<PAGE>
As filed with the Securities and Exchange Commission on May 28, 1999
Registration No. 333-73057
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
US AIRWAYS, INC.
Delaware 4512 53-0218143
(State or other
jurisdiction of
incorporation or
organization)
(Primary Standard IndustrialClassification Code Number)
(I.R.S.
EmployerIdentification
Number)
2345 Crystal Drive
Arlington, Virginia 22227
(703) 872-7000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Copies to:
Thomas A. MutrynSenior Vice
President-- Finance and Chief Lawrence M. Nagin
Financial OfficerUS Airways, Inc.2345
Crystal DriveArlington, Virginia Executive Vice President-- Corporate
22227(703) 872-7000 Affairs and General Counsel
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
(Name, address, including zip code,
and (703) 872-7000
telephone number, including area code,
William R. Kunkel
of agent for service)
Skadden, Arps, Slate, Meagher & Flom
(Illinois)
333 W. Wacker Dr.
Chicago, Illinois 60606
(312) 407-0700
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
WILL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
US AIRWAYS, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form S-
4 Item Location in Prospectus
------- ----------------------------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
Item 1: Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus........................... Outside Front Cover Page
Item 2: Inside Front and Outside Back Cover Inside Front Cover Page; Outside Back
Pages of Prospectus.................. Cover Page
Item 3: Risk Factors, Ratio of Earnings to
Fixed Charges, and Other Inside Front Cover Page; Prospectus
Information.......................... Summary; Risk Factors; The Company;
Ratio of Earnings to Fixed Charges
Item 4: Terms of the Transaction............. Prospectus Summary; The Exchange Offer;
Description of the Certificates; Certain
United States Federal Income Tax
Consequences; Plan of Distribution
Item 5: Pro Forma Financial Information...... Not Applicable
Item 6: Material Contacts With the Company
Being Acquired....................... Not Applicable
Item 7: Additional Information Required For
Reoffering by Persons and Parties
Deemed to be Underwriters............ Not Applicable
Item 8: Interests of Named Experts and
Counsel.............................. Not Applicable
Item 9: Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.......................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
Item 10: Information With Respect to S-3 Available Information; Incorporation of
Registrants.......................... Certain Documents by Reference
Item 11: Incorporation of Certain Information Available Information; Incorporation of
by Reference......................... Certain Documents by Reference
Item 12: Information With Respect to S-2 or S-
3 Registrants........................ Not Applicable
Item 13: Incorporation of Certain Information
by Reference......................... Not Applicable
Item 14: Information With Respect to
Registrants Other Than S-3 or S-2
Registrants.......................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Form S-
4 Item Location in Prospectus
------- ----------------------
<S> <C>
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED
Item 15: Information With Respect to S-3 Companies...... Not Applicable
Item 16: Information With Respect to S-2 or S-3
Companies...................................... Not Applicable
Item 17: Information With Respect to Companies Other
Than S-3 or S-2 Companies...................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
Item 18: Information if Proxies, Consents or
Authorizations Are to be Solicited............. Not Applicable
Item 19: Information if Proxies, Consents or
Authorizations Are Not to be Solicited or in an
Exchange Offer................................. Not Applicable
</TABLE>
<PAGE>
Prospectus
[Logo of US Airways appears Here]
Exchange Offer for
$141,366,000
Class C Pass Through Certificates,
Series 1998-1
----------------
Terms of the Exchange Offer
. Expires 5:00 p.m. New York City . The exchange is not subject to
time, June 28, 1999, unless any condition, other than that
extended. the Exchange Offer not violate
applicable law or any applicable
interpretation of the Staff of
the Securities and Exchange
Commission.
. US Airways will not receive any
proceeds from the Exchange Offer.
. All Old Class C Certificates that . The terms of the New Class C
are validly tendered and not Certificates and the Old Class C
validly withdrawn will be Certificates are substantially
exchanged. identical, except that the New
Class C Certificates will not
contain terms with respect to
transfer restrictions or
liquidated damages and the New
Class C Certificates will be
available only in book-entry
form.
. The exchange of the Old Class C
Certificates (with attached Old
Escrow Receipts) for the New
Class C Certificates (with
attached New Escrow Receipts)
will not be a taxable event for
U.S. federal income tax purposes.
. There is no existing market for
the New Class C Certificates, and
US Airways does not intend to
apply for their listing on any
securities exchange.
. Tenders of the Old Class C
Certificates may be withdrawn any
time prior to the expiration of
the Exchange Offer.
INVESTING IN THE CERTIFICATES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 16.
----------------
<TABLE>
<CAPTION>
FINAL
EXPECTED
PASS THROUGH PRINCIPAL INTEREST DISTRIBUTION
CERTIFICATES AMOUNT RATE DATE
------------ --------- -------- ------------
<S> <C> <C> <C>
1998-1C $141,366,000 6.82% July 30, 2014
</TABLE>
----------------
Each broker-dealer that receives New Class C Certificates for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Certificates. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Class C Certificates
received in exchange for Old Class C Certificates where such Old Class C
Certificates were acquired by such broker-dealer as a result of market-making
activities or other trading activities. US Airways has agreed that, for a
period of one hundred eighty (180) days after June 28, 1999, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
----------------
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
May 28, 1999
<PAGE>
PRESENTATION OF INFORMATION
We have given certain capitalized terms specific meanings for purposes of
this Prospectus. The "Index of Terms" attached as Appendix I to this
Prospectus lists the page in this Prospectus on which we have defined each
such term.
At varying places in this Prospectus, we refer you to other sections of the
Prospectus for additional information by indicating the caption heading of
such other sections. The page on which each principal caption included in this
Prospectus can be found is listed in the Table of Contents below.
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................. 1
The Exchange Offer............... 1
Summary of Terms of
Certificates.................... 5
Cash Flow Structure.............. 6
Equipment Notes and the
Aircraft........................ 7
Loan to Aircraft Value Ratios.... 8
The Certificates................. 9
Risk Factors....................... 16
Risk Factors Relating to US
Airways......................... 16
Risk Factors Relating to the
Airline Industry................ 18
Risk Factors Relating to the
Certificates.................... 20
Risk Factors Relating to the
Exchange Offer.................. 23
The Company........................ 23
Domestic Service................. 24
Expanding International Service.. 25
Code Sharing Relationships....... 26
The US Airways and American
Airlines Marketing
Relationship.................... 26
Labor Agreements................. 26
Fleet Rationalization and the
Airbus Aircraft................. 27
US Airways' Market Position...... 27
The SABRE Group Agreement........ 28
On-Line Reservation System....... 28
Change in Culture--A New
Outlook......................... 28
Use of Proceeds.................... 29
Ratio of Earnings to Fixed
Charges........................... 29
The Exchange Offer................. 30
General.......................... 30
Expiration Date; Extensions;
Amendments; Termination......... 33
Interest on the New Class C
Certificates.................... 33
Procedures for Tendering......... 34
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Acceptance of Old Class C
Certificates for Exchange;
Delivery of New Class C
Certificates..................... 35
Book-Entry Transfer............... 36
Guaranteed Delivery Procedures.... 36
Withdrawal of Tenders............. 36
Conditions........................ 37
Exchange Agent.................... 38
Fees and Expenses................. 38
Miscellaneous..................... 39
Description of the Certificates..... 39
General........................... 39
Payments and Distributions........ 41
Pool Factors...................... 43
Reports to Certificateholders..... 45
Indenture Defaults and Certain
Rights upon an Indenture
Default.......................... 46
Purchase Rights of
Certificateholders............... 48
PTC Event of Default.............. 48
Merger, Consolidation and Transfer
of Assets........................ 48
Modifications of the Pass Through
Trust Agreements and Certain
Other Agreements................. 49
Obligation to Purchase Equipment
Notes............................ 51
Termination of the Trusts......... 54
The Trustees...................... 54
Book-Entry; Delivery and Form..... 54
Description of the Deposit
Agreements......................... 57
General........................... 57
Unused Deposits................... 57
Distribution upon Occurrence of a
Triggering Event................. 59
Distribution upon Occurrence of a
Termination Event................ 59
Depositaries...................... 59
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Description of the Escrow
Agreements........................ 60
Description of the Liquidity
Facilities........................ 61
General.......................... 61
Drawings......................... 61
Reimbursement of Drawings........ 64
Liquidity Events of Default...... 65
Liquidity Provider............... 65
Description of the Intercreditor
Agreement......................... 65
Intercreditor Rights............. 65
Controlling Party................ 66
Priority of Distributions........ 67
The Subordination Agent.......... 70
Description of the Aircraft and the
Appraisals........................ 71
The Aircraft..................... 71
The Appraisals................... 71
Deliveries of Aircraft........... 72
Substitute Aircraft.............. 72
Description of the Equipment
Notes............................. 73
General.......................... 73
Subordination.................... 73
Principal and Interest Payments.. 73
Redemption....................... 74
Security......................... 76
Loan to Value Ratios of Equipment
Notes........................... 76
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Limitation of Liability........... 77
Indenture Defaults, Notice and
Waiver........................... 78
Remedies.......................... 79
Modification of Indentures and
Leases........................... 81
Indemnification................... 81
The Leases and Certain Provisions
of Owned Aircraft Indentures..... 82
Certain United States Federal Income
Tax Consequences................... 88
ERISA Considerations................ 89
General........................... 89
Plan Assets Issues................ 89
Prohibited Transaction
Exemptions....................... 90
Special Considerations Applicable
to Insurance Company General
Accounts......................... 90
Plan of Distribution................ 91
Legal Matters....................... 91
Experts............................. 91
Available Information............... 92
Reports to Certificateholders....... 92
Incorporation of Certain Documents
by Reference....................... 92
Index of Terms...................... I-1
Appraisal Letters................... II-1
</TABLE>
We have not authorized anyone to provide you with information concerning
this offering other than the information contained in this Prospectus. We are
offering to exchange Certificates only in jurisdictions where such offers are
permitted. The information contained in this Prospectus is accurate only as of
the date of this Prospectus, regardless of the time of delivery of this
Prospectus or any exchange of Certificates.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information from this Prospectus and may not
contain all of the information that is important to you. References in this
Prospectus to "we," "us," "our," the "Company" or "US Airways" refer to US
Airways, Inc. and its subsidiary. For more complete information about the
Certificates and US Airways, you should read this entire Prospectus, as well as
the materials filed with the Securities and Exchange Commission that are
considered to be part of this Prospectus. See "Incorporation of Certain
Documents by Reference" in the Prospectus.
