a
Certificate.
Neither the Trusts nor the Certificateholders will be indemnified for any
state or local taxes imposed on them, and the imposition of any such taxes on
a Trust could result in a reduction in the amounts available for distribution
to the Certificateholders of such Trust. In general, should a
Certificateholder or any Trust be subject to any state or local tax which
would not be imposed if the Trustee were located in a different jurisdiction
in the United States, the Trustee will resign and a new Trustee in such other
jurisdiction will be appointed.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to Title I of
ERISA ("ERISA Plans"), and on those persons who are fiduciaries with respect
to ERISA Plans. Investments by ERISA Plans are subject to ERISA's general
fiduciary requirements, including, but not limited to, the requirement of
investment prudence and diversification and the requirement that an ERISA
Plan's investments be made in accordance with the documents governing the
Plan.
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Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions involving the assets of an ERISA Plan (as well as those plans
that are not subject to ERISA but which are subject to Section 4975 of the
Code, such as individual retirement accounts (together with ERISA Plans,
"Plans")) and certain persons (referred to as "parties in interest" or
"disqualified persons") having certain relationships to such Plans, unless a
statutory or administrative exemption is applicable to the transaction. A
party in interest or disqualified person who engages in a prohibited
transaction may be subject to excise taxes and other penalties and liabilities
under ERISA and the Code.
Under a 1993 decision of the United States Supreme Court, insurance company
general accounts in which Plans have invested may themselves be treated as
holding Plan assets and deemed subject to ERISA's fiduciary requirements and
prohibited transaction rules.
Any Plan fiduciary which proposes to cause a Plan to purchase any
Certificates should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA
and Section 4975 of the Code to such an investment, and to confirm that such
purchase and holding will not constitute or result in a non-exempt prohibited
transaction or any other violation of an applicable requirement of ERISA.
Governmental plans and certain church plans, while not subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of ERISA and Section 4975 of the Code, may nevertheless be subject
to state or other federal laws that are substantially similar to the foregoing
provisions of ERISA and the Code. Fiduciaries of any such plans should consult
with their counsel before purchasing any Certificates.
PLAN ASSETS ISSUES
The Department of Labor has promulgated a regulation, 29 CFR Section 2510.3-
101 (the "Plan Asset Regulation"), describing what constitutes the assets of a
Plan with respect to the Plan's investment in an entity for purposes of ERISA
and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan
invests (directly or indirectly) in a Certificate, the Plan's assets will
include both the Certificate and an undivided interest in each of the
underlying assets of the corresponding Trust, including the Equipment Notes
held by such Trust, unless it is established that equity participation in the
Trust by benefit plan investors (including but not limited to Plans and
entities whose underlying assets include Plan assets by reason of an employee
benefit plan's investment in the entity) is not "significant" within the
meaning of the Plan Asset Regulation. In this regard, the extent to which
there is equity participation in a particular Trust by, or on behalf of,
employee benefit plans will not be monitored. If the assets of a Trust are
deemed to constitute the assets of a Plan, transactions involving the assets
and operations of such Trust could be subject to the prohibited transaction
provisions of ERISA and Section 4975 of the Code.
PROHIBITED TRANSACTION EXEMPTIONS
In addition, whether or not the assets of a Trust are deemed to be Plan
assets under the Plan Asset Regulation, the fiduciary of a Plan that proposes
to purchase and hold any Certificates should consider, among other things,
whether such purchase and holding may involve (i) the direct or indirect
extension of credit to a party in interest or a disqualified person, (ii) the
sale or exchange of any property between a Plan and a party in interest or a
disqualified person, or (iii) the transfer to, or use by or for the benefit
of, a party in interest or a disqualified person, of any Plan assets. Such
parties in interest or disqualified persons could include, without limitation,
US Airways and its affiliates, the Owner Participants, the Underwriters, the
Trustees, the Escrow Agent, the Depositaries, the Owner Trustees and the
Liquidity Provider. Moreover, if Certificates are purchased by a Plan and
Certificates of a subordinate Class are held by a party in interest or a
disqualified person with respect to such Plan, the exercise by the holder of
the subordinate Class of Certificates of its right to purchase the senior
Classes of Certificates upon the occurrence and during the continuation of a
Triggering Event could be considered to constitute a prohibited transaction
unless a statutory or administrative exemption were applicable. See
"Description of the Certificates--Purchase Rights of Certificateholders."
Depending on
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the identity of the Plan fiduciary making the decision to acquire or hold
Certificates on behalf of a Plan, Prohibited Transaction Class Exemption
("PTCE") 91-38 (relating to investments by bank collective investment funds),
PTCE 84-14 (relating to transactions effected by a "qualified professional
asset manager"), PTCE 95-60 (relating to investments by an insurance company
general account), PTCE 96-23 (relating to transactions directed by an in-house
professional asset manager) or PTCE 90-1 (relating to investments by insurance
company pooled separate accounts) (collectively, the "Class Exemptions") could
provide an exemption from the prohibited transaction provisions of ERISA and
Section 4975 of the Code. However, there can be no assurance that any of these
Class Exemptions or any other exemption will be available with respect to any
particular transaction involving the Certificates.
Each person who acquires or accepts a Certificate or an interest therein,
will be deemed by such acquisition or acceptance to have represented and
warranted that either: (i) no Plan assets have been used to purchase such
Certificate or an interest therein or (ii) the purchase and holding of such
Certificate or interest therein are exempt from the prohibited transaction
restrictions of ERISA and Section 4975 of the Code pursuant to one or more
prohibited transaction statutory or administrative exemptions.
UNDERWRITER EXEMPTION MAY APPLY TO PURCHASE OF CLASS A CERTIFICATES BY PLANS
In addition to the Class Exemptions referred to above, an individual
exemption may apply to the purchase, holding and secondary market sale of
Class A Certificates by Plans, provided that certain specified conditions are
met. In particular, the Department of Labor has issued individual
administrative exemptions to the Underwriters which are substantially the same
as the administrative exemption issued to Morgan Stanley & Co. Incorporated,
Prohibited Transaction Exemption 90-24 et al. (55 Fed. Reg. 20,548 (1990)), as
amended (the "Underwriter Exemption"). The Underwriter Exemption generally
exempts from the application of certain, but not all, of the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the Code
certain transactions relating to the initial purchase, holding and subsequent
secondary market sale of pass through certificates which represent an interest
in a trust that holds secured credit instruments that bear interest or are
purchased at a discount in transactions by or between business entities
(including equipment notes secured by leases) and certain other assets,
provided that certain conditions set forth in the Underwriter Exemption are
satisfied.
The Underwriter Exemption sets forth a number of general and specific
conditions which must be satisfied for a transaction involving the initial
purchase, holding or secondary market sale of certificates representing a
beneficial ownership interest in a trust to be eligible for exemptive relief
thereunder. In particular, the Underwriter Exemption requires that the
acquisition of certificates by a Plan be on terms that are at least as
favorable to the Plan as they would be in an arm's-length transaction with an
unrelated party; the rights and interests evidenced by the certificates not be
subordinated to the rights and interests evidenced by other certificates of
the same trust estate; the certificates at the time of acquisition by the Plan
be rated in one of the three highest generic rating categories by Moody's,
Standard & Poor's, Duff & Phelps Inc. or Fitch Investors Service, Inc.; and
the investing Plan be an accredited investor as defined in Rule 501(a)(1) of
Regulation D of the Commission under the Securities Act.
In addition, the trust corpus generally must be invested in qualifying
receivables, such as the Equipment Notes, but may not in general include a
pre-funding account (except for a limited amount of pre-funding which is
invested in qualifying receivables within a limited period of time following
the closing not to exceed three months).
In reviewing the potential applicability of the Underwriter Exemption with
their legal advisors, Plans should note that an investment in a Certificate
will evidence both an interest in the respective Trust as well as an interest
in the Deposits held in escrow by an Escrow Agent for the benefit of the
Certificateholder. See "Description of the Deposit Agreements" and
"Description of the Escrow Agreements." Under the terms of the Escrow
Agreement, the proceeds from the Offering of the Class A and Class B
Certificates of each Class will be paid over by the Underwriters to the
applicable Depositary on behalf of the Escrow Agent (for the benefit of such
Certificateholders as the
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holders of the Escrow Receipts) and will not constitute property of the
Trusts. Under the terms of each Escrow Agreement, the Escrow Agent will be
irrevocably instructed to enter into the Deposit Agreements with the
applicable Depositary and to effect withdrawals upon the receipt of
appropriate notice from the relevant Trustee so as to enable such Trustee to
purchase the identified Equipment Notes on the terms and conditions set forth
in the Note Purchase Agreement.
There can be no assurance that the Department of Labor would agree that the
Underwriter Exemption will be applicable to Class A Certificates in these
circumstances. In particular, the Department of Labor might assert that the
escrow arrangement is tantamount to an impermissible pre-funding rendering the
Underwriter Exemption inapplicable. In addition, even if all of the conditions
of the Underwriter Exemption are satisfied with respect to the Class A
Certificates, no assurance can be given that the Underwriter Exemption would
apply with respect to all transactions involving the Class A Certificates or
the assets of the Class A Trust. In particular, the Underwriter Exemption may
not apply to the purchase by Class B Certificateholders or Class C
Certificateholders of Class A Certificates in connection with the exercise of
their rights upon the occurrence and during the continuance of a Triggering
Event. See "Description of the Certificates--Purchase Rights of
Certificateholders." Therefore, the fiduciary of a Plan considering the
purchase of a Class A Certificate should consider the availability of the
exemptive relief provided by the Underwriter Exemption, as well as the
availability of any other Class Exemptions that may be applicable.
The Underwriter Exemption will not in any event apply to the Class B or C
Certificates.
SPECIAL CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
It should be noted that the Small Business Job Protection Act of 1996 added
new Section 401(c) of ERISA relating to the status of the assets of insurance
company general accounts under ERISA and Section 4975 of the Code. Pursuant to
Section 401(c), the Department of Labor is required to issue final regulations
(the "General Account Regulations") with respect to insurance policies issued
on or before December 31, 1998 that are supported by an insurer's general
account. The General Account Regulations are to provide guidance on which
assets held by the insurer constitute "plan assets" for purposes of the
fiduciary responsibility provisions of ERISA and Section 4975 of the Code.
Section 401(c) also provides that, except in the case of avoidance of the
General Account Regulations and actions brought by the Secretary of Labor
relating to certain breaches of fiduciary duties that also constitute breaches
of state or federal criminal law, until the date that is 18 months after the
General Account Regulations become final, no liability under the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section 4975
of the Code may result on the basis of a claim that the assets of the general
account of an insurance company constitute the assets of any Plan. The plan
asset status of insurance company separate accounts is unaffected by new
Section 401(c) of ERISA, and separate account assets continue to be treated as
the assets of any Plan invested in a separate account, except to the extent
provided in the Plan Asset Regulation.
As of the date hereof, the DOL has issued proposed regulations under Section
401(c). If the General Account Regulations are adopted substantially in the
form in which proposed, the General Account Regulations may not exempt the
assets of insurance company general accounts from treatment as "plan assets"
after December 31, 1998. The proposed regulations should not, however,
adversely affect the applicability of PTCE 95-60 to purchases of Certificates
by insurance company general accounts.
PLAN OF DISTRIBUTION
CLASS A AND CLASS B CERTIFICATES
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among US Airways and the Underwriters listed
below (the "Underwriters") relating to the Class A and Class B Certificates,
US Airways has agreed to cause the Class A Trust and the Class B Trust to sell
to each of the Underwriters, and each of such Underwriters has severally
agreed to purchase the respective aggregate
S-82
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amounts of Class A and Class B Certificates set forth after their names below.
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the Class A and Class B Certificates if any Class
A and Class B Certificates are purchased thereunder. The Underwriters have no
obligations with respect to the Class C Certificates.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF CLASS A OF CLASS B
UNDERWRITERS CERTIFICATES CERTIFICATES
------------ ---------------- ----------------
<S> <C> <C>
Morgan Stanley & Co. Incorporated......... $ $
Credit Suisse First Boston Corporation....
Lehman Brothers Inc. .....................
Salomon Smith Barney Inc. ................
----- -----
Total..................................... $ $
===== =====
</TABLE>
The Underwriters have advised US Airways that the Underwriters propose
initially to offer the Class A and Class B Certificates to the public at the
public offering price for each such Class set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such price less a concession
not in excess of the amounts for the respective Class set forth below. The
Underwriters may allow, and such dealers may reallow, a concession to certain
other dealers not in excess of the amounts for the respective Class set forth
below. After the initial public offering, the public offering prices and such
concessions may be changed.
<TABLE>
<CAPTION>
PASS THROUGH CONCESSION REALLOWANCE
CERTIFICATE DESIGNATION TO DEALERS CONCESSION
----------------------- ---------- -----------
<S> <C> <C>
Class A.............................................. % %
Class B..............................................
</TABLE>
US Airways does not intend to apply for the listing of the Class A and Class
B Certificates on a national securities exchange, but has been advised by the
Underwriters that they presently intend to make a market in the Class A and
Class B Certificates, as permitted by applicable laws and regulations. No
Underwriter is obligated, however, to make a market in the Class A and Class B
Certificates, and any such market-making may be discontinued at any time at
the sole discretion of such Underwriter. Accordingly, no assurance can be
given as to the liquidity of, or trading markets for, the Class A and Class B
Certificates.
The Underwriting Agreement provides that US Airways will reimburse the
Underwriters for certain expenses and will indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act.
In order to facilitate the offering of the Class A and Class B Certificates,
the Underwriters may engage in transactions that stabilize, maintain or
otherwise affect the price of the Class A and Class B Certificates.
Specifically, the Underwriters may overallot in connection with the offering,
creating a short position in the Class A and Class B Certificates for their
own account. In addition, to cover over allotments or to stabilize the price
of the Class A and Class B Certificates, the Underwriters may bid for, and
purchase, Class A and Class B Certificates in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an
Underwriter or a dealer for distributing Class A and Class B Certificates in
the Offering, if the syndicate repurchases previously distributed Class A and
Class B Certificates in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Class A and Class B Certificates above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
GENERAL
It is expected that delivery of the Class A and Class B Certificates will be
made against payment therefor on or about the date specified in the last
paragraph of the cover page of this Prospectus Supplement, which will be the
business day following the date of pricing of the Class A and Class B
Certificates (such settlement cycle being herein referred to as "T+ ").
Pursuant to Rule 15c6-1 under the Securities Exchange Act of 1934,
S-83
<PAGE>
as amended, trades in the secondary market generally are required to settle in
three business days, unless the parties to any such trade expressly agree
otherwise. Accordingly, purchasers who wish to trade Class A or Class B
Certificates on the date of pricing or any of the next succeeding business
days will be required, by virtue of the fact that such Certificates initially
will settle in T+ , to specify an alternate settlement cycle at the time of
any such trade to prevent a failed settlement. Purchasers of Class A and Class
B Certificates who wish to trade Certificates on the date of pricing or any of
the next succeeding business days should consult their own advisor.
PURCHASE OF CLASS C CERTIFICATES
Subject to the terms and conditions set forth in the Purchase Agreement (the
"Purchase Agreement") between US Airways and AIFS relating to the Class C
Certificates, US Airways has agreed to cause the Class C Trust to sell to
AIFS, a wholly-owned subsidiary of Airbus Industrie, G.I.E. ("Airbus"), the
principal amount of the Class C Certificates set forth on the cover page of
this Prospectus Supplement. AIFS will purchase the Class C Certificates on
December , 1998, subject to certain conditions, for a purchase price equal to
100% of their principal amount. The interest rate on the Class C Certificates
will be %. The final expected Distribution Date for the Class C Certificates
is January 30, 2018. Interest paid on the Equipment Notes held in the Class C
Trust will be passed through to the Certificateholders of such Trust on each
January 30 and July 30, beginning on January 30, 1999 until the final expected
Regular Distribution Date for such Trust.
AIFS will purchase the Class C Certificates for 100% of their principal
amounts. US Airways will not pay to AIFS any commission or any other
compensation in connection with the sale of the Class C Certificates to AIFS,
except that US Airways will reimburse AIFS and its affiliates for legal and
certain other expenses incurred by them in connection with the registration of
the Class C Certificates. The Purchase Agreement permits AIFS to sell the
Class C Certificates from time to time in one or more transactions at a fixed
price or prices, which may be charged, or at market prices prevailing at the
time of sale (if any), at prices related to such prevailing market prices (if
any) or at negotiated prices, provided that any such sale complies with the
securities laws. Pursuant to a Registration Rights Agreement between US
Airways and AIFS (the "Registration Rights Agreement"), US Airways will use
its best efforts to effect a registered exchange offer under the Securities
Act of 1933, as amended (the "Securities Act"), to exchange the Certificates
for exchange certificates, which will have terms identical in all material
respects to the Certificates (except that the exchange certificates will not
contain terms with respect to transfer restrictions). If US Airways determines
that registration of the exchange offer is not available or would violate
applicable law or interpretations of the staff of the Commission, or at the
request of a holder not eligible to participate in the exchange offer or under
certain other limited circumstances described in the Registration Rights
Agreement, US Airways will use its best efforts to register the Certificates
for resale under the Securities Act through a shelf registration statement
(the "Shelf Registration Statement").
It is expected that delivery of the Class C Certificates will be made
against payment therefor on or about December , 1998, which will be the
business day following the date of pricing of the Class C Certificates.
LEGAL MATTERS
The validity of the Certificates is being passed upon for US Airways by
Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates and for the
Underwriters by Shearman & Sterling, New York, New York. Skadden, Arps, Slate,
Meagher & Flom LLP and its affiliates and Shearman & Sterling will rely on the
opinion of Bingham Dana LLP, counsel for State Street Bank and Trust Company,
as Trustee, as to matters of Massachusetts law relating to the authorization,
execution and delivery of the Pass Through Agreement, each Trust Supplement
and the Certificates by State Street Bank and Trust Company. Shearman &
Sterling also represents the Depositaries in connection with this matter.
EXPERTS
The consolidated financial statements of US Airways, Inc. and its subsidiary
as of December 31, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997 which are included in US Airways' Annual Report
on Form 10-K for the year ended December 31, 1997, have been incorporated by
reference in the Prospectus accompanying this Prospectus Supplement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference therein, and upon the authority
of said firm as experts in accounting and auditing.