The Exchange Offer
The Certificates........
On December 14, 1998, we privately placed an
aggregate of $141,366,000 of Old Class C
Certificates. On the same date, we publicly sold an
aggregate of $447,768,000 of Class A and Class B
Certificates, which were registered under the
Securities Act. We are using the proceeds from the
sale of the Certificates to purchase Equipment Notes
issued to finance the acquisition, from time to time,
of 23 new Airbus aircraft by us and our affiliates.
We already have used some of the proceeds to purchase
Equipment Notes relating to 13 of the Aircraft. The
remaining proceeds are being held in escrow and were
deposited by the Escrow Agent with the applicable
Depositary. Funds are withdrawn from escrow to
acquire Equipment Notes, from time to time, to
finance Aircraft when they are delivered to us.
When we refer to the "Old Class C Certificates" in
this Prospectus, we mean the Class C Pass Through
Certificates, Series 1998-1 privately placed with the
Initial Purchaser on December 14, 1998 and which were
not registered with the Securities and Exchange
Commission.
When we refer to the "New Class C Certificates" in
this Prospectus, we mean the Class C Certificates
registered with the Securities and Exchange
Commission and offered hereby in exchange for the Old
Class C Certificates.
When we refer to the "Class C Certificates" in this
Prospectus, the related discussion applies to both
the Old Class C Certificates and the New Class C
Certificates.
When we refer to the "Certificates" in this
Prospectus, the related discussion applies to all of
the Class A Certificates, the Class B Certificates,
the Old Class C Certificates and the New Class C
Certificates.
Registration On December 14, 1998, we entered into a Registration
Agreement.............. Agreement with the Initial Purchaser and Trustee of
the Class C Trust providing, among other things, for
the Exchange Offer. On January 20, 1999, the parties
entered into Amendment No. 1 to the Registration
Agreement providing for an extension of time by 30
days to file the Registration Statement with the
Commission.
The Exchange Offer...... We are offering New Class C Certificates in exchange
for an equal principal amount of Old Class C
Certificates. The New Class C Certificates will be
issued to satisfy our obligations under the
Registration
1
<PAGE>
Agreement. The New Class C Certificates will be
entitled to the benefits of and will be governed by
the same Pass Through Trust Agreement that governs
the Old Class C Certificates. The form and terms of
the New Class C Certificates are the same in all
material respects as the form and terms of the Old
Class C Certificates, except that we registered the
New Class C Certificates under the Securities Act so
their transfer is not restricted like the Old Class C
Certificates and the New Class C Certificates are not
entitled to liquidated damages under the Registration
Agreement. As of the date of this Prospectus,
$141,366,000 aggregate principal amount of the Old
Class C Certificates are outstanding. You may tender
Old Class C Certificates only in integral multiples
of $1,000. See "The Exchange Offer--General."
The Class A Certificates and the Class B Certificates
are not being exchanged in the Exchange Offer. We
anticipate that all $447,768,000 of the Class A and
Class B Certificates outstanding on the date of this
Prospectus will be outstanding following completion
of the Exchange Offer.
Resale of New Class C
Certificates........... We believe that you can offer for resale, resell and
otherwise transfer the New Class C Certificates
without complying with the registration and
prospectus delivery requirements of the Securities
Act if:
. you acquire the New Class C Certificates in the
ordinary course of your business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the New Class C
Certificates; and
. you are not an "affiliate" of ours, as defined
in Rule 405 of the Securities Act.
If any of these conditions is not satisfied and you
transfer any New Class C Certificate without
delivering a proper prospectus or without qualifying
for a registration exemption, you may incur liability
under the Securities Act. We do not assume or
indemnify you against such liability.
Consequences of Failure
to Exchange Old Class
C Certificates.........
Once the Exchange Offer has been completed, if you do
not exchange your Old Class C Certificates for New
Class C Certificates in the Exchange Offer, you will
no longer be entitled to registration rights and will
not be able to offer or sell your Old Class C
Certificates, unless (i) such Old Class C
Certificates are subsequently registered under the
Securities Act (which, subject to certain exceptions
set forth in the Registration Agreement, we will have
no obligation to do) or (ii) your transaction is
exempt from or otherwise not subject to, the
Securities Act and applicable state securities laws.
See "Risk Factors--Risk Factors Relating to the
Certificates and the Offering--Consequences of
Failure to Exchange" and "The Exchange Offer."
2
<PAGE>
Expiration Date.........
The Exchange Offer expires at 5:00 p.m., New York
City time, June 28, 1999, unless we extend the
expiration date.
Interest on the New
Class C Certificates... The New Class C Certificates will accrue interest at
the rate of 6.82% per annum, from the most recent
date to which interest has been paid on the Old Class
C Certificates or, if no interest has been paid, from
the Issuance Date.
Conditions to the
Exchange Offer......... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Class C Certificates
being tendered for exchange. However, the Exchange
Offer is subject to certain customary conditions,
which may be waived by us. See "The Exchange Offer--
Conditions."
Procedures for
Tendering Old Class C If you wish to accept the Exchange Offer, you must
Certificates........... transmit a properly completed and signed Letter of
Transmittal, or a facsimile thereof (or, in the case
of a book-entry transfer, an Agent's Message in lieu
of such Letter of Transmittal), together with the Old
Class C Certificates to be exchanged and any other
required documentation to the Exchange Agent at the
address set forth in this Prospectus or effect a
tender of Old Class C Certificates pursuant to the
procedures for book-entry transfer as provided for in
this Prospectus. See "The Exchange Offer--Procedures
for Tendering" and "--Book-Entry Transfer."
Guaranteed Delivery If you wish to tender Old Class C Certificates and
Procedures............. your Old Class C Certificates are not immediately
available or you cannot deliver your Old Class C
Certificates and a properly completed Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior to
the Expiration Date, you may tender your Old Class C
Certificates according to the guaranteed delivery
procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
Withdrawal Rights....... You may withdraw a tender of Old Class C Certificates
at any time prior to 5:00 p.m., New York City time,
on the Expiration Date. To withdraw a tender of Old
Class C Certificates, the Exchange Agent must receive
a written or facsimile transmission notice of
withdrawal at its address set forth under "The
Exchange Offer--Exchange Agent" prior to 5:00 p.m.,
New York City time, on the Expiration Date.
Acceptance of Old Class
C Certificates and
Delivery of New Class
C Certificates.........
Subject to certain conditions, we will accept for
exchange any and all Old Class C Certificates which
are properly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration
Date. We will deliver the New Class C Certificates
promptly following the Expiration Date. See "The
Exchange Offer."
3
<PAGE>
Certain United States
Federal Income Tax The exchange of the Old Class C Certificates (with
Consequences........... attached Old Escrow Receipts) for the New Class C
Certificates (with attached New Escrow Receipts) will
not be a taxable event for U.S. federal income tax
purposes. See "Certain United States Federal Income
Tax Consequences."
Exchange Agent..........
State Street Bank and Trust Company is serving as
Exchange Agent in the Exchange Offer.
Fees and Expenses....... We will pay all expenses of completing the Exchange
Offer and compliance with the Registration Agreement,
except that the Initial Purchaser will bear any
additional expenses caused by a request by the
Initial Purchaser to delay effectiveness of the
Registration Statement and keeping the Registration
Statement effective with the Commission for more than
180 days after the expiration of the Exchange Offer.
See "The Exchange Offer--Fees and Expenses."
Use of Proceeds.........
We will not receive any cash proceeds from the
exchange of the New Class C Certificates for the Old
Class C Certificates.
4
<PAGE>
Summary of Terms of Certificates
<TABLE>
<CAPTION>
Class A Class B Class C
Certificates Certificates Certificates
---------------- ---------------- ----------------
<S> <C> <C> <C>
Aggregate Face Amount...... $366,486,000 $81,282,000 $141,366,000
Ratings:
Moody's.................... A2 Baa1 Ba1
Standard & Poor's.......... AA- A BBB-
Initial Loan to Aircraft
Value (cumulative)(1)..... 39.6% 48.3% 63.9%
Expected Principal
Distribution Windows
(in years)................ 0.6-19.1 1.1-19.1 7.1-15.6
Initial Average Life (in
years from issuance
date)..................... 12.9 9.6 12.5
Regular Distribution January 30 January 30 January 30
Dates..................... and July 30 and July 30 and July 30
Final Expected Regular
Distribution Date......... January 30, 2018 January 30, 2018 July 30, 2014
Final Maturity Date........ July 30, 2019 July 30, 2019 January 30, 2016
Minimum Denomination....... $1,000 $1,000 $1,000
Section 1110 Protection.... Yes Yes Yes
3 semiannual 3 semiannual 3 semiannual
Liquidity Facility interest interest interest
Coverage.................. payments payments payments
</TABLE>
- --------
(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.
5
<PAGE>
Cash Flow Structure
Set forth below is a diagram illustrating the cash flow structure relating to
the Certificates.
- --------
(1) Each Aircraft leased to us 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 Old Class C Certificates have been used by the Trusts to purchase
Equipment Notes relating to 13 of the Aircraft. The remaining proceeds
from the sale of the Certificates are held in escrow and deposited with
the Depositaries. The Depositaries are holding 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 a Deposit Make-Whole Premium payable by us, 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 our fault or
negligence.
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
Manu- Amount of Amount of Amount of
Expected facturer's Aircraft Series A Series B Series C Appraised
Registration Serial Delivery Equipment Equipment Equipment Base
Aircraft Type Number Number Month (1) Notes Notes Notes (2) Value (3)
- ------------- ------------ ---------- ----------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Airbus A319............. N700UW 0885 October 15, 1998 $15,053,003 $2,735,481 $5,755,411 $37,633,333
Airbus A319............. N701UW 0890 October 20, 1998 15,053,000 3,617,119 5,758,425 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 14, 1998 15,073,333 3,523,910 5,793,467 37,683,333
Airbus A319............. N705UW 0929 December 17, 1998 15,073,333 3,523,910 5,793,467 37,683,333
Airbus A320............. N101UW 0936 January 29, 1999 17,594,667 4,706,573 7,063,070 43,986,667
Airbus A319............. N706US 0946 January 22, 1999 15,253,333 3,414,504 5,793,467 38,133,333
Airbus A319............. N707UW 0949 January 29, 1999 15,253,333 3,249,879 5,793,467 38,133,333
Airbus A319............. N708UW 0972 March 4, 1999 15,264,000 3,387,021 5,788,248 38,160,000
Airbus A319............. N709UW 0997 March 31, 1999 15,273,333 3,406,805 5,797,284 38,183,333
Airbus A320............. N102UW 0844 May 17, 1999 17,777,333 3,100,808 7,110,663 44,443,333
Airbus A320............. N103US 0861 June 1999 17,777,333 4,179,107 7,110,663 44,443,333
Airbus A319............. N710UW 1019 May 20, 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 July 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>
- --------
(1) The delivery dates for the first 13 Aircraft are set forth in this table.
The delivery date for any other Aircraft may be delayed or accelerated.
The Delivery Period Termination Date will be no later than October 31,
1999. See "Description of the Aircraft and the Appraisals--Deliveries of
Aircraft." We have 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 made in
connection with the initial sale of the Certificates in December of 1998.
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 Exchange Offer--Appraisals and Realizable Value
of Aircraft."
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 Exchange
Offer--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 $358,949,213 $78,388,855 $141,366,000 39.6% 48.3% 63.9%
July 30, 2000........... 878,518,967 355,800,180 78,286,374 141,366,000 40.5 49.4 65.5
July 30, 2001........... 851,032,467 344,668,148 74,637,893 141,366,000 40.5 49.3 65.9
July 30, 2002........... 823,545,967 333,536,115 69,891,574 141,366,000 40.5 49.0 66.2
July 30, 2003........... 796,059,467 322,404,083 63,697,711 141,366,000 40.5 48.5 66.3
July 30, 2004........... 768,572,967 311,119,854 56,358,337 141,366,000 40.5 47.8 66.2
July 30, 2005........... 741,086,467 299,424,046 47,863,796 141,366,000 40.4 46.9 65.9
July 30, 2006........... 713,599,967 284,800,838 41,523,788 140,435,893 39.9 45.7 65.4
July 30, 2007........... 686,113,467 269,507,075 37,335,503 136,477,828 39.3 44.7 64.6
July 30, 2008........... 658,626,967 255,868,673 34,166,914 130,782,717 38.8 44.0 63.9
July 30, 2009........... 631,140,467 249,816,689 31,728,454 120,443,849 39.6 44.6 63.7
July 30, 2010........... 603,653,967 243,091,889 29,289,994 99,155,827 40.3 45.1 61.5
July 30, 2011........... 576,167,467 233,347,823 26,851,534 75,384,499 40.5 45.2 58.2
July 30, 2012........... 548,680,967 222,215,790 24,413,074 48,885,700 40.5 44.9 53.9
July 30, 2013........... 521,194,467 210,920,930 19,814,328 3,406,990 40.5 44.3 44.9
July 30, 2014........... 490,304,233 148,586,631 14,097,042 0 30.3 33.2 NA
July 30, 2015........... 453,655,567 121,490,540 12,068,520 0 26.8 29.4 NA
July 30, 2016........... 417,006,900 84,523,352 12,068,520 0 20.3 23.2 NA
July 30, 2017........... 334,185,000 24,280,592 11,376,265 0 7.3 10.7 NA
</TABLE>
- --------
(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 the offering or the amortization of the Equipment Notes differs from
the assumed amortization schedule calculated for purposes of this
Prospectus.
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.
8
<PAGE>
The Certificates
The Certificates........ Each Class of Certificates represents 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 our affiliates.
Use of Proceeds.........
We are using the proceeds from the sale of the Class
A Certificates, the Class B Certificates and the Old
Class C Certificates to purchase Equipment Notes
issued to finance the acquisition of 23 new Airbus
aircraft to be operated by US Airways and our
affiliates. A portion of the proceeds from such sale
already has been used by the Trusts to purchase
Equipment Notes relating to 13 of the 23 new Airbus
aircraft. The remaining proceeds from such sale are
held in escrow and were deposited with the applicable
Depositary. Each such Trust will withdraw funds from
the escrow relating to such Trust to acquire
Equipment Notes. We will not receive any cash
proceeds from the exchange of the New Class C
Certificates for the Old Class C Certificates.
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 includes:
.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, which commenced on January
30, 1999.
Record Dates............ The fifteenth day preceding the related Distribution
Date.
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.
9
<PAGE>
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 we are in bankruptcy or certain other specified
events have occurred but we are continuing to meet
certain of our 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 under the respective
Indenture. 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.
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.
10
<PAGE>
Right to Buy Other
Classes of If we are in bankruptcy or certain other specified
Certificates........... 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 or liquidated damages
paid pursuant to the Registration Agreement.
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 were deposited with the applicable
Depositary and are 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 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.
11
<PAGE>
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, such distribution will
include a premium payable by us 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 our 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. We
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 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, we 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,
we are in bankruptcy or certain other specified
events have occurred. See "Description of the
Certificates--Obligation to Purchase Equipment
Notes."
Equipment Notes (a)
Issuer................. Leased Aircraft. For Aircraft leased by us, 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, our
scheduled rental obligations under the related Lease
will be in amounts sufficient to pay scheduled
payments on such Equipment Notes.
Owned Aircraft. If we purchase an Aircraft, the
related Equipment Notes will be issued by us.
12
<PAGE>
(b) Interest.......... The Equipment Notes held in the Class C Trust will
accrue interest at the rate of 6.82% per annum. The
Equipment Notes held in the Class A Trust and the
Class B Trust will accrue interest at 6.85% per annum
and 7.35% per annum, respectively. 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, 2006,
respectively.
(d) Redemption and Aircraft Event of Loss. If an Event of Loss occurs
Purchase............. 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
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, we 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
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.
13
<PAGE>
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........... Our outside counsel has provided its opinion to the
Trustees that the 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 United States
Federal Income Tax The exchange of the Old Class C Certificates (with
Consequences........... attached Old Escrow Receipts) for the New Class C
Certificates (with attached New Escrow Receipts) will
not be a taxable event for U.S. federal income tax
purposes.
ERISA Considerations.... In general, employee benefit plans subject to Title I
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 acquire and hold the New Class C
Certificates, subject to certain conditions and the
circumstances applicable to such plans. Each person
who acquires a New Class C Certificate will be deemed
to have represented and warranted that either: (a) no
employee benefit plan assets have been used to
acquire and hold such New Class C Certificate or (b)
the acquisition and holding of such New Class C
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."
Rating of the
Certificates........... The Class A, Class B and Class C Certificates are
rated by Moody's and Standard & Poor's as set forth
below.
<TABLE>
<CAPTION>
Standard
Certificates Moody's & Poor's
------------ ------- --------
<S> <C> <C>
Class A A2 AA-
Class B Baa1 A
Class C Ba1 BBB-
</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.
14
<PAGE>
<TABLE>
<CAPTION>
Standard
Moody's & Poor's
------- --------
<S> <C> <C>
Short Term.................................... P-1 A-1+
</TABLE>
Rating of each
Depositary.............
Threshold Rating for
the Liquidity Short Term
Provider...............
<TABLE>
<CAPTION>
Standard
Moody's & Poor's
------- --------
<S> <C> <C>
Class A....................................... P-1 A-1+
Class B....................................... P-1 A-1
Class C....................................... P-1 A-1
</TABLE>
Liquidity Provider The Liquidity Provider meets the threshold ratings
Rating................. requirement for each Class of Certificates.
15
<PAGE>
RISK FACTORS
You should carefully read the following risk factors before tendering your
Old Class C Certificates in the Exchange Offer. The risk factors set forth
below (other than "Consequences of Failure to Exchange") are generally
applicable to the Old Class C Certificates as well as the New Class C
Certificates.
Risk Factors Relating to US Airways
Leverage and Liquidity
US Airways, Inc. ("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 March 31, 1999, US Airways had:
. $966 million of cash, cash equivalents and short-term investments;
. a ratio of current assets to current liabilities of 0.98;
. $1.9 billion of long-term debt and capital lease obligations; and
. a ratio of debt to equity of 6.0.