S-84
<PAGE>
APPENDIX I--INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
ABN AMRO............................................................... S-53
Adjusted Expected Distributions........................................ S-57
Administration Expenses................................................ S-57
Aggregate LTV Collateral Amount........................................ S-58
AIFS................................................................... S-19
Airbus................................................................. S-84
Airbus Financing Commitment............................................ S-19
Airbus Financing Termination Event..................................... S-48
Aircraft............................................................... S-59
Aircraft Operative Agreements.......................................... S-44
American Airlines...................................................... S-28
Appraised Current Market Value......................................... S-58
Appraisers............................................................. S-59
Assumed Aircraft Value................................................. S-64
Assumed Amortization Schedule.......................................... S-34
Assumed Appraised Value................................................ S-43
Average Life Date...................................................... S-63
AVITAS................................................................. S-59
AVSA................................................................... S-19
AvSolutions............................................................ S-59
Base Rate.............................................................. S-52
Basic Agreement........................................................ S-31
Business Day........................................................... S-34
Cash Collateral Account................................................ S-51
Cede................................................................... S-45
Certificate Account.................................................... S-33
Certificate Owner...................................................... S-46
Certificateholders..................................................... S-31
Certificates........................................................... S-31
Citibank............................................................... S-48
Class A Certificates................................................... S-31
Class A Trust.......................................................... S-31
Class A Trustee........................................................ S-23
Class B Certificates................................................... S-31
Class B Trust.......................................................... S-31
Class B Trustee........................................................ S-23
Class C Certificates................................................... S-31
Class C Trust.......................................................... S-31
Class C Trustee........................................................ S-23
Class Exemptions....................................................... S-81
Code................................................................... S-14
Collateral............................................................. S-33
Commission............................................................. S-30
Company................................................................ S-2
Contracts.............................................................. 28
Controlling Party...................................................... S-54
Convention............................................................. S-71
CSFB................................................................... S-48
Current Distribution Date.............................................. S-56
CWA.................................................................... S-20
default................................................................ S-38
<CAPTION>
PAGE
--------
<S> <C>
Definitive Certificates................................................ 9
Delayed Lease Aircraft................................................. 20
Delivered Aircraft..................................................... S-30
Delivery Period........................................................ S-59
Delta Express.......................................................... S-21
Delivery Period Termination Date....................................... S-47
Deposit................................................................ S-46
Deposit Account........................................................ S-46
Deposit Agreements..................................................... S-46
Deposit Make-Whole Premium............................................. S-47
Depositary............................................................. S-48
Depreciation Assumption................................................ S-65
Distribution Date...................................................... S-33
DOT.................................................................... S-22
Downgrade Drawing...................................................... S-51
DTC.................................................................... S-36
DTC Participants....................................................... S-45
Equipment Notes........................................................ S-61
ERISA.................................................................. S-79
ERISA Plans............................................................ S-79
Escrow Agent........................................................... S-48
Escrow Agreements...................................................... S-48
Escrow Receipts........................................................ S-49
Event of Default....................................................... 12
Event of Loss.......................................................... S-73
Exchange Act........................................................... 3
Excusable Delay........................................................ S-60
Expected Distributions................................................. S-56
FAA.................................................................... S-21
Final Distributions.................................................... S-55
Final Drawing.......................................................... S-52
Final Maturity Date.................................................... S-72
Final Regulations...................................................... S-79
General Account Regulations............................................ S-82
H.15(519).............................................................. S-63
IAMAW.................................................................. S-20
Indenture Default...................................................... S-37
Indentures............................................................. S-42
Indirect Participants.................................................. 8
Intercreditor Agreement................................................ S-54
Interest Drawing....................................................... S-50
IRS.................................................................... S-77
Issuance Date.......................................................... S-51
Lease.................................................................. S-70
Lease Event of Default................................................. S-37
Lease Period Date...................................................... S-70
Leased Aircraft........................................................ S-42
Leased Aircraft Indenture.............................................. S-42
Leased Aircraft Notes.................................................. 1
LIBOR.................................................................. S-52
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Liquidity Event of Default............................................ S-53
Liquidity Expenses.................................................... S-56
Liquidity Facility.................................................... S-49
Liquidity Obligations................................................. S-56
Liquidity Provider.................................................... S-53
Loan Trustees......................................................... 5
Loss Payment Date..................................................... S-73
LTV Appraisal......................................................... S-58
LTV Collateral Amount................................................. S-58
LTV Ratio............................................................. S-58
LTVs.................................................................. S-8
Make-Whole Premium.................................................... S-63
Mandatory Document Terms.............................................. S-44
Mandatory Economic Terms.............................................. S-43
Maximum Amount........................................................ S-47
Maximum Available Commitment.......................................... S-50
MBA................................................................... S-59
MetroJet.............................................................. S-26
Minimum Sale Price.................................................... S-55
Moody's............................................................... S-23
most recent H.15(519)................................................. S-63
NMB................................................................... S-20
Non-Extension Drawing................................................. S-52
Non-Performing Equipment Notes........................................ S-58
Non-Premium Amount.................................................... S-47
Non-U.S. Certificateholders........................................... S-78
Note Holders.......................................................... S-44
Note Purchase Agreement............................................... S-42
Note Purchase Termination Event....................................... S-43
OID................................................................... 25
Owned Aircraft........................................................ S-42
Owned Aircraft Indenture.............................................. S-42
Owned Aircraft Notes.................................................. 1
Owner Participant..................................................... S-61
Owner Trustee......................................................... 5
Par Redemption Amount................................................. S-47
Participation Agreement............................................... S-42
Pass Through Trust Agreements......................................... S-31
Paying Agent.......................................................... S-49
Paying Agent Account.................................................. S-34
Performing Equipment Note............................................. S-50
Permitted Investments................................................. 14
Plan Asset Regulation................................................. S-80
Plans................................................................. S-80
Pool Balance.......................................................... S-34
Pool Factor........................................................... S-34
Pre-Funding Period.................................................... 20
Prospectus............................................................ S-30
Prospectus Supplement................................................. 1
PTC Event Of Default.................................................. S-39
PTCE.................................................................. S-81
Purchase Agreement.................................................... S-84
Rating Agencies....................................................... S-23
<CAPTION>
PAGE
----------
<S> <C>
Receiptholder........................................................ S-49
Registration Rights Agreement........................................ S-84
Registration Statement............................................... 3
Regular Distribution Dates........................................... S-32
Related Indenture.................................................... 6
Remaining Weighted Average Life...................................... S-63
Replacement Facility................................................. S-51
Required Amount...................................................... S-50
Rules................................................................ 8
Scheduled Payments................................................... S-32
Section 1110 Period.................................................. S-50, S-67
Securities Act....................................................... S-84
Series A Equipment Notes............................................. S-61
Series B Equipment Notes............................................. S-61
Series C Equipment Notes............................................. S-61
Shelf Registration Statement......................................... S-84
Shortfall Amounts.................................................... S-77
Southwest Airlines................................................... S-21
Special Distribution Date............................................ S-33
Special Payment...................................................... S-33
Special Payments Account............................................. S-33
Standard & Poor's.................................................... S-23
Stated Interest Rate................................................. S-32
Subordinated Certificate............................................. S-77
Subordinated Certificateholders...................................... S-77
Subordinated Trust................................................... S-77
Subordination Agent.................................................. S-58
Substitute Aircraft.................................................. S-60
T+................................................................... S-83
Tax Counsel.......................................................... S-76
Termination Notice................................................... S-53
Termination Value.................................................... S-72
Threshold Rating..................................................... S-51
Transportation Code.................................................. S-39
Travelers............................................................ S-49
Treasury Yield....................................................... S-63
Triggering Event..................................................... S-39
Trust Agreements..................................................... S-61
Trust Indenture Act.................................................. S-40
Trust Property....................................................... S-31
Trust Supplement..................................................... S-31
Trustee.............................................................. S-31
Trusts............................................................... S-31
TSG.................................................................. 29
US Airways........................................................... S-2
US Airways Express................................................... S-27
US Airways Group..................................................... S-18
US Airwars Shuttle................................................... S-27
U.S. Certificateholders.............................................. S-76
U.S. Persons......................................................... S-76
Underwriter Exemption................................................ S-81
Underwriters......................................................... S-82
Underwriting Agreement............................................... S-82
</TABLE>
I-2
<PAGE>
[LOGO OF AVITAS APPEARS HERE]
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US AIRWAYS, INC. NOVEMBER 16, 1998
- --------------------------------------------------------------------------------
INTRODUCTION
AVITAS, Inc. has been retained by US Airways, Inc. (the "Client") to provide its
opinion as to the Base Value for seventeen Airbus A3 19 and six A320 aircraft.
The subject aircraft are identified and their values are set forth in Figure 1
on page 3.
The values presented in this report assume that this aircraft will be in new,
"flyaway" condition and fully certificated for commercial operations. We have
further assumed that the subject aircraft will be operated under the air
transport regulations of a major nation.
The values presented in this report do not take into consideration fleet sales,
attached leases, tax considerations or other factors that might be considered in
structuring the terms and conditions of a specific transaction. These factors do
not directly affect the value of the aircraft itself but can affect the
economics of the transaction. Therefore, the negotiated striking price in an
aircraft transaction may take into consideration factors such as the present
value of the future lease stream, the terms and conditions of the specific lease
agreement and the impact of tax considerations.
DEFINITIONS
AVITAS's value definitions, set forth in full in the appendix at the end of this
report, conform to those of the International Society of Transport Aircraft
Trading ("ISTAT") adopted in January 1994, and are summarized as follows:
. BASE VALUE is the appraiser's opinion of the underlying economic value of an
aircraft in an open, unrestricted, stable market environment with a
reasonable balance of supply and demand, and assumes full consideration of
its "highest and best use." An aircraft's Base Value is founded in the
historical trend of values and in the projection of value trends and
presumes an arm's-length, cash transaction between willing and knowledgeable
parties, acting prudently, with an absence of duress and with a reasonable
period of time for marketing. Base Value typically assumes that an
aircraft's physical condition is average for an aircraft of its type and
age, and its maintenance time status is at mid-life, mid-time (or benefiting
from an above-average maintenance status if it is new or nearly new).
- --------------[GRAPHIC APPEARS HERE]----------------
WORLD HEADQUARTERS: 1835 Alexander Bell Drive,
Reston, VA 20191 USA . Telephone: (703) 476-2300
Fax: (703) 860-5855 Email: [email protected]
AVITAS EUROPE: Palace House, 3 Cathedral St.
London SEI 9DE . Telephone: 0171-716-6621
Fax: 0717-357-6873 Email: [email protected]
AVITAS ENGINEERING: 5040 N.W. 7th Street, #900
Miami, FL 33126 . Telephone: (305)476-9650
Fax: (305) 476-9915 Email: [email protected]
A DET NORSKE VERITAS COMPANY
- ----------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO OF AVITAS APPEARS HERE]
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US AIRWAYS, INC. NOVEMBER 16, 1998
- --------------------------------------------------------------------------------
AIRCRAFT VALUE
AVITAS's opinion as to the value of the subject aircraft is presented below in
millions of U.S. dollars.
The Base Value of a new aircraft is the modal price paid by an average operator
in a single unit or small lot sale. Actual transaction prices may be either
above or below that level due to a number of factors. For example, a launch
order or a large fleet order may result in discounts, whereas a single unit sale
to a small operator who needs a substantial amount of support may be at or above
the list price.
Furthermore, implicit in these values is AVITAS's assumption that the new
aircraft will remain with the original operator for at least two years. If a
newly delivered aircraft comes onto the market, the seller is at an immediate
disadvantage as he is likely to be in competition with the manufacturer who can
offer training and support.
2
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<PAGE>
[LOGO OF AVITAS APPEARS HERE]
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US AIRWAYS, INC. NOVEMBER 16, 1998
- --------------------------------------------------------------------------------
FIGURE 1
---------------------------------------------------------------------------
US AIRWAYS, INC.
AIRCRAFT DESCRIPTION &
SUMMARY OF AIRCRAFT VALUES
---------------------------------------------------------------------------
AIRCRAFT VALUES IN US$ MILLIONS
---------------------------------------------------------------------------
Base Value
No. Type Manufacturer Engine Date of Delivery at Delivery
---------------------------------------------------------------------------
1 A319 Airbus CFM56-5B6 Oct-98 $ 37.7
---------------------------------------------------------------------------
2 A319 Airbus CFM56-5B6 Oct-98 37.7
---------------------------------------------------------------------------
3 A319 Airbus CFM56-5B6 Nov-98 37.7
---------------------------------------------------------------------------
4 A319 Airbus CFM56-5B6 Nov-98 37.7
---------------------------------------------------------------------------
5 A319 Airbus CFM56-5B6 Dec-98 37.7
---------------------------------------------------------------------------
6 A319 Airbus CFM56-5B6 Dec-98 37.7
---------------------------------------------------------------------------
7 A319 Airbus CFM56-5B6 Jan-99 38.7
---------------------------------------------------------------------------
8 A319 Airbus CFM56-5B6 Jan-99 38.7
---------------------------------------------------------------------------
9 A319 Airbus CFM56-5B6 Feb-99 38.7
---------------------------------------------------------------------------
10 A319 Airbus CFM56-5B6 Mar-99 38.7
---------------------------------------------------------------------------
11 A319 Airbus CFM56-5B6 May-99 39.3
---------------------------------------------------------------------------
12 A319 Airbus CFM56-5B6 Jun-99 39.3
---------------------------------------------------------------------------
13 A319 Airbus CFM56-5B6 Jun-99 39.3
---------------------------------------------------------------------------
14 A319 Airbus CFM56-5B6 Jul-99 39.8
---------------------------------------------------------------------------
15 A319 Airbus CFM56-5B6 Jul-99 39.8
---------------------------------------------------------------------------
16 A319 Airbus CFM56-5B6 Jul-99 39.8
---------------------------------------------------------------------------
17 A319 Airbus CFM56-5B6 Jul-99 39.8
---------------------------------------------------------------------------
18 A320 Airbus CFM56-5B4 Jan-99 44.6
---------------------------------------------------------------------------
19 A320 Airbus CFM56-5B4 May-99 45.3
---------------------------------------------------------------------------
20 A320 Airbus CFM56-5B4 May-99 45.3
---------------------------------------------------------------------------
21 A320 Airbus CFM56-5B4 Jun-99 45.3
---------------------------------------------------------------------------
22 A320 Airbus CFM56-5B4 Jun-99 45.3
---------------------------------------------------------------------------
23 A320 Airbus CFM56-5B4 Jul-99 46.0
---------------------------------------------------------------------------
3
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<PAGE>
[LOGO OF AVITAS APPEARS HERE]
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US AIRWAYS, INC. NOVEMBER 16, 1998
- --------------------------------------------------------------------------------
BACKGROUND - AIRBUS A319
The A319 program was launched in June 1993 and the first aircraft of the type
was certificated in April 1996. The aircraft seats 124 passengers in a typical
two-class configuration or 154 in a maximum configuration. It has a basic
range of 2,000 nautical miles with a MTOW of 141,100 pounds and an optional
range of 3,000 nautical miles with a MTOW of 149,900 pounds. The aircraft is
also available at a higher MTOW of 166,450 pounds as a result of that weight
being offered for the A319CJ, the Airbus corporate jet. However, for an
airline operator to take advantage of the longer range permitted by a higher
weight, the operator would have to trade cargo space in the belly of the
aircraft for an additional fuel tank. The A319 has a 12-feet shorter fuselage
than the A320, accomplished by removing two fuselage plugs.
The design of this new aircraft is focused on maintaining a high degree of
commonality with the A320 and the A321 so that an existing A319 operator
could easily transition to its larger versions, where almost all of the major
systems of the A319 are exactly the same.
The A319 is available with either CFM56-5A/-5B or IAE V2500-A5 engines and
meets the noise abatement requirements outlined in U.S. FAR Part 36, Stage 3,
and ICAO Annex 16, Chapter III regulations.
CURRENT MARKET - AIRBUS A319
CURRENT MARKET
AVITAS believes that A319 current market is firm as is the narrowbody market
as a whole. With a backlog of 371 firm orders and acceptance in the North
American market, the A319 values should remain firm for the foreseeable
future.
HISTORIC MARKET DEVELOPMENT
The development of the A319, A320, and A321 characterizes the market
strategy of Airbus to build an entire family of aircraft capable of
accommodating a wide range of travel demands while maintaining a high degree
of commonality. Operators that have a mixed fleet of A319, A320s and A321s
will a have greater ability to match capacity to demand, reduce operating
cost, increase crew productivity and simplify ground handling. This is shown
by the fact that the majority of all current operators of A319 aircraft or
with A319 aircraft on order are present A320 customers.
THE OPERATING LEASE MARKET
AVITAS is aware of lease rates for 1996 vintage A319s for $310,000 per month
per aircraft on 10-year operating leases with lessor's cost of $34.5 million
per aircraft.
4
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<PAGE>
[LOGO OF AVITAS APPEARS HERE]
- --------------------------------------------------------------------------------
US AIRWAYS, INC. NOVEMBER 16, 1998
- --------------------------------------------------------------------------------
AVAILABILITY
AVITAS is not aware of any used aircraft available. This is in line with
expectations for such a new aircraft program.
RECENT TRANSACTIONS
With the recent introduction of the A319, a secondary market has yet to
develop for this aircraft.
ENGINE CHOICES
The current A319 fleet is powered by CFM56-5A/-5B engines (86%) and IAE V2500-
A5 (14%). However, in the broader scope of the A320 family, 63% are operated
with CFM engines and 37% with IAE engines.
RECENT FLEET DEVELOPMENTS
In August 1998, British Airways announced its first ever Airbus order for 39
A320s and 20 A319s with V2500 engines and options for 129 aircraft.
Deliveries are scheduled from September 1999 through 2004. The aircraft will
replace the carrier's 737-200, Fl00, F28 and MD-83 aircraft operated by the
carrier and its European subsidiaries.
In June 1998, Air France announced that it has placed orders for 16 A319
aircraft, with deliveries beginning in 2002.
In March 1998, the three Latin American carriers TAM of Brazil, TACA Group and
LanChile combined to order 90 A319 and A320 aircraft with options for an
additional 89 aircraft. Breakdown of the order between A319 and A320 aircraft
was not announced, however the aircraft will be powered by IAE V2500 engines.
Also in March, United Airlines signed a firm contract to purchase 10 A319
aircraft for delivery in 2000 and 2001.
Spanish flag carrier Iberia signed a MOU with Airbus in February, 1998 for
orders and options of up to nine A319 aircraft as part of a larger deal
involving the firm order of 50 A319/A320/A321 aircraft and options for 26
additional aircraft.
CURRENT OPERATOR BASE AND BACKLOG
Presented below is the current fleet and backlog for the A319-100 by
operator. Also presented are the A319 by engine type and a presentation of the
A319/A320/A321 family current fleet and backlog.
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US AIRWAYS, INC. NOVEMBER 16, 1998
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FIGURE 2
---------------------------------------------------------------------------
A319 FLEET DATA
as of JUNE 1998
---------------------------------------------------------------------------
Operator In Service Orders Options Total
---------------------------------------------------------------------------
AIR CANADA 33 - - 33
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LUFTHANSA 17 2 20 39
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AIRBUS INDUSTRIE 10 - - 10
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AIR FRANCE 9 4 8 21
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UNITED AIR LINES 9 25 - 34
---------------------------------------------------------------------------
SWISSAIR 8 - - 8
---------------------------------------------------------------------------
TAP AIR PORTUGAL 4 12 - 16
---------------------------------------------------------------------------
EUROWINGS 3 1 2 6
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CROATIA AIRLINES 1 4 6 11
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AMERICA WEST AIRLINES - 22 20 42
---------------------------------------------------------------------------
FINNAIR - 5 5 10
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GE CAPITAL AVIATION SERVICES INC. - 2 4 6
---------------------------------------------------------------------------
IBERIA - - 9 9
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ILFC - 42 - 42
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LAN CHILE - 11 9 20
---------------------------------------------------------------------------
NORTHWEST AIRLINES - 50 100 150
---------------------------------------------------------------------------
SABENA - 26 - 26
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SILKAIR - 3 - 3
---------------------------------------------------------------------------
TACA INTERNATIONAL AIRLINES - 21 18 39
---------------------------------------------------------------------------
TAM TRANSPORTES AEREOS REGIONAIS - 25 25 50
---------------------------------------------------------------------------
TUNIS AIR - 3 - 3
---------------------------------------------------------------------------
UNKNOWN OPERATOR - 4 - 4
---------------------------------------------------------------------------
US AIRWAYS - 109 276 385
---------------------------------------------------------------------------
Grand Total 94 371 502 967
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Source: BACK Information Services
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US AIRWAYS, INC. NOVEMBER 16, 1998
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FIGURE 3
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A319 AIRCRAFT BY ENGINE MANUFACTURER
AS OF JUNE 1998
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ENGINE IN SERVICE ORDERS OPTIONS TOTAL
- --------------------------------------------------------------------------------
CFM 56 81 222 430 733
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V2500 13 116 72 201
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Undecided - 33 - 33
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GRAND TOTAL 94 371 502 967
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Source: BACK Information Services
FIGURE 4
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A319/A320/A321 SERIES CURRENT FLEET AND BACKLOG
AS OF JUNE 1998
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MODEL IN SERVICE ORDERS OPTIONS TOTAL
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A319-100 94 371 502 967
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A320-100 18 - - 18
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A320-200 631 344 136 1,111
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A321-100 74 34 64 172
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A321-200 28 87 34 149
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GRAND TOTAL 845 836 736 2,417
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Source: BACK Information Services
OUTLOOK AND FUTURE ASSET RISK ANALYSIS
The A319 competes with the Boeing 737-500 and -600 which currently have
combined 368 aircraft in service and 154 on order.
It is AVITAS's opinion that expansion of the A319's operator base will primarily
come from existing A320 operators. Of minor concern is that 12% of the current
backlog is held by GE Capital Aviation Services (GECAS) and International Lease
Finance Corporation (ILFC) who have likely ordered the aircraft with the
flexibility to convert to A320 or A321 aircraft.
BACKGROUND - AIRBUS A320 SERIES
The A320, a Stage 3 compliant short to medium range twin-engine jetliner was
launched in 1984 with certification in 1988. The original was the A320-100, of
which there are only 18 in service among three operators. The --100 aircraft
have no wing center tank which limits the range and payload.
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US AIRWAYS, INC. NOVEMBER 16, 1998
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The A320-200 was first flown and delivered in 1988 to Air France and British
Caledonian Airways. Its typical configuration includes a two-person cockpit crew
with capacity for 150 passengers with high density seating of 179. The A320 has
a range of 3,000 nautical miles with 150 passengers and is powered by CFM56-5A/-
5B, V2500-A1/A5 and V2527/E-A5 engines, with thrust ranging from 25,000 pounds
to 26,500 pounds. The maximum takeoff weight (MTOW) ranges from 162,000 pounds
to 169,750 pounds. A technically advanced aircraft, the A320 includes such
design concepts as fly-by-wire flight controls, centralized maintenance
reporting system, side stick controllers in the cockpit and the use of composite
materials in the major elements of primary structures including the horizontal
and vertical stabilizers.
The A320 has a common type rating with the A319 and the A321, which means that
they can be operated as one aircraft type and with identical maintenance
procedures.
CURRENT MARKET -- AIRBUS A320-200
CURRENT MARKET
AVITAS is of the opinion that the current market for the Airbus A320 series
aircraft is firm. This is evidenced by a low level of availability and high
demand for the type, which AVITAS attributes to a general resurgence in the
Stage 3 narrowbody aircraft market.
HISTORIC MARKET DEVELOPMENT
The A320 market was very soft during the early 1990s with an excess supply of
new aircraft being delivered into a depressed market. This was caused not only
by bankruptcies of several carriers with A320s on order, but also by the
speculative buying of A320s by leasing companies. During 1994 and 1995, the
market for the aircraft firmed substantially.
AVAILABILITY
As of September 1998, twelve A320-200s are advertised as available for lease.
Transaer International Airways has nine available for 6-12 month ACMI leases.
Constellation International Airlines has two available for wet lease. Indigo
Aviation is offering one aircraft for sale or lease.
THE OPERATING LEASE MARKET
During the late 1980s, operating lessors, primarily GPA, GATX, ILFC, Kawasaki
and Orix placed orders for a significant amount of A320 aircraft for early 1990
deliveries. Unfortunately, the aircraft were delivered during the soft market of
the early 1990s and were placed at lease rates that were at times less than
$200,000 per month. During the last couple of years, the excess A320 capacity
had been placed with riskier credits such as the U.S. start-up Midway Airlines
at rates in the $235,000 per month range. Lately, the A320 lease market has
strengthened resulting in rentals at the $300,000 per month level or above.
AVITAS is aware of several new aircraft leases in the $330,000 range and one
1992 vintage aircraft being negotiated at just below $300,000 per month.
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US AIRWAYS, INC. NOVEMBER 16, 1998
RECENT TRANSACTIONS
Oasis International Leasing acquired six A320s operated by Gulf Air in a sale-
leaseback transaction in March 1998. The six aircraft are 1992-1993 vintages and
were purchased for an average price of $32.5 million each. In January 1998, TACA
took delivery of two new A320-200 aircraft in a sale and leaseback transaction
in which the lessor paid $41.14 million for each aircraft. Most of the
transactions that have been occurring over the past year have been leases or
sales with leases attached.