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;
. the ability of US Airways to compete effectively in the market;
. 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. US Airways continues to actively address its high
cost structure. Sustained unit cost reductions are especially critical to US
Airways becoming 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 agreements to acquire up to 430 new Airbus aircraft, accompanying jet
engines and ancillary assets. As of March 31, 1999, US Airways Group had 117
Airbus A320 Family single-aisle aircraft on firm order, 112 Airbus A320 Family
aircraft subject to reconfirmation prior to delivery and options for 160
additional Airbus A320 Family aircraft. In addition, US Airways Group had
seven Airbus A330-300 widebody aircraft on firm order, seven aircraft subject
to reconfirmation and options for 16 additional Airbus A330 Family aircraft.
Of the remaining 117 A320 Family aircraft on firm order, 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 certain older aircraft operated by US Airways
Group's subsidiaries, primarily US Airways. The Airbus A330-300 aircraft are
expected to be deployed by US Airways in transatlantic markets. As of December
31, 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 $1.3 billion in 1999, $2.1 billion in 2000 and $9 million in
2001. US Airways Group may from time to time assign its rights and obligations
with respect to the purchase of the new Airbus aircraft to US Airways.
16
<PAGE>
With respect to aircraft for which the purchase rights have been assigned to
US Airways, US Airways anticipates financing such aircraft with a combination
of enhanced pass through trust certificates, other debt, leveraged leases and
cash. Because US Airways is currently funding US Airways Group's purchase
deposits for Airbus aircraft and since it is expected that US Airways Group
will continue to assign its purchase rights to US Airways, this represents a
significant financial obligation of US Airways. US Airways currently has
commitments or letters of intent which it believes will provide financing for
at least 25% of the anticipated purchase price of all of its firm-order Airbus
aircraft. These commitments include a financing commitment between US Airways
and an affiliate of Airbus (the "Airbus Financing Commitment"). Subject to
certain conditions described below, such affiliate fulfilled its commitment
with respect to the Aircraft being financed with the proceeds of the Old Class
C Certificates through the purchase by Airbus Industrie Financial Services
("AIFS") of the Old 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 it 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 $67 million and $101 million for the three
months ended March 31, 1999 and March 31, 1998, respectively, $559 million for
1998, $1.05 billion for 1997, $183 million for 1996 and $33 million for 1995.
However, it recorded net losses in excess of $3.2 billion on revenues of
approximately $35.9 billion from 1989 through 1994. Historically, the United
States airline industry's results have correlated with the performance of the
economy, as is evidenced by the Company's financial performance since 1989. US
Airways is unable to 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 March 31, 1999, US Airways Group owed
US Airways $2.0 billion, of which $1.8 billion was not expected to be
collected prior to March 31, 2000. This reflects an increase from December 31,
1997 when US Airways Group owed US Airways $419 million. The increase is due
primarily to US Airways' funding of US Airways Group's common stock purchase
programs and in US Airways Group's obligations for purchase deposits for new
flight equipment, including new Airbus aircraft. From January 1998, when US
Airways Group's first common stock purchase program was authorized, through
March 31, 1999, US Airways Group had purchased a total of 24.6 million shares
of its common stock at a total cost of $1.4 billion.
High Personnel Costs
US Airways' personnel costs are the largest single component of its
operating costs (approximately 38% for the first three months of 1999). US
Airways' unit operating costs, and particularly its personnel costs, are
generally higher than those of its competitors. US Airways believes that it
must reduce its operating cost structure substantially to achieve sustained
improved financial performance.
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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 agreement with the Association of Flight Attendants ("AFA")
covering US Airways' flight attendants. The AFA and US Airways filed on
February 24, 1999 with the National Mediation Board ("NMB") for a mediator
to assist the negotiations.
. 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 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.
On May 3, 1999, US Airways and CWA jointly filed with the NMB for mediation
to assist in the negotiations.
. 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. On April 1, 1999, US Airways' fleet service employees,
represented by IAMAW, ratified an initial labor contract. The new contract,
which covers approximately 6,000 employees, is based on pay parity with
other domestic airlines. In addition, on May 3, 1999, US Airways' flight
crew training instructors (approximately 125 employees) ratified a new
collective bargaining agreement.
. Other. In April 1999, the IAMAW filed with the NMB for a representation
election with respect to two additional employee groups--Maintenance
Control Supervisors and Maintenance Instructors. These groups total
approximately 84 employees. US Airways cannot predict the outcome of these
elections.
US Airways cannot predict the outcome of its current negotiations with its
unionized employees at this time.
Geographical Concentration
A substantial portion of US Airways' flights are to or from cities in the
Eastern United States. As of March 1999, approximately 84% 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 can 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 US
Airways' Annual Report on Form 10-K for the year ended December 31, 1998 and
US Airways' Quarterly Report on Form 10-Q for the quarter ended March 31,
1999.
Risk Factors Relating to the Airline Industry
General Industry Conditions
The airline industry is highly competitive and susceptible to price
discounting and similar promotions. Airlines, including US Airways, typically
use discount fares and other promotions to stimulate traffic during normally
slack travel periods to generate cash flow and to increase relative market
share in certain markets.
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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 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.
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' 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, Inc. ("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.
Direct competition with low-cost, low-fare competitors has typically
resulted in the dilution of yield realized by US Airways. US Airways
Northeast-Florida service has been particularly affected by low-cost, low-fare
competition. 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 12.34 cents for
1998. In contrast, Southwest Airlines reported unit operating costs for 1998
of 7.32 cents. Although Delta Air Lines reported an overall unit operating
cost of 8.86 cents for calendar year 1998, its Delta Express product is
purported to have a unit operating cost of approximately 7.50 cents.
US Airways launched MetroJet, its competitive response to low-cost, low-fare
competition, on June 1, 1998. US Airways believes that MetroJet is helping 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 6% of US Airways' operating costs for the first three
months of 1999. 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 recent years, for example, the Federal
Aviation Administration ("FAA") has issued or proposed mandates relating to,
among other things, flight data recorders that measure more parameters than
most original equipment flight data recorders, cargo hold
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fire detection/suppression systems, ground proximity warning systems, the
retirement of older aircraft, collision avoidance systems, airborne windshear
avoidance systems, noise abatement and increased inspections and maintenance
procedures to be conducted on certain aircraft.
US Airways expects to continue to incur expenditures relating to compliance
with noise and aging aircraft modifications and fire safety. In addition,
several airports have increased substantially the rates 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.
The FAA has designated John F. Kennedy International Airport ("Kennedy"),
Chicago O'Hare International Airport ("O'Hare"), LaGuardia Airport
("LaGuardia") and Washington's Ronald Reagan Washington National Airport
("Reagan National") as "high-density traffic airports" and limited the number
of departure and arrival slots available to air carriers at those airports.
Currently, slots at the high-density traffic airports may be voluntarily sold
or transferred between air carriers. The DOT has in the past reallocated slots
to other air carriers and reserves the right to add or withdraw slots. In the
past the DOT has awarded slots to several low-cost, low-fare air carriers and
most recently awarded slots on a trial basis to certain small cities in an
effort to promote non-stop service from small cities to high density airports.
However, these slots were "created" and not confiscated from incumbent air
carriers. Various amendments to the slot system, proposed from time-to-time by
the FAA, members of Congress and others, could, if adopted, significantly
affect operations at the high-density traffic airports or expand slot controls
to other airports. Certain proposals could restrict the number of flights,
limit the ownership transferability of slots, increase the risk of slot
withdrawal, or otherwise decrease the value of slots. Legislation introduced
in Congress in 1999 would eliminate the high-density rule at Kennedy, O'Hare
and LaGuardia altogether. Passage of such legislation could have a significant
impact on US Airways' results of operations and financial condition. US
Airways holds a substantial number of slots at both LaGuardia and Reagan
National. These slots are valuable assets and important to the US Airways'
overall business strategy. US Airways cannot predict whether any of the
current proposals before Congress will be adopted or, if adopted, precisely
how their implementation would impact US Airways' current operations at
LaGuardia.
Legislation was enacted in 1998 that provides 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 was 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. In early 1999, legislation was introduced in Congress
that would impose, in some cases, significant obligations on airlines by
providing significant rights to passengers. US Airways cannot predict whether,
or in what form, this legislation might be enacted.
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
Appraisals and Realizable Value of Aircraft
Three independent appraisal and consulting firms prepared base value
appraisals of the Aircraft in connection with the initial sale of the
Certificates in December of 1998. Letters summarizing such appraisals are
annexed to this Prospectus 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."
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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 are estimates of values
as of the Aircraft's projected delivery dates at the time the appraisals were
made. 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.
Control Over Collateral; Sale of Collateral
If an Indenture Default is continuing, subject to certain conditions, the
bank, trust company or other institution as trustee under such Indenture (the
"Loan Trustee") 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."
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
The Class A, Class B and Class C Certificates have received the following
ratings from Moody's Investors Service, Inc. ("Moody's") and 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>
Standard &
Moody's Poor's
------- ----------
<S> <C> <C>
Class A Certificates......................................... A2 AA-
Class B Certificates......................................... Baa1 A
Class C Certificates......................................... Ba1 BBB-
</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
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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. 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 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; Series C Equipment 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 and AIFS owns any Class C
Certificates, US Airways will still be obligated to finance such Aircraft but
will not issue any Series C Equipment Notes with respect to such Aircraft. US
Airways believes that, as of the date of this Prospectus, AIFS owned no Class
C Certificates.
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, such distribution will include
a premium payable by US Airways equal to the Deposit Make-Whole Premium with
respect to such remaining Deposits. However, (i) 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 and (ii) with respect to
Deposits pertaining to the Class C Trust, the amount of a premium will be
limited under certain circumstances. See "Description of the Deposit
Agreements--Unused Deposits."