OPERATOR BASE AND BACKLOG
As of June 1998, there are 631 aircraft in service among 74 operators and 344 on
firm order. Displayed below are the ten largest operators and ten largest
orderholders for the A320-200.
FIGURE 5
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A320-200 TEN LARGEST OPERATORS
AS OF JUNE 1998
OPERATORS AIRCRAFT IN SERVICE
- --------------------------------------------------------------------------------
NORTHWEST AIRLINES 56
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AIR FRANCE 45
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UNITED AIR LINES 44
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AIR CANADA 34
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LUFTHANSA 33
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AMERICA WEST AIRLINES 30
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INDIAN AIRLINES CORPORATION 30
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IBERIA 22
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ALL NIPPON AIRWAYS 21
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ANSETT AIRLINES 20
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Source: BACK Information Services
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US AIRWAYS, INC. NOVEMBER 16, 1998
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FIGURE 6
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A320-200 TEN LARGEST ORDERHOLDERS
AS OF JUNE 1998
- --------------------------------------------------------------------------------
OPERATOR AIRCRAFT ON ORDER
- --------------------------------------------------------------------------------
IBERIA 31
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ILFC 28
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GECAS 25
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UNITED AIRLINES 25
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AMERICA WEST AIRLINES 24
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ALITALIA 19
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TACA INTERNATIONAL AIRLINES 16
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US AIRWAYS 15
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TAM TRANSPORTES AEREOS REGIONAIS 13
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NORTHWEST AIRLINES 12
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Source: BACK Information Services
Presented below is the A320 current fleet and backlog by engine type.
FIGURE 7
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A320-200 CURRENT FLEET & BACKLOG BY ENGINE TYPE
AS OF JUNE 1998
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ENGINE TYPE IN SERVICE ORDERS OPTIONS TOTAL
- --------------------------------------------------------------------------------
CFM56-5 384 178 39 601
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V2500 247 139 95 481
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Unknown 27 2 29
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GRAND TOTAL 631 344 136 1,111
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Source: BACK Information Services
Additionally, combined with the other members of the Airbus narrowbody family,
the A319 and A321, the current fleet for the A320 family amounts to 845
aircraft and 836 firm orders.
RECENT FLEET DEVELOPMENTS
In September 1998, GECAS ordered 30 A320 series aircraft and placed options for
ten more. The aircraft will be powered by CFM56 engines and will be delivered
beginning in spring 2003 and continue through 2006.
In August 1998, British Airways announced its first ever Airbus order for 39
A320s and 20 A319s with V2500 engines and options for 129 aircraft. Deliveries
are scheduled from September 1999 through 2004.
10
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US AIRWAYS, INC. NOVEMBER 16, 1998
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The aircraft will replace the carrier's 737-200, F100, F28 and MD-83 aircraft
operated by the carrier and its European subsidiaries.
Also in August 1998, Qatar Airways signed a letter of intent to purchase 11 A320
aircraft at a price of $550 million. The first aircraft is due to be delivered
in early 2001. The airline will likely have the option to convert orders for
A320 aircraft to A321 aircraft with an increase in price.
United Air Lines ordered 22 Airbus aircraft in July 1998. The order includes 12
A320 aircraft and ten A319 aircraft for delivery in 2000 and 2001.
In March this year, the second largest order ever for Airbus was placed jointly
by LanChile, the TACA Group and TAM for 90 firm orders and 89 options of the
A320 and the A319 aircraft.
OUTLOOK AND FUTURE ASSET RISK ANALYSIS
AVITAS believes that the A320 will continue to be a significant competitor in
the 150-seat market well into the future with competition from the Boeing
737-400 and the 737-800 with 30 and 384 firm orders, respectively. The A320 has
more range than the 737-400 and slightly higher seat capacity, the 737-800
however, fares better than the --400 with a range capacity of 2,900 nautical
miles and increased seat capacity by 17 seats.
Airbus has been enjoying a great deal of success in 1998 with the A320 aircraft;
the manufacturer has received several large and strategically important orders.
In addition, as of early September 1998, the Asian crisis has left this family
of aircraft largely unscathed, as only eight A320 and six A321 aircraft orders
have been cancelled.
With a well established population of 631 A320-200 aircraft currently in service
among 74 operators, and 344 on firm order scheduled for delivery throughout the
year 2005, the future market base for the type is due to expand significantly
with residual values remaining firm.
COVENANTS
Unless otherwise noted, the values presented in this report assume an arm's-
length, free market transaction for cash between informed, willing and able
parties free of any duress to complete the transaction. If a distress sale
becomes necessary, a substantial discount may be required to quickly dispose of
the equipment.
AVITAS does not have, and does not intend to have, any financial or other
interest in the subject aircraft. Further, this report is prepared for the
exclusive use of the Client and shall not be provided to other parties without
the express consent of the Client.
This report represents the opinion of AVITAS and is intended to be advisory only
in nature. Therefore, AVITAS assumes no responsibility or legal liability for
any action taken, or not taken, by the Client or
11
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US AIRWAYS, INC. NOVEMBER 16, 1998
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any other party, with regard to this equipment. By accepting this report, all
parties agree that AVITAS shall bear no such responsibility or legal liability
including liability for special or consequential damage.
STATEMENT OF INDEPENDENCE
AVITAS hereby states that this valuation report has been independently prepared
and fairly represents AVITAS's opinion of the subject aircraft's value.
/s/ Douglas B. Kelly
- ---------------------------
Douglas B. Kelly
Director -- Asset Valuation
/s/ Kimberly S. Higgins
- ---------------------------
Kimberly S. Higgins
Market Analyst
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APPENDIX A - AVITAS VALUE DEFINITIONS
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. BASE VALUE is the appraiser's opinion of the underlying economic value of an
aircraft in an open, unrestricted, stable market environment with a
reasonable balance of supply and demand and assumes full consideration of its
"highest and best use." An aircraft's Base Value is founded in the historical
trend of values and in the projection of value trends and presumes an arm's-
length, cash transaction between willing and knowledgeable parties, acting
prudently, with an absence of duress and with a reasonable period of time for
marketing. Base Value typically assumes that an aircraft's physical condition
is average for an aircraft of its type and age, and its maintenance time
status is at mid-life, mid-time (or benefiting from an above-average
maintenance status if it is new or nearly new).
. MARKET VALUE (or CURRENT MARKET VALUE if the value pertains to the time of
the analysis) is the appraiser's opinion of the most likely trading price
that may be generated for an aircraft under the market conditions that are
perceived to exist at the time in question. Market Value assumes that the
aircraft is valued for its highest, best use, that the parties to the
hypothetical transaction are willing, able, prudent and knowledgeable, and
under no unusual pressure for a prompt sale, and that the transaction would
be negotiated in an open and unrestricted market on an arm's-length basis,
for cash or equivalent consideration, and given an adequate amount of time
for effective exposure to prospective buyers. Market Value assumes that an
aircraft's physical condition is average for an aircraft of its type and age,
and its maintenance time status is at mid-life, mid-time (or benefitting from
an above-average maintenance status if it is new or nearly new). Market Value
is synonymous with Fair Market Value in that both reflect the state of supply
and demand in the market that exists at the time.
. ADJUSTED (CURRENT) MARKET VALUE indicates the Market Value of the aircraft
adjusted for the actual technical status and maintenance condition of the
aircraft, but still assuming the same market conditions and transaction
circumstances as described above.
. DISTRESS VALUE is the appraiser's opinion of the price at which an aircraft
could be sold under abnormal conditions, such as an artificially limited
marketing time period, the perception of the seller being under duress to
sell, an auction, a liquidation, commercial restrictions, legal complications
or other such factors that significantly reduce the bargaining leverage of
the seller and give the buyer a significant advantage that can translate into
heavily discounted actual trading prices. Apart from the fact that the seller
is uncommonly motivated, the parties to the transaction are otherwise assumed
to be willing, able, prudent and knowledgeable, negotiating under the market
conditions that are perceived to exist at the time, not in an idealized
balanced market. While Distress Value normally implies that the seller is
under some duress, there are occasions when buyers, not sellers, are
distressed and, therefore, willing to pay a premium price.
. FUTURE BASE VALUE is the appraiser's forecast of future aircraft value(s)
setting forth Base Value(s) as defined above.
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APPENDIX A - AVITAS VALUE DEFINITIONS
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. SECURITIZED VALUE OR LEASE - ENCUMBERED VALUE is the appraiser's opinion of
the value of an aircraft under lease, given a specified lease payment stream
(rents and term), an estimated future residual value at lease termination and
an appropriate discount rate. The Securitized Value or Lease - Encumbered
Value may be more or less than the appraiser's opinion of Market Value. The
appraiser may not be fully aware of the credit risks associated with the
parties involved, nor the time-value of money to those parties, nor with
possible tax consequences pertaining to the parties involved, nor with all of
the provisions of the lease that may pertain to items such as security
deposits, purchase options at various dates, term extensions, sub-lease
rights, repossession rights, reserve payments and return conditions.
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APPENDIX B - AVITAS APPRAISAL METHODOLOGY
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At AVITAS, we undertake formal periodic value reviews of the approximately ten
dozen aircraft types that we regularly track as well as value updates as market
events and movements require. The primary value opinions we develop are Market
Value, Base Value and Future Base Value. An aircraft's Market Value is the price
at which you could sell the aircraft under the market conditions prevailing at
the time in question and its Base Value is the theoretical value of the aircraft
assuming a balanced market in terms of supply and demand. In reaching our value
opinions, we use data on actual market transactions, various analytical
techniques, a proprietary forecasting model and our own extensive industry
experience. And while Market Value and Base Value embody different value
concepts, we are continually cross checking their relationships to determine if
our value opinions are reasonable given existing market conditions.
Our broad aviation industry backgrounds are critically important; they add a
diversity of viewpoints and a high degree of realism to our value opinions. Our
backgrounds include: aircraft design, performance analysis, traffic and yield
forecasting, fleet forecasting, aircraft finance, the negotiation of aircraft
loans, finance leases and operating leases, problem deal workouts,
repossessions, aircraft sales, jetliner manufacturing, maintenance and overhaul
activities, econometric modeling and forecasting, market research, and database
development.
. MARKET VALUE In determining Current Market Values, we use a blend of
techniques and tools. First, through various services and our extensive
personal contacts, we collect as much actual transaction data as possible on
aircraft sales, leases, financings and scrappings. Our published values
assume airframes, engines and landing gear to be halfway through their
various overhaul and/or life cycles. Because sales of half-life aircraft
rarely occur, and because sales can include spare engines, parts, attached
lease streams, tax considerations and other factors, judgment and experience
are important in adjusting actual transaction data to represent clean, half-
life Market Values. In addition, because over the last several years there
have been a large number of aircraft leases, our experience and knowledge of
the market is used to make value inferences from lease rentals and terms.
As a supplement to transaction data, and in some cases in the absence of actual
market activity, we also use other methods to assist in framing Market Value
opinions. We use several analytical tools because we do not believe that there
is any one technique which always results in the "right" number. Replacement
cost analysis can simply be the cost of a new airplane of the same model or it
can be used where it is possible to reproduce an aircraft. It is often helpful
in framing the upper limit of an aircraft's value, particularly for modified or
upgraded aircraft. Examples would be a passenger aircraft such as the 747-100
which can be converted into freighter configuration or a Stage 2 airplane which
can be hushkitted to Stage 3 compliance. Value in use or income analysis is
another technique in which an aircraft's earning capacity over time is
determined and the present value of those earnings is calculated. Because
different operators have different costs, yields and hurdle rates of return,
this technique can yield a range of values. Therefore, the appraiser must use
his judgment to determine what value in that range represents a Market Value
representative of the overall marketplace. Another powerful tool which we use is
should-cost analysis, which is a blend of replacement cost and value in use
analysis. This technique is used when there is little or no market data on a
particular airplane type but there is on similar or competing types. By
15
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APPENDIX B - AVITAS APPRAISAL METHODOLOGY
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analyzing the economic and operational profiles of competing aircraft, the
appraiser is able to impute what the aircraft in question should cost to
position it competitively.
Once we have formulated our own internal Market Value opinions, we present them
to a small, select group of outside aviation experts - individuals in the fields
of -aircraft manufacturing, sales, remarketing, financing and forecasting who we
know well and regard very highly - for their review and frank comments. We
consider this "reality check," which often results in further value refinements,
to be a critical part of our value process in that it helps us combat "ivory
tower syndrome."
. BASE VALUE The determination of Base Value, an aircraft's balanced market,
long term value, is a highly subjective matter, one in which even the most
skilled appraisers may have widely divergent views. We use three main tools
in developing Base Values. First, we use our own research, judgment and
perceptions of each aircraft type's long term competitive strengths and
weaknesses vis-a-vis both competing aircraft types and the marketplace as a
whole. Second, we utilize a transaction-based computer forecasting model
developed by a former AVITAS director and refined over the years. Based on
thousands of actual market transactions, the model sets forth a series of
value curves which describe the value behaviors of aircraft under different
circumstances. Third, we do a final reality check by comparing our opinion of
an aircraft's Base Value to our opinion of its Current Market Value and
current marketplace conditions.
We analyze each aircraft model to determine its historic, current and projected
competitive position with respect to similar aircraft types in terms of mission
capability (i.e., what are the aircraft's capabilities and to what extent does
the market require those capabilities), economic profile and market penetration.
As a result of weighing those factors, we assign a numerical "strength" to each
aircraft for each year of its economic life, where Strength 10 represents the
strongest value performance and Strength 1 the weakest. The model then takes
those strength factors and translates them into the aircraft's Base and Future
Base Values based on its actual replacement cost (or theoretical replacement
cost if it is no longer in production). After Base Values have been calculated,
we compare them to our Current Market Value opinions as a calibration check of
the computer model. In the infrequent case where the marketplace for that
aircraft is in balance, Base Value and Current Market Value should be the same.
In most cases, though, we must subjectively compare Base Value with Current
Market Value to see if we believe the relationship is reasonable. This may
highlight where Base Value inputs require further refinements. Because of the
dynamics of the aircraft marketplace and our continuing recalibration, Base
Value opinions are not static.
16
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<PAGE>
AvSOLUTIONS
November 16, 1998
Mr. Jeffery McDougle
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Dear Mr. McDougle:
AvSOLUTIONS is pleased to provide this opinion on the base value, as of
October 1998, of seventeen Airbus Industrie A319 aircraft and six Airbus
Industrie A320-200 aircraft (the aircraft). The Airbus A319 aircraft are
powered by CFM International CFM56-5B6/P engines and the Airbus A320-200
aircraft are powered by CFM International CFM56-5B4/P engines. The total of
twenty-three aircraft will be delivered new to US Airways, Inc. from the fourth
quarter of 1998 through the third quarter of 1999. A listing of the particular
aircraft is provided as attachment 1 of this document.
Set forth below is a summary of the methodology, considerations and
assumptions utilized in this appraisal.
BASE VALUE
- ----------
Base value is the appraiser's opinion of the underlying economic value of
an aircraft in an open, unrestricted, stable market environment with a
reasonable balance of supply and demand, and assumes full consideration of its
"highest and best use". An aircraft's base value is founded in the historical
trend of values and in the projection of future value trends and presumes an
arm's length, cash transaction between willing, able and knowledge parties,
acting prudently, with an absence of duress and with a reasonable period of time
available for marketing.
CURRENT FAIR MARKET VALUE
- -------------------------
According to the International Society of Transport Aircraft Trading's
(ISTAT) definition of Fair Market Value (FMV), to which AvSOLUTIONS subscribes,
the quoted FMV is the appraiser's opinion of the most likely trading price that
may be generated for an aircraft under the market circumstances that are
perceived to exist at the time in question. The fair market value assumes that
the aircraft is valued for its highest and best use, that the parties to the
hypothetical sales transaction are willing, able, prudent and knowledgeable, and
under no unusual pressure for a prompt sale, and that the transaction would be
negotiated in an open and unrestricted market on an arm's length basis, for cash
equivalent consideration, and given an adequate amount of time for effective
market exposure to perspective buyers, which AvSOLUTIONS considers to be ten to
eighteen months.
7518-B Diplomat Drive, Manassas, Virginia 20109
Telephone 703-330-0461 Fax 703-330-0581
<PAGE>
AVSOLUTIONS
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Page 2
US Airways, Inc.
APPRAISAL METHODOLOGY
- ---------------------
The method employed by AvSOLUTIONS to appraise the current and future
values of aircraft and the associated equipment addresses the factors that
influence the market value of an aircraft, such as its age, condition,
configuration, the population of similar aircraft, similar aircraft on the
market, operating costs, cost to acquire a new aircraft, and the state of demand
for transportation services.
To achieve this objective, cross-sectional data concerning the values of
aircraft in each of several general categories is collected and analyzed. Cross-
sectional data is then postulated and compared with reported market values at a
specified point in time. Such data reflects the effect of deterioration in
aircraft performance due to usage and exposure to the elements, as well as the
effect of obsolescence due to the evolutionary development and implementation of
new designs and materials.
The product of the analysis identifies the relationship between the value
of each aircraft and its characteristics, such as age, model designation,
service configuration and engine type. Once the relationship is identified, one
can then postulate the effects of the difference between the economic
circumstances at the time when the cross-sectional data were collected and the
current situation. Therefore, if one can determine the current value of an
aircraft in one category, it is possible to estimate the current values of all
aircraft in that category.
The manufacturer and size of the aircraft usually determine the specific
category to which it is assigned. Segregating the world airplane fleet in this
manner accommodates the potential effects of different size and different design
philosophies.
The variability of the data used by AvSOLUTIONS to determine the current
and future market values implies that the actual value realized will fall within
a range of values. Therefore, if a contemplated value falls within the specified
confidence range, AvSOLUTIONS cannot reject the hypothesis that it is a
reasonable representation of the current market situation.
LIMITING CONDITIONS AND ASSUMPTIONS
- -----------------------------------
In order to conduct this valuation, AvSOLUTIONS is solely relying on
information as supplied by US Airways, Inc. or Morgan Stanley, and from data
within AvSOLUTIONS' own database. In determining the base value of the subject
aircraft, the following assumptions have been researched and determined:
<PAGE>
AvSOLUTIONS
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Page 3
US Airways, Inc.
1. AvSOLUTIONS has not inspected these aircraft or their maintenance records;
accordingly, AvSOLUTIONS cannot attest to their specific location or condition.
2. The aircraft will be delivered new to US Airways, Inc. between the fourth
quarter of 1998 and the third quarter of 1999.
3. The aircraft will be certified, maintained and operated under United States
Federal Aviation Regulation (FAR) part 121.
4. All mandatory inspections and Airworthiness Directives have been complied
with.
5. The aircraft have no damage history.
6. The aircraft are in good condition.
7. AvSOLUTIONS considers the economic useful life of these aircraft to be at
least 32 years.
Based upon the above methodology, considerations and assumptions, it is
AvSOLUTIONS' opinion that the base value of each aircraft is as listed in
attachment 1.
<PAGE>
AvSOLUTIONS
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Page 4
US Airways, Inc.
STATEMENT OF INDEPENDENCE
- -------------------------
This appraisal report represents the opinion of AvSOLUTIONS, and is
intended to be advisory in nature. Therefore, AvSOLUTIONS assumes no
responsibility or legal liability for actions taken or not taken by the Client
or any other party with regard to the subject aircraft. By accepting this
report, the Client agrees that AvSOLUTIONS shall bear no responsibility or legal
liability regarding this report. Further, this report is prepared for the
exclusive use of the Client and shall not be provided to other parties without
the Client's express consent.
Aviation Solutions Inc. (AvSOLUTIONS) hereby states that this valuation
report has been independently prepared and fairly represents the subject
aircraft and AvSOLUTIONS' opinion of their values. Aviation Solutions Inc.
(AvSOLUTIONS) further states that it has no present or contemplated future
interest or association with the subject aircraft.