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Risk Factors Relating to the Exchange Offer
Consequences of Failure to Exchange
Holders of Old Class C Certificates who do not exchange their Old Class C
Certificates for New Class C Certificates pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer of such Old Class C
Certificates as set forth in the legend thereon. In general, the Old Class C
Certificates may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. US
Airways does not currently anticipate that it will register the Old Class C
Certificates under the Securities Act, unless required to under the
Registration Agreement. To the extent that Old Class C Certificates are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Old Class C Certificates could be adversely
affected.
Absence of an Established Market for the Certificates
Prior to the Exchange Offer, there was no public market for the Old Class C
Certificates. There can be no assurance as to the liquidity of the public
market for the New Class C Certificates or that any active public market for
the New Class C Certificates will develop. Neither US Airways nor the Class C
Trust intends to apply for listing of the New Class C Certificates on any
securities exchange or for quotation of the New Class C Certificates on The
Nasdaq Stock Market's National Market or otherwise. The Initial Purchaser has
advised us that it does not intend to make a market in the Class C
Certificates. If an active public market does not develop, the market price
and liquidity of the Class C Certificates may be adversely affected.
Procedures for Tender of Old Class C Certificates
The New Class C Certificates will be issued in exchange for the Old Class C
Certificates only after timely receipt by the Exchange Agent of the Old Class
C Certificates, a properly completed and executed Letter of Transmittal and
all other required documentation. Holders of Old Class C Certificates who wish
to tender their Old Class C Certificates in exchange for New Class C
Certificates should allow sufficient time to ensure timely delivery. None of
the Exchange Agent, the Trustee or the Company is under any duty to give
holders of Old Class C Certificates notification of defects or irregularities
with respect to tenders of Old Class C Certificates for exchange. Old Class C
Certificates that are not tendered or are tendered but not accepted will,
following the Exchange Offer, continue to be subject to the existing transfer
restrictions. In addition, holders of Old Class C Certificates who tender Old
Class C Certificates in the Exchange Offer to participate in a distribution of
the New Class C Certificates will be required to comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction.
THE COMPANY
US Airways is a certificated air carrier engaged primarily in the business
of transporting passengers, property and mail. US Airways is the principal
operating subsidiary of US Airways Group, accounting for approximately 90% of
US Airways Group's consolidated operating revenues for the first three months
of 1999.
US Airways carried approximately 58 million passengers in 1998 and is
currently the sixth largest domestic air carrier (as ranked by total revenue
passenger miles). The US Airways system includes its mainline domestic and
international service and its recently introduced 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 March 1999, with a workforce of more than 38,000
full-time equivalent employees.
US Airways has established a new foundation on which it is moving forward
with achieving its long-term strategic objective of establishing itself as a
competitive global airline:
. a new labor contract between US Airways and its pilots;
. an agreement between US Airways Group and Airbus to purchase up to 400
new aircraft from the Airbus A320 Family of single-aisle aircraft (these
aircraft are expected to replace certain older aircraft
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operated by US Airways Group's subsidiaries, primarily US Airways, and
up to 30 new Airbus A330 Family widebody aircraft (these aircraft are
expected to be used primarily by US Airways in the transatlantic
market);
. an expanded and 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; 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' major connecting hubs are located at airports in Charlotte,
Philadelphia and Pittsburgh. US Airways also has substantial operations at the
Baltimore-Washington International Airport, Boston's Logan International
Airport, New York's LaGuardia Airport and Washington's Ronald Reagan
Washington National Airport. As of March 1999, 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. As of March 1999,
approximately 84% 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. 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 March 1999. 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;
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. existing customer base;
. vast travel agency network;
. reciprocal club room access for members of US Airways Clubs and American
Airlines' Admirals Club; and
. marketing agreement with American Airlines to share frequent flyer
miles.
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 34 Boeing
B737-200 aircraft and currently serves 22 cities. US Airways anticipates that
MetroJet will operate approximately 50 aircraft by the end of 1999. US
Airways' new pilot labor agreement allows for additional expansion beyond this
first phase; MetroJet can comprise up to 25% of the US Airways system (as
measured by revenue block hours).
Expanding International Service
As a part of its strategy to become a competitive global airline, US Airways
has expanded and intends to continue to expand its international service.
Commencing in June 1999, US Airways will have increased its weekly flights to
Europe from 21 to 77 over the last two-and-a-half years. In July 1998, US
Airways announced its order for up to 30 Airbus 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 introduction of "Envoy Class"
in December 1997.
In June 1999, US Airways will increase service to both London and Paris. On
June 12, 1999, US Airways will inaugurate daily service to London's Gatwick
Airport from Charlotte, North Carolina, having obtained commercially viable
takeoff and landing slots for that service. On June 19, 1999, US Airways will
begin a second daily service from Philadelphia to Paris, in addition to the
existing service from Pittsburgh to Paris, which was initiated in October
1998, for a total of three daily trips. Also in June 1999, US Airways will
suspend temporarily service to Amsterdam, pending the arrival of new aircraft
to augment its international fleet.
In May 1999, Northwest Airlines and Alitalia filed an application with the
DOT for antitrust immunity, the approval of which is a precondition for
initiation of an Open Skies regime between the United States and Italy. If
that application is approved and Open Skies goes into effect in Italy, it
would enable US Airways to initiate service from Philadelphia to Milan.
In April 1999, US Airways filed with the DOT for authority to serve London's
Gatwick Airport from Pittsburgh, a right not currently available under the
restrictive bilateral aviation agreement known as Bermuda II. In addition, US
Airways has filed with the DOT for authority to serve London's Heathrow
Airport from Charlotte, Philadelphia, Pittsburgh and Boston. US Airways
anticipates moving its operations from 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. Recently, the governments of the United
States and the United Kingdom announced their intention to begin soon formal
negotiations aimed at replacing the existing restrictive bilateral agreement
with a liberal, open skies regime over a period of years. Though it is
difficult to predict the outcome of such negotiations, US Airways plans to
participate vigorously in the process in order to advance its objective of
service transferring to Heathrow Airport at the earliest possible date.
US Airways' transatlantic available seat miles in 1998 were 15% greater than
for 1997, which in 1997 were approximately 35% greater than for 1996, and has
more than doubled from 1995 levels. US Airways continues to explore additional
international opportunities.
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Code Sharing Relationships
US Airways Express
US Airways has code-sharing arrangements with nine 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. Typically, 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 March 31, 1999, US Airways
Express served 170 airports in the continental United States, Canada and the
Bahamas, including 71 airports also served by US Airways. In 1998, US Airways
Express air carriers carried approximately 12 million passengers,
approximately 59% 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 LaGuardia and Boston's Logan International Airport
and between LaGuardia and Reagan National. US Airways Shuttle expects to
retire eight of its 12 Boeing B727-200 aircraft in 1999. These aircraft will
be replaced by Airbus A320 family aircraft.
Other Relationships
US Airways also has code-share arrangements with Deutsche BA for certain
intra-Germany flights.
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 US Airways Shuttle flights (through December 31,
1999), 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. In addition, on April 1, 1999, US Airways'
fleet service employees ratified an initial labor contract and on May 3, 1999,
US Airways' flight crew training instructors ratified a new collective
bargaining agreement. 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."
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<PAGE>
Fleet Rationalization and the Airbus Aircraft
US Airways is committed to rationalizing its fleet through US Airways
Group's order for up to 400 new aircraft from the Airbus A320 Family of
single-aisle aircraft and US Airways Group's order for up to 30 new Airbus
A330-300 widebody aircraft. Prior to taking delivery of any new Airbus
aircraft, US Airways' operating fleet was 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 March 31, 1999, US Airways operated 321 aircraft,
excluding Airbus A320 Family aircraft, in the 95-150 seat category, including
47 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, flight crew and
maintenance training and inventory management (spare parts).
US Airways believes the addition of the Airbus 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 single-aisle
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 is generally expected to have
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 A320
Family of aircraft will provide the airline with added flexibility in
assigning aircraft to routes based on customer volume and demand. As the full-
passenger ranges of the Airbus 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 Group's recent order for up to 30 Airbus A330-300 aircraft is
designed to take advantage of fleet commonality in order to increase US
Airways' savings, besides providing certain customer service benefits. These
aircraft are expected to be deployed by US Airways in transatlantic markets.
The savings in training costs, ground support equipment and spare parts will
be compounded because the Airbus A330-300 aircraft are consistent in cockpit
design with the Airbus A320 aircraft. The decision to select the Airbus A330-
300 was based, in part, on the 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 A330-300 deliveries with the
Airbus A320 Family deliveries, it will have one of the most modern commercial
air carrier fleets within a few years time. US Airways also believes that the
Airbus 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 as has been the level of demand for air transportation.
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 single-aisle 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.
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<PAGE>
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 US Airways' Annual Report on Form 10-K for the year
ended December 31, 1998 and Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999.
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 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 has
offered 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 continued through 1998 as illustrated by the table
below:
<TABLE>
<CAPTION>
1998
-----------------------------------------------
On- Involuntary
1998 Time Consumer Lost Denied
Airline Ranking* Arrival Complaints Baggage Boardings
- ------- -------- ------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C>
US Airways...................... 1 3 2 1 1
American........................ 2 1 3 3 3
Delta........................... 3 2 1 2 5
United.......................... 4 4 4 5 4
Northwest....................... 5 5 5 4 2
</TABLE>
- --------
* Composite average of DOT rankings of on-time arrivals, lost baggage,
consumer complaints and involuntarily denied boardings.
US Airways was named the top airline for 1998 on April 19, 1999 in a study
compiling Airline Quality Ratings by researchers at Wichita State University
and the University of Nebraska. This independent analysis of industry
performance has been compiled since 1991.