Signed,
/s/ Bryant Lynch
Bryant Lynch
Manager, Commercial Appraisals
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AvSOLUTIONS
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ATTACHMENT 1
EETC COLLATERAL SUMMARY
=============================================================================
AIRCRAFT NO. AIRCRAFT DELIVERY ENGINES MTOW BASE VALUE
MO/YR (POUNDS)
-----------------------------------------------------------------------------
1 Airbus A319 Oct-1998 CFM56-5B6/P 166,450 $38,140,000
-----------------------------------------------------------------------------
2 Airbus A319 Oct-1998 CFM56-5B6/P 166,450 $38,140,000
-----------------------------------------------------------------------------
3 Airbus A319 Nov-1998 CFM56-5B6/P 166,450 $38,140,000
-----------------------------------------------------------------------------
4 Airbus A319 Nov-1998 CFM56-5B6/P 166,450 $38,140,000
-----------------------------------------------------------------------------
5 Airbus A319 Dec-1998 CFM56-5B6/P 166,450 $38,140,000
-----------------------------------------------------------------------------
6 Airbus A319 Dec-1998 CFM56-5B6/P 166,450 $38,140,000
-----------------------------------------------------------------------------
7 Airbus A319 Jan-1999 CFM56-5B6/P 166,450 $38,420,000
-----------------------------------------------------------------------------
8 Airbus A319 Jan-1999 CFM56-5B6/P 166,450 $38,420,000
-----------------------------------------------------------------------------
9 Airbus A319 Feb-1999 CFM56-5B6/P 166,450 $38,420,000
-----------------------------------------------------------------------------
10 Airbus A319 Mar-1999 CFM56-5B6/P 166,450 $38,420,000
-----------------------------------------------------------------------------
11 Airbus A319 May-1999 CFM56-5B6/P 166,450 $38,700,000
-----------------------------------------------------------------------------
12 Airbus A319 Jun-1999 CFM56-5B6/P 166,450 $38,700,000
-----------------------------------------------------------------------------
13 Airbus A319 Jun-1999 CFM56-5B6/P 166,450 $38,700,000
-----------------------------------------------------------------------------
14 Airbus A319 Jul-1999 CFM56-5B6/P 166,450 $38,980,000
-----------------------------------------------------------------------------
15 Airbus A319 Jul-1999 CEM56-5B6/P 166,450 $38,980,000
-----------------------------------------------------------------------------
16 Airbus A319 Jul-1999 CFM56-5B6/P 166,450 $38,980,000
-----------------------------------------------------------------------------
17 Airbus A319 Jul-1999 CFM56-5B6/P 166,450 $38,980,000
-----------------------------------------------------------------------------
<PAGE>
AvSOLUTIONS
- --------------------------------------------------------------------------------
ATTACHMENT 1
EETC COLLATERAL SUMMARY
continued
=============================================================================
AIRCRAFT NO. AIRCRAFT DELIVERY ENGINES MTOW BASE VALUE
MO/YR (POUNDS)
-----------------------------------------------------------------------------
18 Airbus A320-200 Jan-1999 CFM56-5B4/P 169,750 $44,390,000
-----------------------------------------------------------------------------
19 Airbus A320-200 May-1999 CFM56-5B4/P 169,750 $44,710,000
-----------------------------------------------------------------------------
20 Airbus A320-200 May-1999 CFM56-5B4/P 169,750 $44,710,000
-----------------------------------------------------------------------------
21 Airbus A320-200 Jun-1999 CFM56-5B4/P 169,750 $44,710,000
-----------------------------------------------------------------------------
22 Airbus A320-200 Jun-1999 CFM56-5B4/P 169,750 $44,710,000
-----------------------------------------------------------------------------
23 Airbus A320-200 Jul-1999 CFM56-5B4/P 169,750 $45,030,000
-----------------------------------------------------------------------------
<PAGE>
MORTEN BEYER & AGNEW
--------------------
AVIATION CONSULTING FIRM
Appraisal of (17) Airbus A319-100,
(6) A320-200 Aircraft
PREPARED FOR:
US Airways, Inc
NOVEMBER 16, 1998
Washington, D.C. London
8180 Greensboro Drive Lahinch 62, Lashmere
Suite 1000 Copthorne
McLean, Virginia 22102 West Sussex
Phone +703 847 6598 Phone +44 1342 716248
Fax +703 734 1474 Fax +44 1342 718967
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
- --------------------------------------------------------------------------------
I. INTRODUCTION AND EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Morten Beyer and Agnew, Inc. (MBA), has been retained by US Airways, Inc to
determine the Base Value (BV) of 23 aircraft, delivered new over the next 11
months. The aircraft are further identified in Section III of this report.
In performing this valuation we did not inspect the aircraft or their
maintenance documentation, and we relied solely on information provided to us by
Morgan Stanley. Based on the information set forth further in this report, it is
our opinion that the BV of the total value of aircraft in this portfolio is
$895,950,000 with their respective individual values noted in Section III.
MBA uses the definition of certain terms, such as Current Market Value (CMV) and
Base Value (BV), as promulgated by the International Society of Transport
Aircraft Trading (ISTAT), a non-profit association of management personnel from
banks, leasing companies, airlines, manufacturers, appraisers, brokers, and
others who have a vested interest in the commercial aviation industry.
ISTAT defines CMV as the appraiser's opinion of the most likely trading price
that may be generated for an aircraft under market conditions that are perceived
to exist at the time in question. Market Value (MV) assumes that the aircraft is
valued for its highest, best use; that the parties to the hypothetical sale
transaction are willing, able, prudent and knowledgeable and under no unusual
pressure for a prompt sale; and that the transaction would be negotiated in an
open and unrestricted market on an arm's-length basis, for cash or equivalent
consideration, and given an adequate amount of time for effective exposure to
prospective buyers.
The ISTAT definition of Base Value (BV) states that market circumstances are
assumed to be in a reasonable state of equilibrium. Thus, BV pertains to an
idealized aircraft and market combination, but will not necessarily reflect the
actual CMV of the aircraft in question. BV is founded in the historical trend of
values and is generally used to analyze historical values or to project future
values.
1 11/16/98
MBA
<PAGE>
- --------------------------------------------------------------------------------
II. CURRENT MARKET CONDITIONS
- --------------------------------------------------------------------------------
---------------------------------
[GRAPHIC OF AN Airbus A319/ A320
AIRPLANE APPEARS HERE] ---------------------------------
The A320 series has been a remarkably successful competitor on the world market,
offering newer technology and greater interior comfort than its Boeing 737
rivals. While Boeing has now developed nine different versions of the B-737 in
three series (100/200, 300/400/500, and now 600/700/800/900) Airbus is still
producing only its three models. The A320 program got its biggest boost late
last year with US Airways commitment to standardize its entire narrowbody fleet
around the A319/320/321 over the next decade as well as the TACA-Latin American
commitment for more than 100. British Airways has since hopped onboard with a
huge order (129) that further erodes Boeing's hold on the segment.
The float of these aircraft is very small, and few transactions have taken
place. We expect that it will be several more years before there are any
significant retirements, and that any aircraft offered will be sold at 100
percent of Base Value. While we have eliminated the value premium for these
aircraft due to the general softening of the market, the A320 series has a firm
hold on an increasing share of the market.
-----------------------------------------------------
*Aircraft Availability as of 10/98 for sale/lease
-----------------------------------------------------
A319 0
-----------------------------------------------------
A320 3 - Wet Lease Only
-----------------------------------------------------
* Information provided by BACK Information Services
2
MBA
<PAGE>
- -------------------------------------------------------------------------------
IV. VALUATION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Aircraft Date of Mfr. Registration # * Base Value
($000,000)
- -------------------------------------------------------------------------------
A319-100 10/98 N700UW 37.06
-----------------------------------------------------------
10/98 N7O1UW 37.06
-----------------------------------------------------------
11/98 N7O2UW 37.13
-----------------------------------------------------------
11/98 N7O3UW 37.13
-----------------------------------------------------------
12/98 N704US 37.21
-----------------------------------------------------------
12/98 N7O5UW 37.21
-----------------------------------------------------------
1/99 N7O6UW 37.28
-----------------------------------------------------------
1/99 N7O7UW 37.28
-----------------------------------------------------------
2/99 N7O8UW 37.36
-----------------------------------------------------------
3/99 N7O9UW 37.43
-----------------------------------------------------------
5/99 N71OUW 37.59
-----------------------------------------------------------
6/99 N711UW 37.66
-----------------------------------------------------------
6/99 N712UW 37.66
-----------------------------------------------------------
7/99 N713UW 37.74
-----------------------------------------------------------
7/99 N714US 37.74
-----------------------------------------------------------
7/99 N715UW 37.74
-----------------------------------------------------------
7/99 N716UW 37.74
- -------------------------------------------------------------------------------
A320-200 1/99 N1O1UW 42.97
-----------------------------------------------------------
5/99 N1O2UW 43.32
-----------------------------------------------------------
5/99 N1O3US 43.32
-----------------------------------------------------------
6/99 N1O4UW 43.41
-----------------------------------------------------------
6/99 N1O5UW 43.41
-----------------------------------------------------------
7/99 N1O6US 43.50
- -------------------------------------------------------------------------------
Total $895,950,000
- -------------------------------------------------------------------------------
* Base Value includes adjustment for additional MTOW.
3 11/16/98
MBA
<PAGE>
In developing the BV of these aircraft, MBA did not inspect the aircraft or its
historical maintenance documentation. Therefore, we used certain assumptions
that are generally accepted industry practice to calculate the value of an
aircraft when more detailed information is not available. The principal
assumptions are as follows (for each aircraft):
1. The aircraft is delivered new.
2. The overhaul status of the airframe, engines, landing gear and other
major components are the equivalent of new delivery unless otherwise
specified.
3. The specifications of the aircraft are those most common for an aircraft
of this type new delivery.
4. The aircraft is in a standard airline configuration.
5. Its modification status is comparable to that most common for an
aircraft of its type and vintage.
6. No accounting was made for lease obligations or terms of ownership.
4 11/16/98
MBA
<PAGE>
- --------------------------------------------------------------------------------
V. COVENANTS
- --------------------------------------------------------------------------------
This report has been prepared for the exclusive use of U.S. Airways/Morgan
Stanley and shall not be provided to other parties by MBA without the express
consent of U.S. Airways/Morgan Stanley.
MBA certifies that this report has been independently prepared and that it fully
and accurately reflects MBA's opinion as to the Current Base Value. MBA further
certifies that it does not have, and does not expect to have, any financial or
other interest in the subject or similar aircraft.
This report represents the opinion of MBA as to the Current Base Value of the
subject aircraft and is intended to be advisory only in nature. Therefore, MBA
assumes no responsibility or legal liability for any actions taken or not taken
by U.S. Airways/Morgan Stanley or any other party with regard to the subject
aircraft. By accepting this report, all parties agree that MBA shall bear no
such responsibility or legal liability.
PREPARED BY:
/s/ Bryson P. Monteleone
BRYSON P. MONTELEONE
Manager of Operations
REVIEWED BY:
/s/ Morten S. Beyer
Morten S. Beyer
Chairman and CEO
ISTAT Certified Fellow Appraiser
5 11/16/98
MBA
<PAGE>
PROSPECTUS
$1,000,000,000
US AIRWAYS, INC.
PASS THROUGH CERTIFICATES
Up to $1,000,000,000 aggregate public offering price of Pass Through
Certificates (the "Certificates") (or its equivalent (based on the applicable
exchange rate at the time of sale) in one or more foreign currencies or
currency units) may be offered for sale from time to time pursuant to this
Prospectus and related Prospectus Supplements (as defined below). Certificates
may be issued in one or more series in amounts, at prices and on terms to be
determined at the time of the offering. In respect of each offering of
Certificates, a separate US Airways Pass Through Trust for each series of
Certificates being offered (each, a "Trust") will be formed pursuant to one or
more Pass Through Trust Agreements (each, a "Basic Agreement") and one or more
supplements thereto (each, a "Trust Supplement") relating to such Trust to be
entered into between US Airways, Inc. ("US Airways" or the "Company") and the
trustee named therein (the "Trustee"), as trustee under each Trust. Unless
otherwise specified, the Trustee will be State Street Bank and Trust Company.
Each Certificate in a series will represent a fractional undivided interest in
the related Trust and will have no rights, benefits or interests in respect of
any other Trust. The property of the Trusts will consist of (a) equipment
notes issued on a nonrecourse basis by one or more owner trustees pursuant to
separate leveraged lease transactions (the "Leased Aircraft Notes") to finance
or refinance a portion of the equipment cost of aircraft, including engines
(each, a "Leased Aircraft" and, collectively, the "Leased Aircraft"), which
have been or will be leased to US Airways pursuant to a separate lease
agreement (each such lease agreement, a "Lease") for each Leased Aircraft, (b)
equipment notes issued with recourse to US Airways (the "Owned Aircraft Notes"
and, together with any Leased Aircraft Notes, the "Equipment Notes") or (c) a
combination of Leased Aircraft Notes and Owned Aircraft Notes to finance or
refinance all or a portion of the equipment cost of, or to purchase all or a
portion of the outstanding debt with respect to, aircraft, including engines
(each, an "Owned Aircraft" and, collectively, the "Owned Aircraft", together
with Leased Aircraft, the "Aircraft"), which have been or will be purchased
and owned by US Airways. To the extent that the proceeds of any offering of
Certificates are not used to purchase Equipment Notes on the date of issuance
of such Certificates, such proceeds will be held for the benefit of the
holders of such Certificates.
The specific terms of the particular Certificates in respect of which this
Prospectus is being delivered will be set forth in a supplement to this
Prospectus (the "Prospectus Supplement") which will be delivered together with
this Prospectus, including, where applicable, the specific designation, form,
aggregate principal amount, interest rate, final distribution date, ranking in
respect of priority of payment, initial public offering price and distribution
dates relating to such Certificates, the currency in which such Certificates
will be payable, the Trust or Trusts relating to such Certificates, the
Equipment Notes to be purchased by such Trust or Trusts, the Aircraft relating
to such Equipment Notes, the leveraged lease transactions or financing
arrangements, as the case may be, relating to such Equipment Notes and other
special terms relating to such Certificates and the net proceeds from the
offering of such Certificates. The Certificates will be issued in registered
form only and may, if so specified in the applicable Prospectus Supplement, be
issued in accordance with a book-entry system.
(continued on next page)
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November 17, 1998.
<PAGE>
With respect to one or more Aircraft, Equipment Notes may be issued, each of
which may have a different interest rate, final maturity date and ranking in
respect of priority of payment. For each series of Certificates, the Trustee
will purchase one or more Equipment Notes issued with respect to one or more
Aircraft such that all of the Equipment Notes held in the related Trust will
have identical ranking and identical interest rates (in each case equal to the
rate applicable to the Certificates issued by such Trust), and such that the
latest maturity date for such Equipment Notes will occur on or before the
final distribution date for such Certificates. Interest paid on the Equipment
Notes held in each Trust will be passed through to the holders of the
Certificates relating to such Trust on the dates and at the rate per annum set
forth in the Prospectus Supplement relating to such Certificates until the
final distribution date for such Trust, subject to the effect of any cross-
subordination provisions described in the Prospectus Supplement for a series
of Certificates. Principal paid on the Equipment Notes held in each Trust will
be passed through to the holders of the Certificates relating to such Trust in
scheduled amounts on the dates set forth in the Prospectus Supplement relating
to such Certificates until the final distribution date for such Trust, subject
to the effect of any cross-subordination provisions described in the
Prospectus Supplement for a series of Certificates. The Owned Aircraft Notes
issued with respect to any Owned Aircraft will be secured by a security
interest in such Aircraft and will be direct obligations of US Airways. The
Leased Aircraft Notes issued with respect to each Leased Aircraft, except
during the Pre-Funding Period (as defined herein), if any, will be secured by
a security interest in the Leased Aircraft and by a security interest in the
Lease relating thereto, including the right to receive rentals payable by US
Airways in respect of such Leased Aircraft. Although neither the Certificates
nor the Leased Aircraft Notes will be direct obligations of, or guaranteed by,
US Airways, the amounts unconditionally payable by US Airways for lease of
Leased Aircraft will be sufficient to pay in full when due all payments
required to be made on the corresponding Leased Aircraft Notes, except as
described under "Description of Equipment Notes--General" relating to any Pre-
Funding Period with respect to such Leased Aircraft.
If specified in the applicable Prospectus Supplement, during any Pre-Funding
Period, the related Leased Aircraft Notes will be secured either by a
collateral account funded by the net proceeds of the sale of such Leased
Aircraft Notes to the Trustee and, if specified in the applicable Prospectus
Supplement, by other security (which may include a letter of credit) or by a
depositary arrangement. Funds in such collateral account, together with any
such other security or amounts payable under a depositary arrangement will be
available to pay any principal due and interest accrued on such Leased
Aircraft Notes during such Pre-Funding Period, as well as to fund any
mandatory prepayment of such Leased Aircraft Notes during such Pre-Funding
Period.
The Certificates may be sold to or through underwriters, through dealers or
agents or directly to purchasers. See "Plan of Distribution." The Prospectus
Supplement will set forth the names of any underwriters, dealers or agents
involved in the sale of the Certificates in respect of which this Prospectus
is being delivered, the proposed amounts, if any, to be purchased by
underwriters and the compensation, if any, of such underwriters or agents. See
"Plan of Distribution" for information concerning secondary trading of the
Certificates.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
The Company................................................................ 4
Use of Proceeds............................................................ 4
Ratio of Earnings to Fixed Charges......................................... 5
General Outline of Trust Structure......................................... 5
Description of the Certificates............................................ 6
Description of the Equipment Notes......................................... 17
Certain United States Federal Income Tax Consequences...................... 24
ERISA Considerations....................................................... 27
Plan of Distribution....................................................... 27
Legal Opinions............................................................. 28
Experts.................................................................... 28
Other Information.......................................................... 29
</TABLE>
2
<PAGE>
AVAILABLE INFORMATION
US Airways has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all
amendments, exhibits and schedules, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Certificates offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission,
and to which reference is hereby made. Statements made in this Prospectus as
to the contents of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved.
US Airways is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the Commission.
Such reports and other information, as well as the Registration Statement may
be inspected at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024, and at the
regional offices of the Commission located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such materials may be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such material may
also be accessed electronically by means of the Commission's Internet web site
(http://www.sec.gov), which contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. In addition, reports, proxy statements and other information
concerning US Airways may be inspected and copied at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-8442) are
hereby incorporated by reference in this Prospectus: (i) US Airways' Annual
Report on Form 10-K for the year ended December 31, 1997, filed on March 19,
1998, (ii) US Airways' Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1998, filed on May 11, 1998, and June 30, 1998, filed
on August 6, 1998, and (iii) US Airways' Current Reports on Form 8-K filed on
January 22, February 4, April 22, June 4, July 2, July 22, and September 4,
1998.
All documents filed by US Airways pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Certificates offered hereby will be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated herein by
reference, or contained in this Prospectus, will be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein or contained in the
Prospectus Supplement with respect to the Certificates modifies or supersedes
such statement. Any such statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
US Airways will provide without charge to any person to whom a copy of this
Prospectus has been delivered, upon written or oral request, a copy of any or
all of the foregoing documents incorporated herein by reference (other than
exhibits to such documents). Requests should be directed to US Airways, Inc.,
2345 Crystal Drive, Arlington, Virginia 22227, Attn: Secretary, telephone
(703) 872-7000.
3
<PAGE>
THE COMPANY
US Airways, the principal wholly-owned subsidiary of US Airways Group, Inc.,
operates the fifth largest domestic air carrier (as ranked by revenue
passenger miles (RPMs) flown) and is engaged primarily in the business of
transporting passengers, property and mail. As of July 31, 1998, US Airways
operated 369 jet aircraft and provided regularly scheduled service through 104
airports in 38 states in the continental United States, Canada, Mexico,
Netherlands, France, Germany, Italy, Spain and the Caribbean.
Enplaning almost 59 million passengers in 1997, US Airways has principal
hubs at the major airports in Charlotte, Philadelphia and Pittsburgh. US
Airways also has substantial operations at Baltimore/Washington International
Airport (BWI), Boston's Logan International Airport, New York's LaGuardia
Airport (LaGuardia) and Washington D.C.'s Ronald Reagan Washington National
Airport (National). US Airways is the leading airline from the Northeast
United States to Florida and currently has approximately 84% of its departures
and approximately 56% of its capacity (available seat miles or ASMs) deployed
in the eastern United States.
US Airways is a Delaware corporation and its executive offices are located
at 2345 Crystal Drive, Arlington, Virginia 22227 and its telephone number is
(703) 872-7000.
USE OF PROCEEDS
Except as set forth in a Prospectus Supplement for a specific offering of
Certificates, the Certificates will be issued in order to facilitate either
(a) the financing or refinancing of the debt portion and, in certain cases,
the refinancing of some of the equity portion of one or more separate
leveraged lease transactions entered into by US Airways, as lessee, with
respect to the Leased Aircraft as described in the applicable Prospectus
Supplement, (b) the financing or refinancing of the aggregate principal amount
of debt to be issued, or the purchase of the aggregate principal amount of the
debt previously issued, by US Airways in respect of the Owned Aircraft as
described in the applicable Prospectus Supplement or (c) a combination of the
foregoing. Except as set forth in a Prospectus Supplement for a specific
offering of Certificates, the proceeds from the sale of the Certificates will
be used by the Trustee on behalf of the applicable Trust or Trusts to purchase
either (a) Leased Aircraft Notes issued by the respective Owner Trustee or
Owner Trustees to finance or refinance (as specified in the applicable
Prospectus Supplement) the related Leased Aircraft, (b) Owned Aircraft Notes
issued by US Airways to finance or refinance (as specified in the applicable
Prospectus Supplement) the related Owned Aircraft or (c) a combination of
Leased Aircraft Notes and Owned Aircraft Notes. To the extent that the
proceeds of any offering of Certificates are not used to purchase Equipment
Notes on the date of issuance of such Certificates, such proceeds will be held
for the benefit of the holders of such Certificates. If any such proceeds are
not subsequently utilized to purchase Equipment Notes by the relevant date
specified in the applicable Prospectus Supplement, such proceeds will be
returned to the holders of such Certificates. See "Description of
Certificates--Delayed Purchase of Equipment Notes."
Except as set forth in a Prospectus Supplement for a specific offering of
Certificates, if, for any Leased Aircraft, under the circumstances discussed
below in "Description of Equipment Notes--Delayed Lease Commencement" the
proceeds from the sale of the related Leased Aircraft Notes to the applicable
Trusts are not applied by the Owner Trustee to pay the purchase price for such
Leased Aircraft on the date of the purchase of such Leased Aircraft Notes by
such Trusts, such proceeds, after deducting certain expenses of the
Certificate offering, will be deposited by the Owner Trustee into a collateral
account or into a deposit account pursuant to a depositary arrangement. Such
collateral account, together with the other security, if any, pledged under
the related Indenture (see "Description of the Equipment Notes--Security"), or
such depositary arrangement, will secure such Leased Aircraft Notes during the
related Pre-Funding Period and will be available to make scheduled payments of
principal, if any, and interest accrued on such Leased Aircraft Notes during
the Pre-Funding Period. If the Lease related to such Leased Aircraft does not
commence by the relevant date specified in the applicable Prospectus
Supplement or an event of loss occurs with respect to such Leased Aircraft
during the Pre-Funding Period, funds in such collateral account, together with
such other security or amounts payable under a depositary
4
<PAGE>
arrangement will be available to prepay such Leased Aircraft Notes as
described in such Prospectus Supplement or will be applied to finance the
aggregate principal amount of the debt to be issued by US Airways in
connection with the acquisition of such Aircraft by US Airways so that such
Aircraft becomes an Owned Aircraft. See "Description of the Equipment Notes--
Delayed Lease Commencement" and "--Mandatory Prepayment During the Pre-Funding
Period."