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<PAGE>
Legal Proceedings
US Airways is involved in legal proceedings arising out of an aircraft
accident in September of 1994 near Pittsburgh in which 127 passengers and five
crew members lost their lives. With respect to this accident, the National
Transportation Safety Board ("NTSB") held hearings in January and November of
1995, and held a final hearing in March 1999, at which it issued the final
accident investigation report. The report concluded that the probable cause of
the accident involved a malfunction of the aircraft's rudder system. Wrongful
death cases are pending in a consolidated multi-district litigation in the
U.S. District Court for the Western District of Pennsylvania and in state
court in Cook County, Illinois. Although US Airways has settled approximately
90% of the cases and claims arising from the Pittsburgh accident, it expects
that it will be at least a year before all of the settlements and/or related
litigation are concluded. A trial has been set for November 1999 in the
Illinois litigation. US Airways is fully insured with respect to this
litigation and, therefore, believes that the litigation will not have a
material adverse effect on the Company's financial condition or results of
operations.
In May 1995, the Company, US Airways and the Retirement Income Plan for US
Airways, (the "Pilots Pension Plan") were sued in federal district court for
the District of Columbia by 481 active and retired pilots alleging that
defendants had incorrectly interpreted the Pilots Pension Plan provisions and
erroneously calculated benefits under the Pilots Pension Plan. The plaintiffs
sought damages in excess of $70 million. In May 1996, the court issued a
decision granting US Airways' Motion to Dismiss the majority of the complaint
for lack of jurisdiction, deciding that the dispute must be resolved through
the arbitration process under the Railway Labor Act because the Pilots Pension
Plan was collectively bargained. The court retained jurisdiction over one
count of the complaint alleging a violation of a disclosure requirement under
the Employee Retirement Income Security Act. The plaintiffs have attempted to
appeal the district court's dismissal before the U.S. Court of Appeals for the
District of Columbia. In January of 1998, the Court of Appeals dismissed
plaintiff's appeal for lack of jurisdiction because the lower court order was
not final. The plaintiffs moved for an order certifying the lower court order
as final. The district court granted the motion to certify and the plaintiffs
appealed to the United States Court of Appeals for the District of Columbia.
In February 1999, the United States Court of Appeals upheld the district
court's decision originally granted in May 1998 in US Airways' favor. In May
1999, the plaintiffs filed a petition for certiorari with the United States
Supreme Court.
The City and County of San Francisco have sued a number of San Francisco
International Airport tenants for the recovery of approximately $18 million of
costs incurred with respect to the characterization and cleanup of soil and
groundwater contamination at the airport. US Airways has been identified by
the City and County of San Francisco as a potentially responsible party. The
City and County of San Francisco and US Airways have entered into an agreement
in principle to resolve this matter and expect to finalize the agreement this
year.
USE OF PROCEEDS
There will be no cash proceeds payable to US Airways from the issuance of
the New Class C Certificates pursuant to the Exchange Offer. US Airways is
using the proceeds from the sale of the Class A Certificates, the Class B
Certificates and the Old Class C Certificates to purchase the Series A, Series
B and Series C Equipment Notes, respectively, issued by (a) the related Owner
Trustees in connection with the refinancing of the indebtedness originally
incurred by such Owner Trustees to finance the purchase of each of the Leased
Aircraft and (b) US Airways in connection with the debt financings secured by
the Owned Aircraft.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the three months ended March 31,
1999 and 1998 and for the years ended December 31, 1998, 1997, 1996 and 1995
was 1.8, 2.2, 2.7, 2.2, 1.3 and 1.1, respectively. For the year ended December
31, 1994, earnings were not sufficient to cover fixed charges. Additional
earnings of $721
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<PAGE>
million would have been required to achieve a ratio of earnings to fixed
charges 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.
THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Agreement dated
as of December 14, 1998 (the "Registration Agreement") among US Airways, the
Initial Purchaser and the Trustee does not purport to be complete and reference
is made to the provisions of the Registration Agreement, which has been filed
as an exhibit to the Registration Statement. In addition, on January 20, 1999,
the parties entered into Amendment No. 1 to the Registration Agreement
("Amendment No. 1 to the Registration Agreement") providing for an extension of
time by 30 days to file the Registration Statement with the Commission. The
Registration Agreement and Amendment No. 1 to the Registration Agreement are
collectively referred to herein as the "Registration Agreement."
General
On December 14, 1998, US Airways, through its Class C Trust, privately placed
an aggregate of $141,366,000 of Class C Pass Through Certificates, Series 1998-
1 (the "Old Class C Certificates"). In connection with the issuance of the Old
Class C Certificates, pursuant to a Purchase Agreement, dated as of December
14, 1998 (the "Purchase Agreement"), between US Airways and Airbus Industries
Financial Services (the "Initial Purchaser"), a wholly-owned subsidiary of
Airbus Industries, G.I.E. ("Airbus"), the Initial Purchaser and its respective
assignees became entitled to the benefits of the Registration Agreement.
Under the Registration Agreement, US Airways is obligated (i) to file the
Registration Statement of which this Prospectus is a part for a registered
exchange offer (the "Exchange Offer") with respect to an issue of Class C Pass
Through Certificates, Series 1998-1 (the "New Class C Certificates") identical
in all material respects to the Old Class C Certificates within 75 days after
December 14, 1998 (the "Issuance Date"), (ii) to cause the Registration
Statement to become effective under the Securities Act within 150 days after
the Issuance Date, (iii) to consummate the Exchange Offer within 180 calendar
days after the Issuance Date and (iv) to keep the Registration Statement
effective under the Securities Act until the close of business on the 180th day
following the expiration of the Exchange Offer. The Initial Purchaser may cause
the Issuer to delay effectiveness of the Registration Statement to any date not
later than 210 days from the Issuance Date (the "Delay Period"). The 150 day
and 180 day periods described above will be extended by the Delay Period. In
addition, each of the above 75 day, 150 day, and the 180 day periods may be
extended under certain other circumstances. US Airways will keep the Exchange
Offer open for a period of not less than 30 calendar days. The Exchange Offer,
if commenced and consummated within the time periods described in this
paragraph, will satisfy those requirements under the Registration Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal (which together constitute the Exchange Offer),
all Old Class C Certificates validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date will be accepted for exchange.
New Class C Certificates of the same class will be issued in exchange for an
equal face amount of outstanding Old Class C Certificates accepted in the
Exchange Offer. Old Class C Certificates may be tendered only in integral
multiples of $1,000. This Prospectus, together with the letter of transmittal
accompanying this Prospectus (the "Letter of Transmittal"), is being sent to
all registered holders of the Old Class C Certificates as of May 28, 1999. The
Exchange Offer is not conditioned upon any minimum principal amount of Old
Class C Certificates being tendered for exchange. However, the obligation to
accept Old Class C Certificates for exchange pursuant to the Exchange Offer is
subject to certain conditions as set forth under "--Conditions."
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<PAGE>
Old Class C Certificates will be deemed to have been accepted as validly
tendered when, as and if the Trustee has given oral or written notice thereof
to the Exchange Agent. The "Exchange Agent" will act as agent for the tendering
holders of Old Class C Certificates for the purposes of receiving the New Class
C Certificates and delivering New Class C Certificates to such holders.
The New Class C Certificates are being offered hereby in order to satisfy
certain obligations of US Airways contained in the Registration Agreement. US
Airways is making the Exchange Offer in reliance on the position of the staff
of the Commission as set forth in certain interpretive letters addressed to
third parties in other transactions. However, US Airways has not sought its own
interpretive letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third parties. Based on these
interpretations by the staff of the Commission, US Airways believes that New
Class C Certificates issued pursuant to the Exchange Offer to a holder in
exchange for Old Class C Certificates may be offered for resale, resold and
otherwise transferred by a holder (other than (i) a broker-dealer who purchased
Old Class C Certificates directly from US Airways for resale pursuant to Rule
144A or any other available exemption under the Securities Act, (ii) an
"affiliate" of US Airways within the meaning of Rule 405 under the Securities
Act, or (iii) a broker-dealer who acquired the Old Class C Certificates as a
result of market-making or other trading activities) without further compliance
with the registration and prospectus delivery provisions of the Securities Act;
provided, that such holder is acquiring the New Class C Certificates in the
ordinary course of business and is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of the New Class C Certificates. Any holder of
Old Class C Certificates who is not able to rely on the interpretations of the
staff of the Commission set forth in the above-mentioned interpretive letters
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Old Class
C Certificates unless such sale is made pursuant to an exemption from such
requirements.
Each broker-dealer that receives New Class C Certificates for its own account
pursuant to the Exchange Offer (a "Participating Broker-Dealer"), where such
Old Class C Certificates were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Class C Certificates. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of New Class C Certificates received in exchange for
Old Class C Certificates where such Old Class C Certificates were acquired by
such Participating Broker-Dealer for its own account as a result of market
making or other trading activities. Subject to certain provisions set forth in
the Registration Agreement, US Airways has agreed that this Prospectus may be
used by a Participating Broker-Dealer in connection with resales of such New
Class C Certificates. See "Plan of Distribution."
Each holder of the Old Class C Certificates who wishes to exchange such Old
Class C Certificates for New Class C Certificates in the Exchange Offer will be
required to make certain representations, including that (i) any New Class C
Certificates to be received by it are being acquired in the ordinary course of
its business, (ii) it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Old Class C Certificates or of the New Class C Certificates, (iii) it is
not an affiliate of US Airways or if it is an affiliate of US Airways, such
holder acknowledges that it must comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (iv) if
such holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, a distribution of the New Class C Certificates and (v) if
such holder is a broker-dealer, that it will receive New Class C Certificates
for its own account in exchange for the Old Class C Certificates that were
acquired as a result of market-making activities or other trading activities
and that it will be required to acknowledge that it will deliver a prospectus
in connection with any resale of such New Class C Certificates.