The Leased Aircraft Notes will be issued under separate trust indentures
(the "Leased Aircraft Indentures") between a bank, trust company or other
institution specified in the related Prospectus Supplement, as trustee
thereunder (in such capacity, herein referred to as the "Loan Trustee"), and
an institution specified in the related Prospectus Supplement acting, not in
its individual capacity, but solely as owner trustee (an "Owner Trustee") of a
separate trust for the benefit of one or more institutional investors (each,
an "Owner Participant"). With respect to each Leased Aircraft, the related
Owner Participant will have provided or will provide from sources other than
the Leased Aircraft Notes a portion of the equipment cost of the related
Leased Aircraft. No Owner Participant, however, will be personally liable for
any amount payable under the related Leased Aircraft Indenture or the Leased
Aircraft Notes issued thereunder. Each Leased Aircraft will have been or will
be leased by the related Owner Trustee to US Airways pursuant to a separate
Lease. The Owned Aircraft Notes will be issued under separate trust indentures
(the "Owned Aircraft Indentures" and, together with any Leased Aircraft
Indentures, the "Indentures") between the applicable Loan Trustee and US
Airways.
RATIO OF EARNINGS TO FIXED CHARGES
For the years ended December 31, 1993 and 1994, earnings were not sufficient
to cover fixed charges. Additional earnings of $385 million and $721 million,
respectively, would have been required to achieve ratios of earnings to fixed
charges of 1.0. The ratio of earnings to fixed charges for the years ended
December 31, 1995, 1996 and 1997 was 1.1, 1.3 and 2.2, respectively. The ratio
of earnings to fixed charges for the six months ended June 30, 1998 was 2.7.
For purposes of calculating this ratio, earnings consist of pre-tax income,
fixed charges, capitalized interest and amortization of previously capitalized
interest. Fixed charges consist of interest expense, amortization of debt
issue expense and the portion of rental expense representative of interest
expense.
GENERAL OUTLINE OF TRUST STRUCTURE
In respect of each offering of Certificates, one or more Trusts will be
formed, and the related Certificates issued, pursuant to separate Trust
Supplements to be entered into between the Trustee and US Airways in
accordance with the terms of the Basic Agreement. Concurrently with the
execution and delivery of each Trust Supplement, the Trustee, on behalf of the
Trust formed thereby, will enter into one or more purchase or refunding
agreements (each such agreement being herein referred to as a "Note Purchase
Agreement") pursuant to which it will agree to purchase one or more Equipment
Notes relating to one or more of the Aircraft described in the applicable
Prospectus Supplement. Pursuant to the applicable Note Purchase Agreement or
Note Purchase Agreements, the Trustee, on behalf of each Trust, will purchase
one or more Equipment Notes such that all of the Equipment Notes that
constitute the property of such Trust will have identical interest rates (in
each case equal to the rate applicable to the Certificates issued by such
Trust) and identical priority of payment relative to each of the other
Equipment Notes issued under the Related Indentures (as defined below). The
maturity dates of the Equipment Notes acquired by each Trust will occur on or
before the final distribution date applicable to the Certificates that will be
issued by such Trust. The Trustee will distribute the amount of payments of
principal, premium, if any, and interest received by it as holder of the
Equipment Notes to the registered holders of Certificates of the Trust (the
"Certificateholders") in which such Equipment Notes are held, subject to the
effect of any cross-subordination provisions described in the Prospectus
Supplement for a series of Certificates. To the extent that the proceeds of
any offering of Certificates are not used to purchase Equipment Notes on the
date of issuance of such Certificates, such proceeds will be held for the
benefit of the holders of such Certificates. If any such proceeds are not
subsequently utilized to purchase Equipment Notes by the relevant date
specified in the
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applicable Prospectus Supplement, such proceeds will be returned to the
holders of such Certificates. See "Description of the Certificates" and
"Description of the Equipment Notes."
DESCRIPTION OF THE CERTIFICATES
In connection with each offering of Certificates, one or more separate
Trusts will be formed and one or more series of Certificates will be issued
pursuant to the Basic Agreement and one or more separate Trust Supplements to
be entered into between US Airways and the Trustee. The statements made under
this caption are summaries and reference is made to the detailed provisions of
the Basic Agreement, the form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The summaries
relate to the Basic Agreement and each of the Trust Supplements, the Trusts to
be formed thereby and the Certificates to be issued by each Trust except to
the extent, if any, described in the applicable Prospectus Supplement. The
Prospectus Supplement that accompanies this Prospectus contains a glossary of
the material terms used with respect to the specific series of Certificates
being offered thereby. The Trust Supplement relating to each series of
Certificates and the forms of the related Note Purchase Agreement, Indenture,
Lease, Trust Agreement, participation agreement, intercreditor agreement and
liquidity facility arrangement, as applicable, will be filed as exhibits to a
post-effective amendment to the Registration Statement of which this
Prospectus is a part, a Current Report on Form 8-K, a Quarterly Report on Form
10-Q or an Annual Report on Form 10-K, as applicable, filed by US Airways with
the Commission.
The Certificates offered pursuant to this Prospectus will be limited to
$1,000,000,000 aggregate public offering price (or its equivalent (based on
the applicable exchange rate at the time of sale) in one or more foreign
currencies or currency units).
To the extent that any provision in any prospectus supplement is
inconsistent with any provision in this summary, the provision of such
prospectus supplement will control.
GENERAL
Each Certificate will represent a fractional undivided interest in the Trust
created by the Trust Supplement pursuant to which such Certificate was issued
and all payments and distributions will be made only from the related Trust
Property (as defined below). The property of each Trust (the "Trust Property")
will include (i) the Equipment Notes held in such Trust and all monies at any
time paid thereon and all monies due and to become due thereunder, subject to
the effect of any cross-subordination provisions described in the Prospectus
Supplement for a series of Certificates, (ii) funds from time to time
deposited with the Trustee in accounts relating to such Trust and (iii) if so
specified in the Prospectus Supplement related to a series of Certificates,
rights under intercreditor agreements relating to cross-subordination
arrangements and monies receivable under a liquidity facility. Each
Certificate will represent a pro rata share of the outstanding principal
amount of the Equipment Notes held in the related Trust and, unless otherwise
specified in the applicable Prospectus Supplement, will be issued in minimum
denominations of $1,000 or any integral multiple thereof except that one
Certificate of each series may be issued in a different denomination. The
Certificates do not represent an interest in or obligation of US Airways, the
Trustee, any of the Loan Trustees or Owner Trustees in their individual
capacities, any Owner Participant, or any affiliate of any thereof. Each
Certificateholder by its acceptance of a Certificate agrees to look solely to
the income and proceeds from the Trust Property as provided in the Basic
Agreement and the applicable Trust Supplement.
The Equipment Notes issued under an Indenture may be held in more than one
Trust and one Trust may hold Equipment Notes issued under more than one
Indenture (each Indenture the Equipment Notes of which are held in a Trust, a
"Related Indenture"). Unless otherwise provided in a Prospectus Supplement,
only Equipment Notes having the same priority of payment (the Equipment Notes
of any such priority, a "Class") may be held in the same Trust.
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Interest will be passed through to Certificateholders of each Trust at the
rate per annum payable on the Equipment Notes held in such Trust, as set forth
for such Trust on the cover page of the applicable Prospectus Supplement,
subject to the effect of any cross-subordination provisions described in the
Prospectus Supplement for a series of Certificates.
Reference is made to the Prospectus Supplement that accompanies this
Prospectus for a description of the specific series of Certificates being
offered thereby, including: (1) the specific designation and title of such
Certificates; (2) the Regular Distribution Dates (as defined below) and
Special Distribution Dates (as defined below) applicable to such Certificates;
(3) the currency or currencies (including currency units) in which such
Certificates may be denominated; (4) the specific form of such Certificates,
including whether or not such Certificates are to be issued in accordance with
a book-entry system; (5) a description of the Equipment Notes to be purchased
by such Trust, including (a) the period or periods within which, the price or
prices at which, and the terms and conditions upon which such Equipment Notes
may or must be redeemed or defeased in whole or in part, by US Airways or,
with respect to Leased Aircraft Notes, the Owner Trustee, (b) the payment
priority of such Equipment Notes in relation to any other Equipment Notes
issued with respect to the related Aircraft, (c) any additional security or
liquidity enhancements therefor and (d) any intercreditor or other rights or
limitations between or among the holders of Equipment Notes of different
priorities issued with respect to the same Aircraft; (6) a description of the
related Aircraft; (7) a description of the related Note Purchase Agreement and
Related Indentures, including a description of the events of default under the
Related Indentures, the remedies exercisable upon the occurrence of such
events of default and any limitations on the exercise of such remedies with
respect to such Equipment Notes; (8) if such Certificates relate to Leased
Aircraft, a description of the related Leases, Trust Agreements and
participation agreements, including (a) the names of the related Owner
Trustees, (b) a description of the events of default under the related Leases,
the remedies exercisable upon the occurrence of such events of default and any
limitations on the exercise of such remedies with respect to such Leased
Aircraft Notes, and (c) the rights of the related Owner Trustee, if any,
and/or Owner Participant, if any, to cure failures of US Airways to pay rent
under the related Lease; (9) the extent, if any, to which the provisions of
the operative documents applicable to such Equipment Notes may be amended by
the parties thereto without the consent of the holders of, or only upon the
consent of the holders of a specified percentage of aggregate principal amount
of, such Equipment Notes; (10) cross-default or cross-collateralization
provisions in the Related Indentures, if any; (11) subordination provisions
among the holders of Certificates, including any cross-subordination
provisions among the holders of Certificates in separate Trusts; and (12) any
arrangements for the investment or other use of proceeds of the Certificates
prior to the purchase of the Equipment Notes; and (13) any other special terms
pertaining to such Certificates.
If any Certificates are denominated in one or more foreign currencies or
currency units, the restrictions, certain United States federal income tax
considerations, specific terms and other information with respect to such
Certificates and such foreign currency or currency units will be set forth in
the applicable Prospectus Supplement.
BOOK-ENTRY REGISTRATION
General
If specified in the applicable Prospectus Supplement, the Certificates will
be subject to the provisions described below and under the caption "--
Definitive Certificates." Upon issuance, each series of Certificates will be
represented by one or more fully registered global certificates. Unless
otherwise provided in a Prospectus Supplement, each global certificate will be
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of Cede & Co. ("Cede"), the nominee of DTC. No person
acquiring an interest in such Certificates ("Certificate Owner") will be
entitled to receive a certificate representing such person's interest in such
Certificates, except as set forth below under "--Definitive Certificates."
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references to actions by
Certificateholders will refer to actions taken by DTC upon instructions from
DTC Participants (as defined below), and all references herein to
distributions, notices, reports and statements to Certificateholders will
refer, as the case may be, to distributions, notices, reports and statements
to DTC or Cede, as the registered holder of
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such Certificates, or to DTC Participants for distribution to Certificate
Owners in accordance with DTC procedures.
DTC has advised US Airways that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and "clearing agency" registered pursuant to section
17A of the Exchange Act. DTC was created to hold securities for its
participants ("DTC Participants") and to facilitate the clearance and
settlement of securities transactions between DTC Participants through
electronic book-entry changes in the accounts of DTC Participants, thereby
eliminating the need for physical transfer of certificates. DTC Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of DTC
Participants and by the New York State Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Indirect access to the DTC system also is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC Participant either directly or indirectly
("Indirect Participants").
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, the Certificates may do so only through DTC Participants and
Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Trustee through DTC
Participants or Indirect Participants, as the case may be. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments because such payments will be forwarded by the Trustee to Cede, as
nominee for DTC. US Airways expects DTC to forward such payments in same-day
funds to DTC Participants who are credited with ownership of the Certificates
in amounts proportionate to the principal amount of each such DTC
Participant's respective holdings of beneficial interests in the Certificates,
as shown on the records of DTC or its nominee. US Airways also expects that
DTC Participants will thereafter forward payments to Indirect Participants or
Certificate Owners, as the case may be, in accordance with standing
instructions and customary industry practices. The forwarding of such
distributions to the Certificate Owners will be the responsibility of such DTC
Participants. Unless and until the Definitive Certificates are issued under
the limited circumstances described herein, the only "Certificateholder" will
be Cede, as nominee of DTC. Certificate Owners will not be recognized by the
Trustee as Certificateholders, as such term is used in the Basic Agreement,
and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and DTC Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Certificates among DTC Participants on whose behalf it acts with respect
to the Certificates and to receive and transmit distributions of principal,
premium, if any, and interest with respect to the Certificates. DTC
Participants and Indirect Participants with which Certificate Owners have
accounts with respect to the Certificates similarly are required to make book-
entry transfers and receive and transmit such payments on behalf of their
respective customers. Accordingly, although Certificate Owners will not
possess the Certificates, the Rules provide a mechanism by which Certificate
Owners will receive payments and will be able to transfer their interests.
Conveyance of notices and other communications by DTC to DTC Participants and
by DTC Participants to Indirect Participants and to Certificate Holders will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. The Rules applicable to
DTC and DTC Participants are on file with the Commission.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
the Certificates to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Certificates, may be limited
due to the lack of a physical certificate for such Certificates.
DTC has advised US Airways that it will take any action permitted to be
taken by a Certificateholder under the Basic Agreement only at the direction
of one or more DTC Participants to whose accounts with DTC the
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Certificates are credited. Additionally, DTC has advised US Airways that in
the event any action requires approval by Certificateholders of a certain
percentage of beneficial interest in each Trust, DTC will take such action
only at the direction of and on behalf of DTC Participants whose holdings
include undivided interests that satisfy any such percentage. DTC may take
conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of DTC Participants whose holdings
include such undivided interests.
Neither US Airways nor the Trustee will have any liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in the Certificates held by Cede, as nominee for DTC, for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for the performance by DTC, any DTC Participant or any
Indirect Participant of their respective obligations under the rules and
procedures governing their obligations.
The applicable Prospectus Supplement will specify any additional book-entry
registration procedures applicable to Certificates denominated in a currency
other than United States dollars.
The information contained in this Prospectus concerning DTC and its book
entry system has been obtained from sources US Airways believes to be
reliable, but US Airways takes no responsibility for the accuracy thereof.
Same-Day Settlement and Payment
As long as the Certificates are registered in the name of DTC or its
nominee, all payments made by US Airways to the Loan Trustee under any Lease
or any Owned Aircraft Indenture will be in immediately available funds. Such
payments, including the final distribution of principal with respect to the
Certificates of any Trust, will be passed through to DTC in immediately
available funds.
Any Certificates registered in the name of DTC or its nominee, will trade in
DTC's Same-Day Funds Settlement System until maturity, and secondary market
trading activity in the Certificates will therefore be required by DTC to
settle in immediately available funds. No assurance can be given as to the
effect, if any, of settlement in same-day funds on trading activity in the
Certificates.
Definitive Certificates
Certificates will be issued in certificated form ("Definitive Certificates")
to Certificate Owners or their nominees, rather than to DTC or its nominee,
only if (i) US Airways advises the Trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository with
respect to such Certificates and US Airways is unable to locate a qualified
successor, (ii) US Airways, at its option, elects to terminate the book-entry
system through DTC or (iii) after the occurrence of certain events of default
or other events specified in the related Prospectus Supplement, Certificate
Owners with fractional undivided interests aggregating not less than a
majority in interest in such Trust advise the Trustee, US Airways and DTC
through DTC Participants in writing that the continuation of a book-entry
system through DTC (or a successor thereto) is no longer in the Certificate
Owners' best interest. Upon the occurrence of any event described in the
immediately preceding sentence, the Trustee will be required to notify all
Certificate Owners through DTC Participants of the availability of Definitive
Certificates. Upon surrender by DTC of the certificates representing the
Certificates and receipt of instructions for re-registration, the Trustee will
reissue the Certificates as Definitive Certificates to Certificate Owners.
Distributions of principal, premium, if any, and interest with respect to
Certificates will thereafter be made by the Trustee directly in accordance
with the procedures set forth in the Basic Agreement and the applicable Trust
Supplements, to holders in whose names the Definitive Certificates were
registered at the close of business on the applicable record date. Such
distributions will be made by check mailed to the address of such holder as it
appears on the register maintained by the Trustee. The final payment on any
Certificate, however, will be made
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only upon presentation and surrender of such Certificate at the office or
agency specified in the notice of final distribution to Certificateholders.
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee upon compliance with the requirements set forth in the
Basic Agreement and the applicable Trust Supplements. No service charge will
be imposed for any registration of transfer or exchange, but payment of a sum
sufficient to cover any tax or other governmental charge will be required.
PAYMENTS AND DISTRIBUTIONS
US Airways will make scheduled payments of principal of, and interest on,
the unpaid amount of the Owned Aircraft Notes to the Loan Trustee under the
related Indenture, and the Loan Trustee will distribute such principal and
interest payments to the Trustee for each Trust that holds such Owned Aircraft
Notes. Upon commencement of the Lease for any Leased Aircraft, US Airways will
make scheduled rental payments for each Leased Aircraft under the related
Lease. After any Pre-Funding Period for a Leased Aircraft, these scheduled
rental payments will be assigned under the applicable Indenture by the related
Owner Trustee to the Loan Trustee to provide the funds necessary to make the
corresponding payments of principal and interest due from the Owner Trustee on
the Leased Aircraft Notes issued by such Owner Trustee.
Until US Airways has entered into a Lease in connection with a Leased
Aircraft, US Airways will not be obligated to make any scheduled rental
payments and, during any Pre-Funding Period for such Leased Aircraft, the
related Leased Aircraft Notes will not be secured by such Leased Aircraft or
the related Lease, including any rental payments under such Lease. In general,
during the Pre-Funding Period, if any, for such Leased Aircraft, however, the
related collateral account, together with any other security pledged under the
related Indenture or otherwise provided to the Loan Trustee or amounts payable
under a depositary arrangement will be available to provide funds necessary to
make the corresponding scheduled payments of principal, if any, and interest
accrued on the related Leased Aircraft Notes during such Pre-Funding Period,
and to pay the portion, if any, of principal and interest due on the first
payment date after the Pre-Funding Period to the extent exceeding the amount
of rent payable by US Airways on such payment date. See "Description of the
Equipment Notes--Delayed Lease Commencement."
Following any Pre-Funding Period, after the Loan Trustee has made such
principal and interest payments to the Trustee for each of the Trusts on the
Leased Aircraft Notes held in such Trust, the Loan Trustee will, except under
certain circumstances, pay the remaining balance, if any, to the Owner Trustee
for the benefit of the related Owner Participant. The Trustee for each such
Trust will distribute to the Certificateholders of such Trust payments
received on the Equipment Notes held in such Trust as described below. Unless
otherwise specified in a Prospectus Supplement, during any Pre-Funding Period
for a Leased Aircraft, the Loan Trustee will not make any payments to the
Owner Trustee for the benefit of the related Owner Participant.
Subject to the effect of any cross-subordination provisions set forth in the
Prospectus Supplement for a series of Certificates, payments of principal,
premium, if any, and interest with respect to the Equipment Notes held in each
Trust will be distributed by the Trustee, upon receipt, to Certificateholders
of such Trust on the dates and in the currency specified in the applicable
Prospectus Supplement, except in certain cases when some or all of such
Equipment Notes are in default as described in the applicable Prospectus
Supplement. Payments of principal of, and interest on, the unpaid principal
amount of the Equipment Notes held in each Trust will be scheduled to be
received by the Trustee on the dates specified in the applicable Prospectus
Supplement (such scheduled payments of interest and principal on the Equipment
Notes to the Trustee are herein referred to as "Scheduled Payments", and the
dates specified in the applicable Prospectus Supplement for distribution of
Scheduled Payments to the Trustee are herein referred to as "Regular
Distribution Dates"). See "Description of the Equipment Notes--General."
Subject to the effect of any cross-subordination provisions set forth in the
Prospectus Supplement for a series of Certificates, each Certificateholder of
each Trust will be entitled to receive
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a pro rata share of any distribution in respect of Scheduled Payments of
principal and interest made on the Equipment Notes held in the Trust.
Payments of principal, premium, if any, and interest received by the Trustee
on account of the early redemption, if any, of the Equipment Notes relating to
one or more Aircraft held in a Trust, and payments, other than Scheduled
Payments received on a Regular Distribution Date or within five days
thereafter, received by the Trustee following default in respect of Equipment
Notes held in a Trust relating to one or more Aircraft ("Special Payments")
will be distributed on the date determined as described in the applicable
Prospectus Supplement (a "Special Distribution Date") except that, if
specified in the applicable Prospectus Supplement, payments received by the
Trustee following default in respect of the Equipment Notes on a Regular
Distribution Date as a result of a drawing under any liquidity facility, as
described in the applicable Prospectus Supplement (each, a "Liquidity
Facility"), provided for the benefit of the specified Certificateholders will
be distributed on such Regular Distribution Date to such Certificateholders.
The Trustee will mail notice to the Certificateholders of record of the
applicable Trust stating any such anticipated Special Distribution Date.
POOL FACTORS
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Trust or for the Certificates issued by any Trust
indicates, as of any date, the original aggregate face amount of the
Certificates of such Trust less the aggregate amount of all payments made in
respect of the Certificates of such Trust other than payments made in respect
of interest or premium thereon or reimbursement of any costs and expenses in
connection therewith. The Pool Balance for each Trust as of any Regular
Distribution Date or Special Distribution Date will be computed after giving
effect to the payment of principal, if any, on the Equipment Notes or other
Trust Property held in such Trust and the distribution thereof to be made on
that date.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Trust as of any Regular Distribution Date or Special
Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (i) the Pool Balance by (ii) the aggregate original face
amount of the Certificates of such Trust. The Pool Factor for each Trust as of
any Regular Distribution Date or Special Distribution Date will be computed
after giving effect to the payment of principal, if any, on the Equipment
Notes or other Trust Property held in such Trust and distribution thereof to
be made on that date. The Pool Factor for each Trust will initially be
1.0000000; thereafter, the Pool Factor for each Trust will decline as
described herein to reflect reductions in the Pool Balance of such Trust. The
amount of a Certificateholder's pro rata share of the Pool Balance of a Trust
can be determined by multiplying the original denomination of the holder's
Certificate of such Trust by the Pool Factor for such Trust as of the
applicable Regular Distribution Date or Special Distribution Date. The Pool
Factor and the Pool Balance for each Trust will be mailed to
Certificateholders of such Trust on each Regular Distribution Date and Special
Distribution Date.
Unless there has been an early redemption, a purchase of an issue of
Equipment Notes by the related Owner Trustee after an Indenture Default (as
defined below), a default in the payment of principal in respect of one or
more issues of the Equipment Notes held in a Trust or certain actions have
been taken following a default thereon, as described in the applicable
Prospectus Supplement, the Pool Factor for the Trusts will decline in
proportion to the scheduled repayments of principal on the Equipment Notes
held in such Trust as described in the applicable Prospectus Supplement. In
the event of such redemption, purchase or default, the Pool Factor and the
Pool Balance of each Trust so affected will be recomputed after giving effect
thereto and notice thereof will be mailed to the Certificateholders of such
Trust. Each Trust will have a separate Pool Factor.
REPORTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date and Special Distribution Date, the Trustee
will include with each distribution of a Scheduled Payment or Special Payment
to Certificateholders of the related Trust a statement, giving effect to such
distribution to be made on such Regular Distribution Date or Special
Distribution Date,
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setting forth the following information (per $1,000 aggregate principal amount
of Certificate for such Trust, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the amount
allocable to premium, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Trust.
As long as the Certificates are registered in the name of DTC or its
nominee, on the record date prior to each Regular Distribution Date and
Special Distribution Date, the Trustee will request from DTC a securities
position listing setting forth the names of all DTC Participants reflected on
DTC's books as holding interests in the Certificates on such record date. On
each Regular Distribution Date and Special Distribution Date, the applicable
Trustee will mail to each such DTC Participant the statement described above
and will make available additional copies as requested by such DTC Participant
for forwarding to Certificate Owners.
In addition, after the end of each calendar year, the Trustee will prepare
for each Certificateholder of each Trust at any time during the preceding
calendar year a report containing the sum of the amounts determined pursuant
to clauses (i) and (ii) above with respect to the Trust for such calendar year
or, in the event such person was a Certificateholder during only a portion of
such calendar year, for the applicable portion of such calendar year, and such
other items as are readily available to the Trustee and which a
Certificateholder will reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax returns. Such report
and such other items will be prepared on the basis of information supplied to
the Trustee by the DTC Participants and will be delivered by the Trustee to
such DTC Participants to be available for forwarding by such DTC Participants
to Certificate Owners in the manner described above.
At such time, if any, as the Certificates are issued in the form of
Definitive Certificates, the Trustee will prepare and deliver the information
described above to each Certificateholder of record of each Trust as the name
and period of ownership of such Certificateholder appears on the records of
the registrar of the Certificates.
VOTING OF EQUIPMENT NOTES
Subject to the effect of any cross-subordination provisions set forth in the
related Prospectus Supplement, the Trustee, as holder of the Equipment Notes
held in each Trust, has the right to vote and give consents and waivers with
respect to such Equipment Notes under the Related Indentures. The Basic
Agreement and related Trust Supplement set forth (i) the circumstances in
which the Trustee may direct any action or cast any vote as the holder of the
Equipment Notes held in the applicable Trust at its own discretion, (ii) the
circumstances in which the Trustee will seek instructions from the
Certificateholders of such Trust and (iii) the percentage of
Certificateholders required to direct the Trustee to take any such action. If
specified in the related Prospectus Supplement, the right of a Trustee to vote
and give consents and waivers with respect to the Equipment Notes held in the
related Trust may, in the circumstances set forth in an intercreditor
agreement to be executed by such Trustee, be exercisable by another person
specified in such Prospectus Supplement.
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
The Prospectus Supplement will specify the events of default under the Basic
Agreement (an "Event of Default") and the Related Indentures (an "Indenture
Default"). The Indenture Defaults in the case of Leased Aircraft Indentures
will include events of default under the related Leases (a "Lease Event of
Default"). With respect to any Equipment Notes which are supported by a
Liquidity Facility, the Indenture Defaults or Events of Default may include
events of default under such Liquidity Facility. Unless otherwise provided in
a Prospectus Supplement, all of the Equipment Notes issued under the same
Indenture will relate to a specific Aircraft and there will be no cross-
collateralization or cross-default provisions in the Indentures, and events
resulting in an Indenture Default under any particular Indenture will not
necessarily result in an Indenture Default occurring under any other
Indenture. If an Indenture Default occurs in fewer than all of the Indentures,
notwithstanding the treatment of Equipment Notes issued under any Indenture
under which an Indenture Default has occurred,
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payments of principal and interest on the Equipment Notes issued pursuant to
Indentures with respect to which an Indenture Default has not occurred will
continue to be made as originally scheduled. As described below under "--
Cross-Subordination Issues", a Prospectus Supplement may provide the terms of
any cross-subordination provisions among Certificateholders of separate
Trusts. If such provisions are so provided, payments made pursuant to a
Related Indenture under which an Indenture Default has not occurred may be
distributed first to the holders of the Certificates issued under the Trust
which holds the most senior Equipment Notes issued under all Related
Indentures.
The ability of the applicable Owner Trustee or Owner Participant under a
Leased Aircraft Indenture to cure Indenture Defaults, including an Indenture
Default that results from the occurrence of a Lease Event of Default under the
related Lease, will be described in the Prospectus Supplement. Unless
otherwise provided in a Prospectus Supplement, with respect to any
Certificates or Equipment Notes entitled to the benefits of a Liquidity
Facility, a drawing under any such Liquidity Facility for the purpose of
making a payment of interest as a result of the failure by US Airways to have
made a corresponding payment will not cure an Indenture Default related to
such failure by US Airways.
The Prospectus Supplement related to a series of Certificates will describe
the circumstances under which the Trustee of the related Trust may vote some
or all of the Equipment Notes held in such Trust. Such Prospectus Supplement
also will set forth the percentage of Certificateholders of such Trust
entitled to direct the Trustee to take any action with respect to such
Equipment Notes. If the Equipment Notes outstanding under an Indenture are
held by more than one Trust, then the ability of the Certificateholders issued
with respect to any one Trust to cause the Loan Trustee with respect to any
Equipment Notes held in such Trust to accelerate the Equipment Notes under the
applicable Indenture or to direct the exercise of remedies by the Loan Trustee
under the applicable Indenture will depend, in part, upon the proportion of
the aggregate principal amount of the Equipment Notes outstanding under such
Indenture and held in such Trust to the aggregate principal amount of all
Equipment Notes outstanding under such Indenture. In addition, if cross-
subordination provisions are applicable to any series of Certificates, then
the ability of the Certificateholders of any one Trust holding Equipment Notes
issued under an Indenture to cause the Loan Trustee with respect to any
Equipment Notes held in such Trust to accelerate the Equipment Notes under
such Indenture or to direct the exercise of remedies by the Loan Trustee under
such Indenture will depend, in part, upon the Class of Equipment Notes held in
such Trust. If the Equipment Notes outstanding under an Indenture are held by
more than one Trust, then each Trust will hold Equipment Notes with different
terms from the Equipment Notes held in the other Trusts and therefore the
Certificateholders of each Trust may have divergent or conflicting interests
from those of the Certificateholders of the other Trusts holding Equipment
Notes issued under the same Indenture. In addition, as long as the same
institution acts as Trustee of each Trust, in the absence of instructions from
the Certificateholders of any such Trust, the Trustee for such Trust could for
the same reason be faced with a potential conflict of interest upon an
Indenture Default. In such event, the Trustee has indicated that it would
resign as Trustee of one or all such Trusts, and a successor trustee would be
appointed in accordance with the terms of the Basic Agreement.
The Prospectus Supplement for a series of Certificates will specify whether
and under what circumstances the Trustee may or will sell for cash to any
person all or part of the Equipment Notes held in the related Trust. Any
proceeds received by the Trustee upon any such sale will be deposited in an
account established by the Trustee for the benefit of the Certificateholders
of such Trust for the deposit of such Special Payments (the "Special Payments
Account") and will be distributed to the Certificateholders of such Trust on a
Special Distribution Date. The market for Equipment Notes in default may be
very limited, and there can be no assurance that they could be sold for a
reasonable price. Furthermore, as long as the same institution acts as Trustee
of multiple Trusts, it may be faced with a conflict in deciding from which
Trust to sell Equipment Notes to available buyers. If the Trustee sells any
such Equipment Notes with respect to which an Indenture Default exists for
less than their outstanding principal amount, the Certificateholders of such
Trust will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against US Airways,
any Owner Trustee, Owner Participant or the Trustee. Furthermore, neither the
Trustee nor the Certificateholders of
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such Trust could take any action with respect to any remaining Equipment Notes
held in such Trust so long as no Indenture Defaults exist with respect
thereto.
Any amount, other than Scheduled Payments received on a Regular Distribution
Date, distributed to the Trustee of any Trust by the Loan Trustee under any
Indenture on account of the Equipment Notes held in such Trust following an
Indenture Default under such Indenture will be deposited in the Special
Payments Account for such Trust and will be distributed to the
Certificateholders of such Trust on a Special Distribution Date. In addition,
if a Prospectus Supplement provides that the applicable Owner Trustee may,
under circumstances specified therein, redeem or purchase the outstanding
Equipment Notes issued under the applicable Indenture, the price paid by such
Owner Trustee to the Trustee of any Trust for the Equipment Notes issued under
such Indenture and held in such Trust will be deposited in the Special
Payments Account for such Trust and will be distributed to the
Certificateholders of such Trust on a Special Distribution Date.
Any funds representing payments received with respect to any Equipment Notes
in default held in a Trust, or the proceeds from the sale by the Trustee of
any such Equipment Notes, held by the Trustee in the Special Payments Account
for such Trust will, to the extent practicable, be invested and reinvested by
the Trustee in Permitted Investments pending the distribution of such funds on
a Special Distribution Date. "Permitted Investments" will be specified in the
related Prospectus Supplement.
The Basic Agreement provides that the Trustee of each Trust will, within 90
days after the occurrence of a default in respect of such Trust, give to the
Certificateholders of such Trust notice, transmitted by mail, of all uncured
or unwaived defaults with respect to such Trust known to it, provided that,
except in the case of default in the payment of principal, premium, if any, or
interest on any of the Equipment Notes held in such Trust, the Trustee will be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interests of such Certificateholders. The
term "default" as used in this paragraph only means the occurrence of an
Indenture Default with respect to Equipment Notes held in a Trust as described
above, except that in determining whether any such Indenture Default has
occurred, any grace period or notice in connection therewith will be
disregarded.
The Basic Agreement contains a provision entitling the Trustee of each
Trust, subject to the duty of the Trustee during a default to act with the
required standard of care, to be offered reasonable security or indemnity by
the Certificateholders of such Trust before proceeding to exercise any right
or power under the Basic Agreement at the request of such Certificateholders.
The Prospectus Supplement for a series of Certificates will specify the
percentage of Certificateholders entitled to waive, or to instruct the Trustee
to waive, any past Event of Default with respect to such Trust and its
consequences. The Prospectus Supplement for a series of Certificates also will
specify the percentage of Certificateholders (and whether of such Trust or of
any other Trust holding Equipment Notes issued under Related Indentures)
entitled to waive, or to instruct the Trustee or the Loan Trustee to waive,
any past Indenture Default under any Related Indenture and thereby annul any
direction given with respect thereto.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
US Airways will be prohibited from consolidating with or merging into any
other corporation or transferring substantially all of its assets as an
entirety to any other corporation unless (i) the surviving, successor or
transferee corporation (a) is validly existing under the laws of the United
States or any state thereof, (b) is a "citizen of the United States" (as
defined in Title 49 of the United States Code relating to aviation (the
"Transportation Code")) holding an air carrier operating certificate issued by
the Secretary of Transportation pursuant to Chapter 447 of Title 49, United
States Code, if, and so long as, such status is a condition of entitlement to
the benefits of Section 1110 of the Bankruptcy Code, and (c) expressly assumes
all of the obligations of US Airways contained in the Basic Agreement and any
Trust Supplement, the Note Purchase Agreements, any Owned Aircraft Indentures
and, with respect to the Leased Aircraft, the applicable participation
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agreements and Leases, and any other operative documents; and (ii) US Airways
has delivered a certificate and an opinion or opinions of counsel indicating
that such transaction, in effect, complies with such conditions.
MODIFICATIONS OF THE BASIC AGREEMENT
The Basic Agreement contains provisions permitting US Airways and the
Trustee of each Trust to enter into a supplemental trust agreement, without
the consent of the holders of any of the Certificates of such Trust, including
among other things (i) to provide for the formation of such Trust and the
issuance of a series of Certificates, (ii) to evidence the succession of
another corporation to US Airways and the assumption by such corporation of US
Airways' obligations under the Basic Agreement and the applicable Trust
Supplement, (iii) to add to the covenants of US Airways for the benefit of
holders of such Certificates, or to surrender any right or power in the Basic
Agreement conferred upon US Airways, (iv) to cure any ambiguity or correct or
supplement any defective or inconsistent provision of the Basic Agreement or
the applicable Trust Supplement or to make any other provisions with respect
to matters or questions arising thereunder, provided such action will not
materially adversely affect the interests of the holders of such Certificates,
or to cure any ambiguity or correct any mistake or (without limitation of the
foregoing), to give effect or provide for replacement liquidity facilities, if
applicable to such Certificates, (v) to comply with any requirement of the
Commission, any applicable law, rules or regulations of any exchange or
quotation system on which any Certificates may be listed or of any regulatory
body, (vi) to modify, eliminate or add to the provisions of the Basic
Agreement to the extent as will be necessary to continue the qualification of
the Basic Agreement (including any supplemental agreement) under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") and to add to
the Basic Agreement such other provisions as may be expressly permitted by the
Trust Indenture Act, (vii) to provide for a successor Trustee or to add to or
change any provision of the Basic Agreement as necessary to facilitate the
administration of the Trusts thereunder by more than one Trustee, (viii) to
provide certain information to the Trustee as required in the Basic Agreement
and (ix) to make any other amendments or modifications to the Basic Agreement,
provided such amendments or modifications will only apply to Certificates
issued thereafter; provided, in the case of clauses (i) through (ix) above,
that no such supplemental trust agreement will adversely affect the status of
any Trust as a grantor trust for United States federal income tax purposes.
The Basic Agreement also contains provisions permitting US Airways and the
Trustee of each Trust, with the consent of the Certificateholders of such
Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust, and, with respect to any Leased Aircraft,
with the consent of the applicable Owner Trustee (such consent not to be
unreasonably withheld), to execute supplemental trust agreements adding any
provisions to or changing or eliminating any of the provisions of the Basic
Agreement, to the extent relating to such Trust, and the applicable Trust
Supplement, or modifying the rights of the Certificateholders, except that no
such supplemental trust agreement may, without the consent of each
Certificateholder so affected thereby, (a) reduce in any manner the amount of,
or delay the timing of, any receipt by the Trustee of payments on the
Equipment Notes held in such Trust or distributions in respect of any
Certificate related to such Trust, or change the date or place of any payment
in respect of any Certificate, or make distributions payable in coin or
currency other than that provided for in such Certificates, or impair the
right of any Certificateholder of such Trust to institute suit for the
enforcement of any such payment when due, (b) permit the disposition of any
Equipment Note held in such Trust, except as provided in the Basic Agreement
or the applicable Trust Supplement, or otherwise deprive any Certificateholder
of the benefit of the ownership of the applicable Equipment Notes, (c) reduce
the percentage of the aggregate fractional undivided interests of the Trust
provided for in the Basic Agreement or the applicable Trust Supplement, the
consent of the holders of which is required for any such supplemental trust
agreement or for any waiver provided for in the Basic Agreement or such Trust
Supplement, (d) modify any of the provisions relating to the rights of the
Certificateholders in respect of the waiver of events of default or receipt of
payment, (e) alter the priority of distributions specified in any applicable
intercreditor agreement in a manner materially adverse to the interests of the
Certificateholders of such Trust or (f) adversely affect the status of any
Trust as a grantor trust for United States federal income tax purposes.
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MODIFICATION OF INDENTURE AND RELATED AGREEMENTS
The Prospectus Supplement will specify the Trustee's obligations in the
event that the Trustee, as the holder of any Equipment Notes held in a Trust,
receives a request for its consent to any amendment, modification or waiver
under the Indenture or other documents relating to such Equipment Notes
(including any Lease with respect to Leased Aircraft Notes) or any Liquidity
Facility.
CROSS-SUBORDINATION ISSUES
The Equipment Notes issued under an Indenture may be held in more than one
Trust and one Trust may hold Equipment Notes issued under more than one
Related Indenture. Unless otherwise provided in a Prospectus Supplement, only
Equipment Notes of the same Class may be held in the same Trust. In such
event, payments made on account of a subordinate class of Certificates issued
under a Prospectus Supplement may, under circumstances described in such
Prospectus Supplement, be subordinated to the prior payment of all amounts
owing to Certificateholders of a Trust which holds senior Equipment Notes
issued under any Related Indentures. The Prospectus Supplement related to an
issuance of Certificates will describe any such "cross-subordination"
provisions and any related terms, including the percentage of
Certificateholders under any Trust which are permitted to (i) grant waivers of
defaults under any Related Indenture, (ii) consent to the amendment or
modification of any Related Indenture or (iii) direct the exercise of remedial
actions under any Related Indenture.
TERMINATION OF THE TRUSTS
The obligations of US Airways and the Trustee with respect to a Trust will
terminate upon the distribution to Certificateholders of such Trust of all
amounts required to be distributed to them pursuant to the Basic Agreement and
the applicable Trust Supplement and the disposition of all property held in
such Trust. The Trustee will send to each Certificateholder of record of such
Trust notice of the termination of such Trust, the amount of the proposed
final payment and the proposed date for the distribution of such final payment
for such Trust. The final distribution to any Certificateholder of such Trust
will be made only upon surrender of such Certificateholder's Certificates at
the office or agency of the Trustee specified in such notice of termination.
DELAYED PURCHASE OF EQUIPMENT NOTES
In the event that, on the issuance date of any Certificates, all of the
proceeds from the sale of such Certificates are not used to purchase the
Equipment Notes contemplated to be held in the related Trust, such Equipment
Notes may be purchased by the Trustee at any time on or prior to the date
specified in the applicable Prospectus Supplement. In such event, the proceeds
from the sale of such Certificates not used to purchase Equipment Notes will
be held under an arrangement described in the applicable Prospectus Supplement
pending the purchase of the Equipment Notes not so purchased. The arrangements
with respect to the payment of interest on funds so held will be described in
the applicable Prospectus Supplement. If any such proceeds are not
subsequently utilized to purchase Equipment Notes by the relevant date
specified in the applicable Prospectus Supplement, such proceeds will be
returned to the holders of such Certificates.
LIQUIDITY FACILITY
The related Prospectus Supplement may provide that one or more payments of
interest on the Certificates of one or more series will be supported by a
Liquidity Facility issued by an institution identified in the related
Prospectus Supplement. The provider of such Liquidity Facility may have a
claim senior to the Certificateholders' as specified in the related Prospectus
Supplement.
THE TRUSTEE
Unless otherwise provided in the Prospectus Supplement for any series of
Certificates, the Trustee for each series of Certificates will be State Street
Bank and Trust Company. With certain exceptions, the Trustee makes
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no representations as to the validity or sufficiency of the Basic Agreement,
the Trust Supplements, the Certificates, the Equipment Notes, the Indentures,
the Leases or other related documents. The Trustee will not be liable with
respect to any series of Certificates for any action taken or omitted to be
taken by it in good faith in accordance with the direction of the holders of a
majority in face amount of outstanding Certificates of such series issued
under the Basic Agreement. Subject to such provisions, such Trustee will be
under no obligation to exercise any of its rights or powers under the Basic
Agreement at the request of any holders of Certificates issued thereunder
unless they will have offered to the Trustee indemnity satisfactory to it. The
Basic Agreement provides that the Trustee in its individual or any other
capacity may acquire and hold Certificates issued thereunder and, subject to
certain conditions, may otherwise deal with US Airways and, with respect to
the Leased Aircraft, with any Owner Trustee with the same rights it would have
if it were not the Trustee.
The Trustee may resign with respect to any or all of the Trusts at any time,
in which event US Airways will be obligated to appoint a successor trustee. If
the Trustee ceases to be eligible to continue as Trustee with respect to a
Trust or becomes incapable of acting as Trustee or becomes insolvent, US
Airways may remove such Trustee, or any Certificateholder of such Trust for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of such Trustee
and the appointment of a successor trustee. Any resignation or removal of the
Trustee with respect to a Trust and appointment of a successor trustee for
such Trust does not become effective until acceptance of the appointment by
the successor trustee. Pursuant to such resignation and successor trustee
provisions, it is possible that a different trustee could be appointed to act
as the successor trustee with respect to each Trust. All references in this
Prospectus to the Trustee should be read to take into account the possibility
that the Trusts could have different successor trustees in the event of such a
resignation or removal.
The Basic Agreement provides that US Airways will pay the Trustee's fees and
expenses and indemnify the Trustee against certain liabilities.
DESCRIPTION OF THE EQUIPMENT NOTES
The statements made under this caption are summaries and reference is made
to the entire Prospectus and detailed information appearing in the applicable
Prospectus Supplement. Where no distinction is made between the Leased
Aircraft Notes and the Owned Aircraft Notes or between their respective
Indentures, such statements refer to any Equipment Notes and any Indenture.
To the extent that any provision in any prospectus supplement is
inconsistent with any provision in this summary, the provision of such
prospectus supplement will control.