If the Exchange Offer does not occur in the time period prescribed by the
Registration Agreement because (i) US Airways determines that registration of
the Exchange Offer is not available because of any change in
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<PAGE>
applicable law or interpretations thereof by the staff of the Commission, (ii)
the Exchange Offer is not consummated by the 180th day after the Issuance Date
(as voluntarily extended by any Delay Period or for any other reason permitted
under the Registration Agreement), (iii) the Initial Purchaser determines that
any Holder (as defined in the Registration Agreement) is not eligible to
participate in the Exchange Offer, (iv) the Initial Purchaser requests with
respect to Old Class C Certificates not eligible to be exchanged for New Class
C Certificates or (v) the Initial Purchaser determines that any holder of Old
Class C Certificates will not receive freely transferable New Class C
Certificates, (a) as promptly as practicable (but in any event within 45 days
of being so required or requested), file with the Commission a shelf
registration statement on an appropriate form, under the Securities Act (the
"Shelf Registration Statement") covering resales of such Old Class C
Certificates, (b) use all reasonable best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act within
120 days after so required or requested pursuant to the Registration Agreement
and (c) use all reasonable best efforts to keep continuously effective the
Shelf Registration Statement for a period of two years from the Issuance Date
(or for such shorter period as ends when all of the Old Class C Certificates
covered by the Shelf Registration Statement have been sold pursuant thereto).
US Airways will, in the event of the filing of a Shelf Registration Statement,
provide to each holder of such Certificates copies of the prospectus which is a
part of the Shelf Registration Statement, notify each such holder when the
Shelf Registration Statement for the Old Class C Certificates has become
effective and take certain other actions as are required pursuant to the
Registration Agreement. A holder of the Old Class C Certificates who sells such
Old Class C Certificates pursuant to the Shelf Registration Statement generally
will be required to be named as a selling security holder in the related
prospectus and to deliver the prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Agreement that are applicable to such a holder (including certain
indemnification obligations).
If (i) any Registration Statement required by the Registration Agreement is
not filed with the Commission on or prior to the applicable filing deadline
specified in the Registration Agreement, (ii) any Registration Statement
required by the Registration Agreement is not declared effective by the
Commission on or prior to the applicable effectiveness deadline specified in
the Registration Agreement, (iii) the Exchange Offer has not been consummated
on or prior to the consummation deadline specified in the Registration
Agreement or (iv) any Registration Statement required by the Registration
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
within two (2) days by a post-effective amendment to such Registration
Statement that cures such failure and that is itself declared effective within
five (5) days of filing such post-effective amendment to such Registration
Statement (each such event in clauses (i) through (iv), a "Registration
Default"), then US Airways agrees to pay to the Class C Trust for distribution
to each Holder effected thereby liquidated damages in an amount equal to the
following: during the first ninety (90)-day period immediately following the
occurrence of such Registration Default, .0025 (the "Multiplier") times the
aggregate principal amount of such Holder's Old Class C Certificates times the
number of days such Registration Default exists divided by 360 (less any amount
thereof that has been paid as provided in the next paragraph). The amount of
the Multiplier shall increase by .0025 during each subsequent ninety (90)-day
period up to a maximum Multiplier of .01. Once US Airways cures a default
described in clause (i), (ii), (iii) or (iv) of the preceding sentence, the
liquidated damages payable with respect to the Old Class C Certificates as a
result of such clause (i), (ii), (iii) or (iv), as applicable, will cease,
until such time, if any, that another Registration Default occurs.
US Airways will pay any such liquidated damages to the Class C Trust for
distribution to each Holder affected thereby as Class C Special Indemnity
Payments under the Participation Agreement and as Class C Special Deposit
Payments under the Note Purchase Agreement. (Participation Agreement, 6(d);
Note Purchase Agreement, 5(a)) Liquidated damages paid by US Airways to the
Class C Trust are not subject to the Intercreditor Agreement and, accordingly,
are not subordinated to the payment of principal and interest on the Class A
and Class B Certificates. Liquidated damages payable by US Airways, if any, are
not covered by the Liquidity Facility for the Class C Certificates.
US Airways' obligation to pay liquidated damages may be postponed for up to
30 days if the reason US Airways failed to meet a deadline described above is
because (i) such action was required by law, (ii) US
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<PAGE>
Airways cannot obtain, after using its reasonable best efforts, financial
information necessary for the Registration Statement or (iii) such action is
taken by US Airways in good faith and for valid business reasons (not including
the avoidance of US Airways' obligations under the Registration Agreement).
All accrued liquidated damages will be paid to holders entitled thereto in
the manner provided for the payment of interest in the Class C Pass Through
Trust Agreement, on each Regular Distribution Date, as more fully set forth in
the Class C Pass Through Trust Agreement and the Old Class C Certificates.
Upon consummation of the Exchange Offer, subject to certain exceptions
described above, holders of Old Class C Certificates who do not exchange their
Old Class C Certificates for New Class C Certificates in the Exchange Offer
will no longer be entitled to registration rights and will not be able to offer
or sell their Old Class C Certificates, unless such Old Class C Certificates
are subsequently registered under the Securities Act (which, subject to certain
limited exceptions, US Airways will have no obligation to do), except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act
and applicable state securities laws. See "Risk Factors--Risk Factors Relating
to the Certificates and the Exchange Offer--Consequences of Failure to
Exchange."
Expiration Date; Extensions; Amendments; Termination
The term "Expiration Date" means June 28, 1999 (30 calendar days following
the commencement of the Exchange Offer), unless US Airways, in its sole
discretion, voluntarily extends the Exchange Offer, in which case the term
"Expiration Date" means the latest date to which the Exchange Offer is so
extended. Notwithstanding any voluntary extension of the Exchange Offer, if the
Exchange Offer is not consummated within the time period required under the
Registration Agreement as described above, US Airways is obligated to pay
liquidated damages to the Class C Trust for distribution to the holders of the
Class C Certificates. See "--General."
In order to extend the Expiration Date, US Airways will notify the Exchange
Agent of any extension by oral or written notice and will mail to the record
holders of Old Class C Certificates an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that US Airways is
extending the Exchange Offer for a specified period of time.
US Airways reserves the right (i) to delay acceptance of any Old Class C
Certificates, to extend the Exchange Offer or to terminate the Exchange Offer
and not permit acceptance of Old Class C Certificates not previously accepted
if any of the conditions set forth under "--Conditions" have occurred and not
have been waived by US Airways, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, or (ii) to amend the terms of
the Exchange Offer in any manner deemed by it to be advantageous to the holders
of the Old Class C Certificates. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the Exchange Agent. If the Exchange Offer is amended
in a manner determined by US Airways to constitute a material change, US
Airways will promptly disclose such amendment in a manner reasonably calculated
to inform the holders of the Old Class C Certificates of such amendment.
Without limiting the manner in which US Airways may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, US Airways has no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
Interest on the New Class C Certificates
The New Class C Certificates will accrue interest at the rate of 6.82% per
annum, from the most recent date to which interest has been paid on the Old
Class C Certificates or, if no interest has been paid, from the Issuance Date.
Interest on the New Class C Certificates is payable on January 30 and July 30
of each year, commencing on January 30, 1999.
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<PAGE>
Procedures for Tendering
To tender in the Exchange Offer, a holder must transmit a properly completed
and duly executed Letter of Transmittal, or a facsimile thereof, together with
any other documents required by such Letter of Transmittal, or (in the case of
a book-entry transfer) an Agent's Message in lieu of such Letter of
Transmittal, to the Exchange Agent at the address set forth below under "--
Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date.
In addition, either (i) certificates for such Old Class C Certificates must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Class C Certificates, if such procedure is available, into the
Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date with
the Letter of Transmittal or Agent's Message in lieu of such Letter of
Transmittal or (iii) the holder must comply with the guaranteed delivery
procedures described below. The term "Agent's Message" means a message,
transmitted by the Book-Entry Transfer Facility to and received by the Exchange
Agent and forming a part of a Book-Entry Confirmation, which states that the
Book-Entry Transfer Facility has received an express acknowledgment from the
tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by, and makes the representations and
warranties contained in, the Letter of Transmittal and that US Airways may
enforce such Letter of Transmittal against such participant. THE METHOD OF
DELIVERY OF OLD CLASS C CERTIFICATES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD CLASS C
CERTIFICATES SHOULD BE SENT TO US AIRWAYS. Delivery of all documents must be
made to the Exchange Agent at its address set forth below. Holders may also
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect such tender for such holders.
The tender by a holder of Old Class C Certificates will constitute an
agreement between such holder and US Airways in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal.
Only a holder of Old Class C Certificates may tender such Old Class C
Certificates in the Exchange Offer. The term "holder" with respect to the
Exchange Offer means any person in whose name Old Class C Certificates are
registered on the books of US Airways or any other person who has obtained a
properly completed bond power from the registered holder.
Any beneficial owner whose Old Class C Certificates are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on his behalf. If such beneficial
holder wishes to tender on its own behalf, such beneficial holder must, prior
to completing and executing the Letter of Transmittal and delivering its Old
Class C Certificates, either make appropriate arrangements to register
ownership of the Old Class C Certificates in such owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each, an "Eligible Institution") unless the Old
Class C Certificates tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Class C Certificates listed therein, such Old Class C
Certificates must be endorsed or accompanied by bond powers and a
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proxy which authorizes such person to tender the Old Class C Certificates on
behalf of the registered holder, in each case as the name of the registered
holder or holders appears on the Old Class C Certificates.