GENERAL
For each Owned Aircraft, the related Owned Aircraft Notes will be issued as
direct obligations by US Airways and will be authenticated under the
applicable Indenture by the Loan Trustee. All of the Owned Aircraft Notes
issued under the same Indenture will relate to a specific Owned Aircraft and
will not be secured by any other Aircraft. The Owned Aircraft relating to each
Indenture will be specified in the applicable Prospectus Supplement. US
Airways will be directly obligated under each Owned Aircraft Indenture to make
payments of principal of, premium, if any, and interest on the related Owned
Aircraft Notes.
For each Leased Aircraft, the related Leased Aircraft Notes will be issued
as nonrecourse obligations by the Owner Trustee, in each case acting for a
separate Owner Trust for the benefit of an Owner Participant, and will be
authenticated under the applicable Indenture by the Loan Trustee. All of the
Leased Aircraft Notes issued under the same Indenture will relate to and,
after any related Pre-Funding Period, as discussed below under "Delayed Lease
Commencement," will be secured by a specific Leased Aircraft and will not be
secured by any other Aircraft. In each case, the Owner Trustee will lease the
related Leased Aircraft to US Airways pursuant to a separate Lease between
such Owner Trustee and US Airways. See "Delayed Lease Commencement" below
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for a discussion of the circumstances under which the Lease for an Aircraft
may commence after the date of issuance of the related Leased Aircraft
Certificates.
The Leased Aircraft subject to each Lease and the Leased Aircraft Notes
issued under the related Indenture will be specified in the applicable
Prospectus Supplement. Upon the commencement of the Lease for any Leased
Aircraft, US Airways will be obligated to make rental payments under such
Lease that will be sufficient to pay the principal of and accrued interest on
the related Leased Aircraft Notes when and as due and payable except that,
with respect to a Delayed Lease Aircraft, on the first scheduled payment date
after the related Pre-Funding Period, any difference between the rental
payment due on such date by US Airways and the scheduled payment of principal,
if any, and interest then due on such Leased Aircraft Notes will be payable
from the related collateral account and any other security pledged under the
related Indenture or otherwise available to the Loan Trustee or from amounts
payable under a depositary arrangement. See "Delayed Lease Commencement"
below. The Leased Aircraft Notes will not, however, be obligations of, or
guaranteed by, US Airways. The obligations to pay rent and to cause other
payments to be made under each Lease will be general obligations of US
Airways.
Until US Airways has entered into a Lease in connection with a Leased
Aircraft, US Airways will not be obligated to make any scheduled rental
payments and, during any Pre-Funding Period for such Leased Aircraft, the
related Leased Aircraft Notes will not be secured by such Leased Aircraft or
the related Lease, including any rental payments under such Lease. During any
Pre-Funding Period for such Leased Aircraft, however, the related collateral
account, together with any other security pledged under the related Indenture
or otherwise available to the Loan Trustee or amounts payable under a
depositary arrangement will be available to provide funds necessary to make
the corresponding scheduled payments of principal, if any, and interest
accrued on the related Leased Aircraft Notes during such Pre-Funding Period,
including the portion, if any, of principal and interest due on the first
payment date after the Pre-Funding Period to the extent exceeding the amount
of rent payable by US Airways pursuant to the related Lease. See "Delayed
Lease Commencement" below.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the Trustee on the Equipment Notes held in each Trust
will be passed through to the Certificateholders of such Trust on the dates
and at the rate per annum set forth in the applicable Prospectus Supplement
until the final distribution for such Trust. Principal payments received by
the Trustee on the Equipment Notes held in each Trust will be passed through
to the Certificateholders of such Trust in scheduled amounts on the dates set
forth in the applicable Prospectus Supplement until the final distribution
date for such Trust.
If any date scheduled for any payment of principal, premium, if any, or
interest with respect to the Equipment Notes is not a business day, such
payment will be made on the next succeeding business day without any
additional interest unless otherwise provided in the applicable Prospectus
Supplement.
REDEMPTION
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the Equipment Notes may be
redeemed or purchased prior to the stated maturity date thereof, in whole or
in part, the premium, if any, applicable upon certain redemptions or purchases
and other terms applying to the redemptions or purchases of such Equipment
Notes.
SECURITY
Except during any relevant Pre-Funding Period, the Leased Aircraft Notes
will be secured by (i) an assignment by the related Owner Trustee to the
related Loan Trustee of such Owner Trustee's rights (except for certain
rights, including those described below) under the Lease or Leases with
respect to the related Aircraft, including the right to receive payments of
rent thereunder, and (ii) a mortgage granted to such Loan Trustee in such
Aircraft, subject to the rights of US Airways under such Lease or Leases.
Under the terms of each Lease,
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US Airways' obligations in respect of each Leased Aircraft will be those of a
lessee under a "net lease." Accordingly, US Airways will be obligated, among
other things and at its expense, to cause each Leased Aircraft to be duly
registered, to pay all costs of operating such Aircraft and to maintain,
service, repair and overhaul (or cause to be maintained, serviced, repaired
and overhauled) such Aircraft. With respect to the Leased Aircraft, the
assignment by the related Owner Trustee to the related Loan Trustee of its
rights under the related Lease will exclude, among other things, rights of
such Owner Trustee and the related Owner Participant relating to
indemnification by US Airways for certain matters, insurance proceeds payable
to such Owner Trustee in its individual capacity and to such Owner Participant
under liability insurance maintained by US Airways pursuant to such Lease or
by such Owner Trustee or such Owner Participant, insurance proceeds payable to
such Owner Trustee in its individual capacity or to such Owner Participant
under certain casualty insurance maintained by such Owner Trustee or such
Owner Participant pursuant to such Lease and any rights of such Owner
Participant or such Owner Trustee to enforce payment of the foregoing amounts
and their respective rights to the proceeds of the foregoing.
The Owned Aircraft Notes will be secured by a mortgage granted to the
related Loan Trustee of all of US Airways' right, title and interest in and to
such Owned Aircraft. Under the terms of each Owned Aircraft Indenture, US
Airways will be obligated, among other things and at its expense, to cause
each Owned Aircraft to be duly registered, to pay all costs of operating such
Aircraft and to maintain, service, repair and overhaul (or cause to be
maintained, serviced, repaired and overhauled) such Aircraft.
The Prospectus Supplement will describe the required insurance coverage with
respect to the Aircraft.
US Airways will be required, except under certain circumstances, to keep
each Aircraft registered under the Transportation Code, and to record the
Indenture and the Lease, if applicable, among other documents, with respect to
each Aircraft under the Transportation Code. Such recordation of the
Indenture, the Lease, if applicable, and other documents with respect to each
Aircraft will give the related Loan Trustee a perfected security interest in
the related Aircraft whenever it is located in the United States or any of its
territories and possessions; the Convention on the International Recognition
of Rights in Aircraft (the "Convention") provides that such security will also
be recognized, with certain limited exceptions, in those jurisdictions that
have ratified or adhere to the Convention. US Airways will have the right,
subject to certain conditions, at its own expense to register each Aircraft in
countries other than the United States. Each Aircraft may also be operated by
US Airways or under lease, sublease or interchange arrangements in countries
that are not parties to the Convention. The extent to which the related Loan
Trustee's security interest would be recognized in an Aircraft located in a
country that is not a party to the Convention, and the extent to which such
security interest would be recognized in a jurisdiction adhering to the
Convention if the Aircraft is registered in a jurisdiction not a party to the
Convention, is uncertain. Moreover, in the case of an Indenture Default, the
ability of the related Loan Trustee to realize upon its security interest in
an Aircraft could be adversely affected as a legal or practical matter if such
Aircraft were registered or located outside the United States.
Unless otherwise specified in the applicable Prospectus Supplement, the
Equipment Notes will not be cross-collateralized and consequently the
Equipment Notes issued in respect of any one Aircraft will not be secured by
any other Aircraft or, in the case of Leased Aircraft Notes, the Lease related
to any other Aircraft. Unless and until an Indenture Default with respect to a
Leased Aircraft has occurred and is continuing, the related Loan Trustee may
exercise only limited rights of the related Owner Trustee under the related
Lease.
Funds, if any, held from time to time by the Loan Trustee with respect to
any Aircraft, prior to the distribution thereof, will be invested and
reinvested by such Loan Trustee. Such investment and reinvestment will be at
the direction of US Airways (except, with respect to a Leased Aircraft, in the
case of a Lease Event of Default under the applicable Lease or, with respect
to an Owned Aircraft, in the case of an Indenture Default under the applicable
Indenture), in certain investments described in the applicable Indenture. The
net amount of any loss resulting from any such investments will be paid by US
Airways.
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Section 1110 of the U.S. Bankruptcy Code provides in relevant part that,
unless certain events occur after the commencement of the Chapter 11 case, the
right of lessors, conditional vendors and holders of security interests with
respect to "equipment" (as defined in Section 1110 of the U.S. Bankruptcy
Code) to take possession of such equipment in compliance with the provisions
of a lease, conditional sale contract or security agreement, as the case may
be, is not affected by (a) the automatic stay provision of the U.S. Bankruptcy
Code, which provision enjoins repossessions by creditors for the duration of
the reorganization period, (b) the provision of the U.S. Bankruptcy Code
allowing the trustee in reorganization to use property of the debtor during
the reorganization period, (c) Section 1129 of the U.S. Bankruptcy Code (which
governs the confirmation of plans of reorganization in Chapter 11 cases) or
(d) any power of the bankruptcy court to enjoin a repossession. Specifically,
Section 1110 provides in relevant part that the right of a lessor, conditional
vendor or holder of a security interest to take possession of an aircraft in
the event of an event of default may not be exercised for 60 days following
the date of commencement of the reorganization proceedings (unless
specifically permitted by the bankruptcy court) and may not be exercised at
all if, within such 60-day period (or such longer period consented to by the
lessor, conditional vendor or holder of a security interest), the trustee in
reorganization agrees to perform the debtor's obligations that become due on
or after such date and cures all existing defaults (other than defaults
resulting solely from the financial condition, bankruptcy, insolvency or
reorganization of the debtor). "Equipment" is defined in Section 1110 of the
U.S. Bankruptcy Code, in part, as an aircraft, aircraft engine, propeller,
appliance, or spare part (as defined in Section 40102 of Title 49 of the U.S.
Code) that is subject to a security interest granted by, leased to, or
conditionally sold to a debtor that is a citizen of the United States (as
defined in Section 40102 of Title 49 of the U.S. Code) holding an air carrier
operating certificate issued by the Secretary of Transportation pursuant to
chapter 447 of Title 49 of the U.S. Code for aircraft capable of carrying 10
or more individuals or 6,000 pounds of more of cargo (subject to certain
limitations in the case of equipment first placed in service on or prior to
October 22, 1994).
In connection with any issuance of Certificates under this Prospectus and
the applicable Prospectus Supplement, it is a condition to the Trustee's
obligation to purchase Equipment Notes with respect to each Aircraft that
outside counsel to US Airways provide its opinion to such Trustee that (i) if
such Aircraft is a Leased Aircraft, the Owner Trustee, as lessor under the
Lease for such Aircraft, and the Loan Trustee, as assignee of such Owner
Trustee's rights under such Lease pursuant to the applicable Indenture, will
be entitled to the benefits of Section 1110 of the U.S. Bankruptcy Code with
respect to the airframe and engines comprising such Aircraft or (ii) if such
Aircraft is an Owned Aircraft, the Loan Trustee will be entitled to the
benefits of Section 1110 with respect to the airframe and engines comprising
such Owned Aircraft, in each case as long as US Airways continues to be a
"citizen of the United States" as defined in Section 40102 of Title 49 of the
U.S. Code holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49 of the U.S. Code for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of
cargo. Such opinion will not address the possible replacement of an Aircraft
after an Event of Loss (as defined in the applicable Indenture) in the future.
DELAYED LEASE COMMENCEMENT
If the applicable Prospectus Supplement provides that a Pre-Funding Period
will apply to a Leased Aircraft and that a Trust may purchase Leased Aircraft
Notes prior to the commencement of the related Lease, then until commencement
of a Lease with respect to such Leased Aircraft and the Loan Trustee's release
of funds from the related collateral account or until payment by the provider
of the depositary arrangement of the debt portion of the purchase price for
such Leased Aircraft, such Leased Aircraft is referred to as a "Delayed Lease
Aircraft" and the period prior to commencement of such Lease and the Loan
Trustee's release of such funds is referred to as the "Pre-Funding Period."
Unless otherwise specified in a Prospectus Supplement, in the case of Leased
Aircraft Notes relating to a Delayed Lease Aircraft, the proceeds from sale of
such Leased Aircraft Notes to the applicable Trusts, after deducting certain
expenses of the offering of the related Certificates, will be deposited by the
Owner Trustee on the date of such sale, in a collateral account established
pursuant to the applicable Indenture or pursuant to a collateral agreement.
Such collateral account will secure payment of the related Leased Aircraft
Notes pending
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delivery of the related Aircraft. In addition, if the Prospectus Supplement so
provides, US Airways will be required to provide to the Loan Trustee
additional collateral (in addition to such collateral account) for such Leased
Aircraft Notes during the related Pre-Funding Period. Alternatively, US
Airways may establish a depositary arrangement pursuant to which the proceeds
from the sale of such Leased Aircraft will be deposited in a deposit account
with a third party (having a short-term senior unsecured credit rating at
least equal to the highest rating applicable to the Certificates), who agrees
to pay amounts corresponding to amounts payable on the Leased Aircraft Notes
in respect of the related Pre-Funding Period and the debt portion of the
purchase price of the related Aircraft upon delivery thereof. Funds in any
collateral account will be invested pursuant to the related collateral
agreement or Indenture in U.S. government obligations or such other
obligations as further described in the applicable Prospectus Supplement.
Earnings on such investments will be retained in the collateral account
pending distribution as contemplated below.
Unless otherwise specified in a Prospectus Supplement, the Leased Aircraft
Notes relating to a Delayed Lease Aircraft will be issued in an amount such
that the net proceeds thereof, together with expected earnings on the
investments in any collateral account and any additional collateral or
together with a depositary arrangement, will be sufficient (i) to make
scheduled payments of principal, if any, and interest accrued on such Leased
Aircraft Notes during the related scheduled Pre-Funding Period specified in
such Prospectus Supplement and (ii) to finance a portion of the purchase price
of such Delayed Lease Aircraft, as specified in such Prospectus Supplement.
Subject to any mandatory prepayment contemplated below, on each date during
any scheduled Pre-Funding Period for the scheduled payments of principal, if
any, and interest on the related Leased Aircraft Notes, the Loan Trustee shall
withdraw from the collateral account the amount necessary to make the
scheduled payment then due or, in the case of a depositary arrangement, shall
withdraw such amount from the deposit account.
MANDATORY PREPAYMENTS DURING THE PRE-FUNDING PERIOD
Unless otherwise specified in a Prospectus Supplement, to the extent that
the Lease related to a Delayed Lease Aircraft has not commenced on or prior to
the relevant date specified in the applicable Prospectus Supplement as the
last date of the related permitted Pre-Funding Period either (i) the
collateral account and, to the extent necessary, any additional collateral
will be drawn upon or, in the case of a depositary arrangement, the deposit
account will be drawn upon and the related Leased Aircraft Notes will be
prepaid at a prepayment price equal to the aggregate principal amount of such
Leased Aircraft Notes, together with accrued but unpaid interest thereon to
the date designated for such prepayment specified in such Prospectus
Supplement or (ii) US Airways will assume the Leased Aircraft Notes on a full
recourse basis.
With respect to any Delayed Lease Aircraft, the applicable Prospectus
Supplement also will set forth (i) any mandatory prepayment of the related
Leased Aircraft Notes, and the prepayment price therefor, upon the occurrence
of any event of loss with respect to such Delayed Lease Aircraft during such
Pre-Funding Period and (ii) any option US Airways may have to convert the
leveraged lease financing for a Delayed Lease Aircraft into the type of
financing available for Owned Aircraft.
RANKING OF EQUIPMENT NOTES
Some of the Equipment Notes related to one or more Aircraft, as described in
the related Prospectus Supplement, may be subordinated and junior in right of
payment to other Equipment Notes related to the same Aircraft. The terms of
such subordination, if any, will be described in the related Prospectus
Supplement.
PAYMENTS AND LIMITATION OF LIABILITY
Each Leased Aircraft will be leased by the related Owner Trustee to US
Airways for a term commencing on the delivery date thereof to such Owner
Trustee and expiring on a date not earlier than the latest maturity date of
the related Leased Aircraft Notes, unless previously terminated as permitted
by the terms of the related Lease. The basic rent and certain other payments
under each such Lease will be payable by US Airways and will
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be assigned by the related Owner Trustee under the applicable Indenture to the
related Loan Trustee to provide the funds necessary to pay principal of,
premium, if any, and interest due from such Owner Trustee on the Leased
Aircraft Notes issued under such Indenture. In certain cases, the basic rent
payments under a Lease may be adjusted, but each Lease will provide that under
no circumstances will rent payments by US Airways be less than the scheduled
payments on the related Leased Aircraft Notes. The balance of any basic rent
payment under each Lease, after payment of amounts due on the Leased Aircraft
Notes issued under the Indenture corresponding to such Lease, will be paid
over to the applicable Owner Trustee. US Airways' obligation to pay rent and
to cause other payments to be made under each Lease will be general
obligations of US Airways.
With respect to the Leased Aircraft Notes, except in certain circumstances
involving US Airways' purchase of a Leased Aircraft and the assumption of the
Leased Aircraft Notes related thereto, the Leased Aircraft Notes will not be
obligations of, or guaranteed by, US Airways. With respect to the Leased
Aircraft Notes, none of the Owner Trustees, the Owner Participants or the Loan
Trustees will be personally liable to any holder of such Leased Aircraft Notes
for amounts payable under such Leased Aircraft Notes, or, except as provided
in the Indentures relating thereto in the case of the Owner Trustees and the
Loan Trustees, for any liability under such Indentures. Except in the
circumstances referred to above, all amounts payable under any Leased Aircraft
Notes (other than payments made in connection with an optional redemption or
purchase by the related Owner Trustee or the related Owner Participant) will
be made only from (i) the assets subject to the lien of the applicable
Indenture with respect to such Aircraft or the income and proceeds received by
the related Loan Trustee therefrom (including rent payable by US Airways under
the related Lease) or (ii) if so provided in the related Prospectus
Supplement, the applicable Liquidity Facility.
With respect to the Leased Aircraft Notes, except as otherwise provided in
the applicable Indenture, no Owner Trustee will be personally liable for any
amount payable or for any statements, representations, warranties, agreements
or obligations under any such Indenture or under such Leased Aircraft Notes
except for its own willful misconduct or gross negligence. None of the Owner
Participants will have any duty or responsibility under the Leased Aircraft
Indentures or under such Leased Aircraft Notes to the related Loan Trustee or
to any holder of any such Leased Aircraft Note.
US Airways' obligations under each Owned Aircraft Indenture and under the
Owned Aircraft Notes will be general obligations of US Airways.
DEFEASANCE OF THE INDENTURES AND THE EQUIPMENT NOTES IN CERTAIN CIRCUMSTANCES
Unless otherwise specified in the applicable Prospectus Supplement, the
applicable Indenture provides that the obligations of the related Loan Trustee
and, with respect to any Leased Aircraft Notes, the related Owner Trustee or,
with respect to any Owned Aircraft Notes, US Airways under the applicable
Indenture will be deemed to have been discharged and paid in full (except for
certain obligations, including the obligations to register the transfer or
exchange of Equipment Notes, to replace stolen, lost, destroyed or mutilated
Equipment Notes and to maintain paying agencies and hold money for payment in
trust) on the 91st day after the date of irrevocable deposit with the related
Loan Trustee of money or certain obligations of the United States or any
agency or instrumentality thereof the payment of which is backed by the full
faith and credit of the United States which, through the payment of principal
and interest in respect thereof in accordance with their terms, will provide
money in an aggregate amount sufficient to pay when due (including as a
consequence of redemption in respect of which notice is given on or prior to
the date of such deposit) principal of, premium, if any, and interest on all
Equipment Notes issued thereunder in accordance with the terms of such
Indenture. Such discharge may occur only if, among other things, there has
been published by the Internal Revenue Service a ruling to the effect that
holders of such Equipment Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount and in
the same manner and at the same time as would have been the case if such
deposit, defeasance and discharge had not occurred.
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Upon such defeasance, or upon payment in full of the principal of, premium,
if any, and interest on all Equipment Notes issued under any Indenture on the
maturity date therefor or deposit with the applicable Loan Trustee of money
sufficient therefor no earlier than one year prior to the date of such
maturity, the holders of such Equipment Notes will have no beneficial interest
in or other rights with respect to the related Aircraft or other assets
subject to the lien of such Indenture and such lien will terminate.
ASSUMPTION OF OBLIGATIONS BY US AIRWAYS
Unless otherwise specified in the applicable Prospectus Supplement with
respect to Leased Aircraft, upon the exercise by US Airways of any purchase
options it may have under the related Lease prior to the end of the term of
such Lease, US Airways may assume on a full recourse basis all of the
obligations of the Owner Trustee (other than its obligations in its individual
capacity) under the Indenture with respect to such Aircraft, including the
obligations to make payments in respect of the related Leased Aircraft Notes.
In such event, certain relevant provisions of the related Lease, including
(among others) provisions relating to maintenance, possession and use of the
related Aircraft, liens, insurance and events of default will be incorporated
into such Indenture, and the Leased Aircraft Notes issued under such Indenture
will not be redeemed and will continue to be secured by such Aircraft. Such
assumption may occur only if, among other things, US Airways has provided an
opinion of counsel to the effect that holders of such Equipment Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such assumption and will be subject to federal income tax on the same amount
and in the same manner and at the same time as would have been the case if
such assumption had not occurred.
LIQUIDITY FACILITY
The related Prospectus Supplement may provide that one or more payments of
interest on the related Equipment Notes of one or more series or distributions
made by the Trustee of the related Trust will be supported by a Liquidity
Facility issued by an institution identified in the related Prospectus
Supplement. Unless otherwise provided in the related Prospectus Supplement,
the provider of the Liquidity Facility will have a senior claim upon the
assets securing the Equipment Notes.
INTERCREDITOR ISSUES
Equipment Notes may be issued in different Classes, which means that the
Equipment Notes may have different payment priorities even though they are
issued by the same borrower and relate to the same Aircraft. In such event,
the related Prospectus Supplement will describe the priority of distributions
among such Equipment Notes (and any Liquidity Facilities therefor), the
ability of any Class to exercise and/or enforce any or all remedies with
respect to the related Aircraft (and, if the Equipment Notes are Leased
Aircraft Notes, the Lease related thereto) and certain other intercreditor
terms and provisions.
OWNER PARTICIPANT; REVISIONS TO AGREEMENTS
If specified in the applicable Prospectus Supplement, at the time Pass
Through Certificates are issued, US Airways may still be seeking Owner
Participants with respect to the trusts relating to certain of the Aircraft.
US Airways will hold the beneficial interest under the Trust Agreement
relating to each such Aircraft until the date upon which a prospective Owner
Participant commits to participate in the purchase price of such Aircraft
(which date may be up to 90 days after the scheduled delivery date of the
Aircraft). US Airways will transfer to such Owner Participant on such date US
Airways' beneficial interest under the Trust Agreement. Such prospective Owner
Participants may request revisions to the Participation Agreement, Lease,
Trust Agreement and Indenture so that the terms of such agreements applicable
to these Aircraft may differ from the description of such agreements contained
in the applicable Prospectus Supplement.
Notwithstanding the foregoing, the terms of such agreements will be required
to (i) contain certain mandatory document terms and (ii) not vary certain
mandatory economic terms. In addition, US Airways will be
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obligated (i) to certify to the Pass Through Trustee that any such
modifications will not materially and adversely affect the Certificateholders
and (ii) if the documents are modified in any material respect, to obtain
written confirmation from each Rating Agency that the use of modified versions
of such agreements will not result in a withdrawal, suspension or downgrading
of the rating of any Class of Pass Through Certificates.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Unless otherwise indicated in the applicable Prospectus Supplement, the
following summary describes the principal U.S. federal income tax consequences
to Certificateholders of the purchase, ownership and disposition of the
Certificates offered hereby and in the opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, special tax counsel to US Airways ("Tax Counsel"), is
accurate in all material respects with respect to the matters discussed
herein. Except as otherwise specified, the summary is addressed to the initial
beneficial owners of Certificates ("U.S. Certificateholders") that are
citizens or residents of the United States, corporations, partnerships or
other entities created or organized in or under the laws of the United States
or any state therein, or estates, the income of which is subject to U.S.
federal income taxation regardless of its source, or trusts if a court within
the U.S. is able to exercise primary jurisdiction over the administration of
the trust and one or more U.S. persons have the authority to control all
substantial decisions of the trust ("U.S. Persons") that will hold the
Certificates as capital assets. This summary does not address the tax
treatment of U.S. Certificateholders that may be subject to special tax rules,
such as banks, insurance companies, dealers in securities or commodities, tax-
exempt entities, holders that will hold Certificates as part of a straddle or
holders that have a "functional currency" other than the U.S. Dollar, nor does
it address the tax treatment of U.S. Certificateholders that do not acquire
Certificates at the initial offering price as part of the initial offering
thereof. This summary does not purport to be a comprehensive description of
all of the tax considerations that may be relevant to a decision to purchase
Certificates. This summary does not describe any tax consequences arising
under the laws of any state, locality or taxing jurisdiction other than the
United States.
The summary is based upon the tax laws and practice of the United States as
in effect on the date of this Prospectus, as well as judicial and
administrative interpretations thereof (in final or proposed form) available
on or before such date. All of the foregoing are subject to change, which
change could apply retroactively. Prospective investors should note that no
rulings have been sought from the Internal Revenue Service (the "IRS") with
respect to the federal income tax consequences, discussed below, and no
assurances can be given that the IRS will not take contrary positions. The
Trusts are not indemnified for any federal income taxes that may be imposed
upon them, and the imposition of any such taxes on a Trust could result in a
reduction in the amounts available for distribution to the Certificateholders
of such Trust. Prospective investors should consult their own tax advisors
with respect to the federal, state, local and foreign tax consequences to them
of the purchase, ownership and disposition of the Certificates.
TAX TREATMENT OF THE TRUSTS AND CERTIFICATEHOLDERS
Each Trust will not itself be subject to U.S. federal income taxation. Each
U.S. Certificateholder will be required to report on its federal income tax
return its pro rata share of the entire income from the Equipment Notes and
any other property held in the related Trust, in accordance with the U.S.
Certificateholder's method of accounting. Accordingly, each U.S.
Certificateholder's share of interest paid on the Equipment Notes will be
taxable as ordinary income, as it is paid or accrued, and a U.S.
Certificateholder's share of premium, if any, paid on redemption of an
Equipment Note will be treated as capital gain. In the event that a Trust is
supported by a Liquidity Facility, any amounts received by the Trust under the
Liquidity Facility with respect to unpaid interest will be treated for U.S.
federal income tax purposes as having the same characteristics as the payments
they replace.
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Each U.S. Certificateholder will be entitled to deduct, consistent with its
method of accounting, its pro rata share of fees and expenses paid or incurred
by the corresponding Trust as provided in Section 162 or 212 of the Internal
Revenue Code of 1986, as amended (the "Code"). Certain fees and expenses,
including fees paid to the Trustee and the provider of the Liquidity Facility
(if applicable), will be borne by parties other than the Certificateholders.
It is possible that such fees and expenses will be treated as constructively
received by the Trust, in which event a U.S. Certificateholder will be
required to include in income and will be entitled to deduct its pro rata
share of such fees and expenses. If a U.S. Certificateholder is an individual,
estate or trust, the deduction for such holder's share of such fees or
expenses will be allowed only to the extent that all of such holder's
miscellaneous itemized deductions, including such holder's share of such fees
and expenses, exceed 2% of such holder's adjusted gross income. In addition,
in the case of U.S. Certificateholders who are individuals, certain otherwise
allowable itemized deductions will be subject generally to additional
limitations on itemized deductions under applicable provisions of the Code.
EFFECT OF SUBORDINATION OF SUBORDINATED CERTIFICATEHOLDERS
In the event that any Trust (such Trust being a "Subordinated Trust" and the
related Certificates being "Subordinated Certificates") is subordinated in
right of payment to any other Trust and the Subordinated Trust receives less
than the full amount of the receipts of interest, principal or premium paid
with respect to the Equipment Notes held by it (any shortfall in such receipts
being the "Shortfall Amounts") because of the subordination of such Trust, the
corresponding owners of beneficial interests in the Subordinated Certificates
(the "Subordinated Certificateholders") would probably be treated for federal
income tax purposes as if they had (1) received as distributions their full
share of such receipts, (2) paid over to the relevant preferred class of
Certificateholders an amount equal to their share of such Shortfall Amount,
and (3) retained the right to reimbursement of such amounts to the extent of
future amounts payable to such Subordinated Certificateholders with respect to
such Shortfall Amount.
Under this analysis, (1) Subordinated Certificateholders incurring a
Shortfall Amount would be required to include as current income any interest
or other income of the corresponding Subordinated Trust that was a component
of the Shortfall Amount, even though such amount was in fact paid to the
relevant preferred class of Certificateholders, (2) a loss would only be
allowed to such Subordinated Certificateholders when their right to receive
reimbursement of such Shortfall Amount becomes worthless (i.e., when it
becomes clear that funds will not be available from any source to reimburse
such loss), and (3) reimbursement of such Shortfall Amount prior to such a
claim of worthlessness would not be taxable income to Subordinated
Certificateholders because such amount was previously included in income.
These results should not significantly affect the inclusion of income for
Subordinated Certificateholders on the accrual method of accounting, but could
accelerate inclusion of income to Subordinated Certificateholders on the cash
method of accounting by, in effect, placing them on the accrual method.
ORIGINAL ISSUE DISCOUNT
The Equipment Notes may be issued with original issue discount ("OID"). The
Prospectus Supplement will state whether any Equipment Notes to be held by the
related Trust will be issued with OID. Generally, a holder of a debt
instrument issued with OID that is not de minimis must include such OID in
income for federal income tax purposes as it accrues, in advance of the
receipt of the cash attributable to such income, under a method that takes
into account the compounding of interest.
SALE OR OTHER DISPOSITION OF THE CERTIFICATES
Upon the sale, exchange or other disposition of a Certificate, a U.S.
Certificateholder generally will recognize capital gain or loss equal to the
difference between the amount realized on the disposition (other than any
amount attributable to accrued interest which will be taxable as ordinary
income) and the U.S. Certificateholder's adjusted tax basis in the related
Equipment Notes and any other property held by the corresponding Trust. Any
gain or loss will be long-term capital gain or loss to the extent attributable
to property
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held by the Trust for more than one year. In the case of individuals, estates,
and trusts, the maximum U.S. federal income tax rate on long-term capital
gains generally is 20%.
FOREIGN CERTIFICATEHOLDERS
Under present U.S. federal income tax law, assuming certain certification
requirements are satisfied (which include identification of the beneficial
owner of a Certificate), and subject to the discussion of backup withholding
below:
(1) payments of interest (including any OID) on a Certificate to, or on
behalf of, any beneficial owner of a Certificate that is not a U.S. Person
(a "Non-U.S. Certificateholder") will not be subject to U.S. federal income
tax or withholding tax provided that (1) such Non-U.S. Certificateholder
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of an Owner Participant or US Airways,
(2) such Non-U.S. Certificateholder is not (i) a bank receiving interest
pursuant to a loan agreement entered into in the ordinary course of its
trade or business, or (ii) a controlled foreign corporation for U.S. tax
purposes that is related to an Owner Participant or US Airways, and (3)
such interest payments are not effectively connected with the conduct of a
U.S. trade or business of such Non-U.S. Certificateholder; and
(2) a Non-U.S. Certificateholder will not be subject to U.S. federal
income tax on any capital gain realized on the sale, exchange, retirement
or other disposition of a Certificate, unless (1) such Non-U.S.
Certificateholder is an individual who is present in the United States for
183 days or more during the taxable year of the sale, exchange, retirement
or other disposition and certain other requirements are met or (2) such
gain is effectively connected with the conduct of a U.S. trade or business
of such Non-U.S. Certificateholder.
The certification referred to above may be made on an IRS Form W-8 or
substantially similar substitute form.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments within the United States of principal, interest, OID and premium on
the Certificates, and to payments of the proceeds of certain sales of
Certificates made to U.S. Certificateholders other than certain exempt
recipients (such as corporations). A 31% "backup withholding" tax may apply to
such payments if the holder fails or has failed to provide an accurate
taxpayer identification number or otherwise establish an exemption or fails to
report in full interest income. With respect to Non-U.S. Certificateholders,
payments made on a Certificate and proceeds from the sale of a Certificate
owned by a Non-U.S. Certificateholder will generally not be subject to such
information reporting requirements or backup withholding tax if such Non-U.S.
Certificateholder provides the applicable statement as to its non-U.S. status
or otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be allowed as a refund or credit against such
holder's U.S. federal income tax liability, if any, provided the required
information is furnished to the IRS.
The Treasury Department recently issued final Treasury Regulations (the
"Final Regulations") governing backup withholding and information reporting
requirements. The Final Regulations do not significantly alter the substantive
withholding and information reporting requirements discussed herein; they
unify current certification procedures and forms and clarify reliance
standards. The Final Regulations will generally become effective for payments
made after December 31, 1999.
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ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Certificates may, subject to certain legal restrictions, be purchased and held
by an employee benefit plan (a "Plan") subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or an individual
retirement account or an employee benefit plan subject to section 4975 of the
Code. A fiduciary of a Plan must determine that the purchase and holding of a
Certificate is consistent with its fiduciary duties under ERISA and does not
result in a non-exempt prohibited transaction as defined in section 406 of
ERISA or section 4975 of the Code. Employee benefit plans which are
governmental plans (as defined in section 3(32) of ERISA) and certain church
plans (as defined in section 3(33) of ERISA) are not subject to Title I of
ERISA or section 4975 of the Code. The Certificates may, subject to certain
legal restrictions, be purchased and held by such plans.
PLAN OF DISTRIBUTION
Certificates may be sold to one or more underwriters for public offering and
sale by them or to investors or other persons directly or through one or more
dealers or agents. Any such underwriter, dealer or agent involved in the offer
and sale of the Certificates will be named in an applicable Prospectus
Supplement.
The Certificates may be sold at a fixed price or prices, which may be
changed, or from time to time at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Dealer trading may take place in certain of the Certificates, including
Certificates not listed on any securities exchange. US Airways does not intend
to apply for listing of the Certificates on a national securities exchange. US
Airways also may, from time to time, authorize underwriters acting as US
Airways' agents to offer and sell the Certificates upon the terms and
conditions as will be set forth in any Prospectus Supplement. In connection
with the sale of Certificates, underwriters may be deemed to have received
compensation from US Airways in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Certificates
for whom they may act as agent. Underwriters may sell Certificates to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
(which may be changed from time to time) from the purchasers for whom they may
act as agent.
If a dealer is used directly by US Airways in the sale of Certificates in
respect of which this Prospectus is delivered, such Certificates will be sold
to the dealer, as principal. The dealer may then resell such Certificates to
the public at varying prices to be determined by such dealer at the time of
resale. Any such dealer and the terms of any such sale will be set forth in
the Prospectus Supplement relating thereto.
Certificates may be offered and sold through agents designated by US Airways
from time to time. Any such agent involved in the offer or sale of the
Certificates in respect of which this Prospectus is delivered will be named
in, and any commissions payable by US Airways to such agent will be set forth
in, the applicable Prospectus Supplement. Unless otherwise indicated in the
applicable Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
Offers to purchase Certificates may be solicited directly by US Airways and
sales thereof may be made by US Airways directly to institutional investors or
others who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto. Except as set
forth in the applicable Prospectus Supplement, no director, officer or
employee of US Airways will solicit or receive a commission in connection with
direct sales by US Airways of the Certificates, although such persons may
respond to inquiries by potential purchasers and perform ministerial and
clerical work in connection with any such direct sales.
Any underwriting compensation paid by US Airways to underwriters, dealers or
agents in connection with the offering of Certificates, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Certificates may
be deemed to be underwriters, and any discounts and
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commissions received by them and any profit realized by them on resale of the
Certificates may be deemed to be underwriting discounts and commissions under
the Securities Act. Underwriters, dealers and agents may be entitled, under
agreements with US Airways, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act, and
to reimbursement by US Airways for certain expenses.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, US Airways and its subsidiaries in the ordinary course of
business.
If so indicated in an applicable Prospectus Supplement and subject to
existing market conditions, US Airways will authorize dealers acting as US
Airways' agents to solicit offers by certain institutions to purchase
Certificates at the public offering price set forth in such Prospectus
Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for
payment and delivery on the date or dates stated in such Prospectus
Supplement. Each Contract will be for an amount not less than, and the
aggregate principal amount of Certificates sold pursuant to Contracts will not
be less nor more than, the respective amounts stated in such Prospectus
Supplement. Institutions with whom Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions, but will in all cases be subject to the approval of US Airways.
Contracts will not be subject to any conditions except the purchase by an
institution of the Certificates covered by its Contracts will not at the time
of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject. A commission indicated in the
applicable Prospectus Supplement will be granted to underwriters and agents
soliciting purchases of Certificates pursuant to Contracts accepted by US
Airways. Agents and underwriters will have no responsibility in respect of the
delivery or performance of Contracts.
If an underwriter or underwriters are utilized in the sale of any
Certificates, the applicable Prospectus Supplement will contain a statement as
to the intention, if any, of such underwriters at the date of such Prospectus
Supplement to make a market in the Certificates. No assurances can be given
that there will be a market for the Certificates.
The place and time of delivery for the Certificates in respect of which this
Prospectus is delivered will be set forth in the applicable Prospectus
Supplement.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Certificates will be passed upon for US Airways by Skadden,
Arps, Slate, Meagher & Flom (Illinois) and its affiliates. Unless otherwise
indicated in the applicable Prospectus Supplement, Skadden, Arps, Slate,
Meagher & Flom (Illinois) and its affiliates will rely on the opinion of
counsel for the Trustee as to certain matters relating to the authorization,
execution and delivery of such Certificates by, and the valid and binding
effect thereof on, such Trustee.
EXPERTS
The consolidated financial statements of US Airways, Inc. and its subsidiary
as of December 31, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997 which are included in US Airways' Annual Report
on Form 10-K for the year ended December 31, 1997, have been incorporated by
reference herein and in the registration statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
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OTHER INFORMATION
EFFECTS OF YEAR 2000
The Company is currently operating computer software applications and
systems to support important business applications, including reservations,
accounting and flight operations systems, that will not properly process dates
on or after January 1, 2000 (commonly referred to as the "Year 2000" problem).
In order to address this situation, the Company has implemented a plan that
addresses the Company's information technology and non-information technology
systems. The Company has two teams of full-time staff in place. One team is
coordinating the conversion of the Company's information technology to systems
managed by The SABRE Group ("TSG"), including the Year 2000 compliance for
those systems, as further described below. A second team, headed by the
Company's Chief Information Officer, is coordinating Year 2000 compliance
efforts for non-information technology systems. This team has engaged the
consulting arm of a "big five" public accounting firm to assist them in their
efforts. This team is reviewing the level of the Company's Year 2000
compliance, and recommending such remedial measures as are necessary.
TSG Year 2000 Project
The Company has a long-term information technology relationship with TSG
pursuant to which it is converting many of its information technology systems
to those operated by TSG. TSG has reported that a majority of its primary
"host" systems (including systems for reservations, flight operations, and
cargo) are already Year 2000 compliant. Generally, US Airways' conversion to
TSG systems is being implemented after the applicable TSG system is already
Year 2000 compliant. The remaining systems will be made compliant by TSG by
August 1, 1999. The Company is working to establish Year 2000 testing
procedures between its systems and TSG's systems. The balance of TSG's systems
to which the Company will be converting are scheduled to be Year 2000
compliant no later than August 1, 1999. TSG is also remediating all non-Year
2000 compliant systems that are covered by the Company's relationship with
TSG, but that are not being converted to a TSG system. These remediation
efforts are scheduled for completion by August 1, 1999.
TSG has also informed the Company that it is in the process of communicating
with TSG's own third party vendors concerning the Year 2000 compliance of
their products and services.
Company Year 2000 Project
The Company operates computer software and systems that are not Year 2000
compliant, and that are not covered by the TSG relationship. This includes
both information technology and non-information technology systems (such as
fax machines, miscellaneous airport devices, and aircraft avionics).
The Company has completed an inventory of items with possible Year 2000
problems. The Company has prioritized these items and has begun to implement a
program to assess, remediate and test the non-discretionary systems based on
this prioritization. The Company plans to complete the assessment of all vital
items by December 31, 1998. The Company plans to complete the remediation of
all non-discretionary systems by June 30, 1999. The Company is also working
with the Federal Aviation Administration ("FAA") to ensure full compliance
with any FAA Year 2000 requirements.
The Company has also commenced airport and facility reviews. This entails
reviewing the Year 2000 compliance of the systems in those locations over
which the Company has little or no control, such as certain flight information
displays, elevators, security and other miscellaneous airport devices. The
Company plans to complete these reviews by December 31, 1998. The Company is
also participating in Year 2000 review efforts being coordinated on an
industry-wide basis by the Airline Transport Association and the International
Air Transport Association.
The Company has identified and prioritized its supplier base, and is
commencing formal contact with these vendors to determine their Year 2000
status, and any possible impact on the Company. Approximately one-third of the
vendors have been contacted with fourteen percent vendor responses returned.
The Company will track these responses and evaluate its long term relationship
with these vendors based on the responses it receives.
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Contingency Plans
Although TSG has notified the Company that it believes that its Year 2000
compliance program is on schedule, there can be no assurance that the
compliance program will be completed on a timely basis. Similarly, there can
be no assurance that the Company's own computer software and systems, those of
its suppliers, the airports at which the Company operates, or the air traffic
control system managed by the FAA will be made Year 2000 compliant in a timely
manner. Any such failures could have a material adverse effect on the
business, financial position and results of operations of the Company.
The Company is establishing contingency plans in the event that any non-
discretionary system is not Year 2000 compliant by the date required. These
plans will entail reverting to an older and/or manual system until the
applicable system can be remediated. In the event that the Company is required
to implement a contingency plan, it believes that the result may be
significant delays in operations and flight cancellations. In the event that
such delays and flight cancellations occur, it is possible, depending on the
extent of the delays and cancellations, that there could be a material adverse
impact on the Company's results of operations and financial position.
As of September 30, 1998, aggregate expenses incurred by the Company to
become Year 2000 compliant, apart from expenses related to the TSG
relationship, have amounted to approximately $2.1 million. The Company expects
to spend an additional $8 million, apart from the TSG relationship, in order
to become fully Year 2000 compliant. These amounts are also exclusive of any
replacement equipment that may become necessary and have not yet been
identified. With respect to the cost of TSG's Year 2000 compliance program,
the Company cannot completely quantify the costs for Year 2000 compliance on
its information technology systems because such costs have been incorporated
into the costs of the broader conversion plan to TSG systems. However, the
Company anticipates incurring $24 million in expenses for TSG services which
are related solely to Year 2000 compliance efforts on the systems, unrelated
to the broader conversion plan. The Company expects to pay TSG $18 million for
these services in 1998 and another $6 million in 1999. Overall, the Company
believes that the cost of becoming Year 2000 compliant is not expected to have
a material adverse effect on the business, financial position or results of
operations of the Company.
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