If the Letter of Transmittal or any Old Class C Certificates or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by US Airways, evidence satisfactory to US Airways of their
authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Class C Certificates will be
determined by US Airways in its sole discretion, which determination will be
final and binding. US Airways reserves the absolute right to reject any and all
Old Class C Certificates not properly tendered or any Old Class C Certificates
the acceptance of which would, in the opinion of counsel for US Airways, be
unlawful. US Airways also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Old Class C
Certificates. US Airways' interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Class C Certificates must be
cured within such time as US Airways shall determine. Neither US Airways, the
Exchange Agent nor any other person will be under any duty to give notification
of defects or irregularities with respect to tenders of Old Class C
Certificates, nor will any of them incur any liability for failure to give such
notification. Tenders of Old Class C Certificates will not be deemed to have
been made until such irregularities have been cured or waived. Any Old Class C
Certificates received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the tendering
holders of Old Class C Certificates, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, US Airways reserves the right in its sole discretion, subject to
the provisions of the Pass Through Trust Agreements, to (i) purchase or make
offers for any Old Class C Certificates that remain outstanding subsequent to
the Expiration Date or, as set forth under "--Conditions," to terminate the
Exchange Offer in accordance with the terms of the Registration Agreement and
(ii) to the extent permitted by applicable law, purchase Old Class C
Certificates in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
Acceptance of Old Class C Certificates for Exchange; Delivery of New Class C
Certificates
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Class C Certificates properly tendered will be accepted, promptly after
the Expiration Date, and the New Class C Certificates will be issued promptly
after acceptance of the Old Class C Certificates. See "--Conditions" below. For
purposes of the Exchange Offer, Old Class C Certificates will be deemed to have
been accepted for exchange when, as and if US Airways has given oral or written
notice thereof to the Exchange Agent. For each Old Class C Certificate accepted
for exchange, the holder of such Old Class C Certificate will receive a New
Class C Certificate having a denomination equal to that of the surrendered Old
Class C Certificate.
In all cases, issuance of New Class C Certificates for Old Class C
Certificates that are accepted for exchange pursuant to the Exchange Offer will
be made only after timely receipt by the Exchange Agent of (i) certificates for
such Old Class C Certificates or a timely Book-Entry Confirmation of such Old
Class C Certificates into the Exchange Agent's account at the Book-Entry
Transfer Facility, (ii) a properly completed and duly executed Letter of
Transmittal or an Agent's Message in lieu thereof and (iii) all other required
documents. If any tendered Old Class C Certificates are not accepted for any
reason set forth in the terms and conditions of the Exchange Offer, such
unaccepted or nonexchanged Old Class C Certificates will be returned without
expense to the tendering holder thereof (or, in the case of Old Class C
Certificates tendered by book-entry transfer procedures described below, such
nonexchanged Old Class C Certificates will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
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Book-Entry Transfer
The Exchange Agent will make a request to establish an account with respect
to the Old Class C Certificates at the Book-Entry Transfer Facility for
purposes of the Exchange Offer within two business days after the date of this
Prospectus. Any financial institution that is a participant in the Book-Entry
Transfer Facility's systems may make book-entry delivery of Old Class C
Certificates by causing the Book-Entry Transfer Facility to transfer such Old
Class C Certificates into the Exchange Agent's account at the Book-Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures for transfer. However, although delivery of Old Class C Certificates
may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal or facsimile thereof with any required
signature guarantees or an Agent's Message in lieu thereof, together with any
other required documents, must, in any case, be transmitted to and received by
the Exchange Agent at one of the addresses set forth below under "--Exchange
Agent" on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
Guaranteed Delivery Procedures
If a registered holder of the Old Class C Certificates desires to tender such
Old Class C Certificates, and the Old Class C Certificates are not immediately
available, or time will not permit such holder's Old Class C Certificates or
other required documents to reach the Exchange Agent before the Expiration
Date, or the procedures for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed notice of
guaranteed delivery, substantially in the form provided by US Airways (a
"Notice of Guaranteed Delivery") (by facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of Old Class C
Certificates and the amount of Old Class C Certificates tendered, stating that
the tender is being made thereby and guaranteeing that within three New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates for all physically tendered Old Class
C Certificates, in proper form for transfer, or a Book-Entry Confirmation, as
the case may be, together with a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof or an Agent's Message in lieu thereof),
with any required signature guarantees and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent and (iii) the certificates for all physically tendered Old Class
C Certificates, in proper form for transfer, or a Book-Entry Confirmation, as
the case may be, together with a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof or an Agent's Message in lieu thereof),
with any required signature guarantees and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
Withdrawal of Tenders
Tenders of Old Class C Certificates may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date at the address set forth below under "--Exchange Agent." Any
such notice of withdrawal must specify the name of the person having tendered
the Old Class C Certificates to be withdrawn, identify the Old Class C
Certificates to be withdrawn (including the principal amount of such Old Class
C Certificates) and (where certificates for Old Class C Certificates have been
transmitted) specify the name in which such Old Class C Certificates are
registered, if different from that of the withdrawing holder. If certificates
for Old Class C Certificates have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution unless such holder is an Eligible
Institution. If Old Class C Certificates have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the
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withdrawn Old Class C Certificates and otherwise comply with the procedures of
such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by US Airways,
whose determination will be final and binding on all parties. Any Old Class C
Certificates so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Class C Certificates which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder (or, in the case
of Old Class C Certificates tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Class C Certificates will be
credited to an account maintained with such Book-Entry Transfer Facility for
the Old Class C Certificates) as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Class C Certificates may be retendered by following one of the procedures
described under "--Procedures for Tendering" and "--Book-Entry Transfer" above
at any time on or prior to the Expiration Date.
Conditions
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, US Airways will not be required to accept for exchange,
or to exchange, any Old Class C Certificates for any New Class C Certificates,
and, as described below, may terminate the Exchange Offer (whether or not any
Old Class C Certificates have theretofore been accepted for exchange) or may
waive any conditions to or amend the Exchange Offer, if any of the following
conditions have occurred or exists or have not been satisfied:
(i) the due tendering of Old Class C Certificates in accordance with the
Exchange Offer;
(ii) the Exchange Offer, or the making of any exchange by a holder,
violates any applicable law, statute, rule, regulation or any applicable
interpretation of the staff of the Commission;
(iii) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted that, in the reasonable
judgment of US Airways, might materially impair the ability of US Airways
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to US Airways; or
(iv) each holder of Old Class C Certificates exchanged in the Exchange
Offer shall have made certain customary representations, including
representations that, among other things, (a) the holder will acquire New
Class C Certificates in the ordinary course of business, (b) that the
holder has no arrangement or understanding with any person to participate,
in the distribution of the New Class C Certificates, (c) the holder is not
an "affiliate" of US Airways as defined in Rule 405 of the Securities Act
or, if it is an affiliate, the holder acknowledges it must comply with the
prospectus delivery requirements of the Securities Act, (d) if such holder
is not a broker-dealer, that it is not engaged in, and does not intend to
engage in, a distribution of the New Class C Certificates and (e) if such
holder is a broker-dealer, that it will receive New Class C Certificates
for its own account in exchange for Old Class C Certificates that were
acquired as a result of market-making activities or other trading
activities and that it will be required to deliver a prospectus in
connection with any resale of New Class C Certificates.
If US Airways determines in its sole and absolute discretion that any of the
foregoing events or conditions has occurred or exists or has not been
satisfied, US Airways may, subject to applicable law, (i) terminate the
Exchange Offer (whether or not any Old Class C Certificates have theretofore
been accepted for exchange), (ii) extend the Exchange Offer and retain all Old
Class C Certificates tendered prior to the expiration of the Exchange Offer
subject, however, to the rights of holders to withdraw such Old Class C
Certificates or (iii) waive any such condition or otherwise amend the terms of
the Exchange Offer in any respect. If such waiver or amendment constitutes a
material change to the Exchange Offer, US Airways will promptly disclose such
waiver or amendment by means of a prospectus supplement that will be
distributed to the registered holders of the Old Class C Certificates, and US
Airways will extend the Exchange Offer to the extent required by Rule 14e-1
under the Exchange Act.
The foregoing conditions are for the sole benefit of US Airways and may be
waived by US Airways in whole or in part at any time and from time to time in
its sole discretion. The failure by US Airways at any time
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to exercise any of the foregoing rights shall not be deemed a waiver of such
rights and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by US Airways
concerning the events described above will be final and binding upon all
parties.
In addition, US Airways will not accept for exchange any Old Class C
Certificates tendered, and no New Class C Certificates will be issued in
exchange for any such Old Class C Certificates, if at such time any stop order
shall be threatened or in effect with respect to the Registration Statement of
which this Prospectus constitutes a part or the qualification of the Pass
Through Trust Agreements under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
The Exchange Offer is not conditioned upon any minimum principal amount of
the Old Class C Certificates being tendered for exchange.
Exchange Agent
State Street Bank and Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
By Hand, Mail or Overnight Delivery:
State Street Bank and Trust Company
Corporate Trust Department
Two International Place-4th Floor
Boston, MA 02110
Attention: Susan Lavey
Facsimile Transmission:
(617) 664-5290
Confirm by Telephone:
(617) 664-5314
Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer and all
other expenses to be incurred in connection with the Exchange Offer will be
paid by US Airways, including fees and expenses of the Exchange Agent and
Trustee and accounting, legal, printing and related fees and expenses, provided
that the Initial Purchaser will bear any additional expenses caused by a
request by the Initial Purchaser to delay effectiveness of the Registration
Statement and keeping the Registration Statement effective with the Commission
for more than 180 days after the expiration of the Exchange Offer. The
principal solicitation for tenders pursuant to the Exchange Offer is being made
by mail. However, additional solicitations may be made by telegraph, telephone,
telecopy, electronic mail or in person by officers and regular employees of US
Airways.
US Airways will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. US Airways will, however, pay the
Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. US Airways may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of the Prospectus and related documents
to the beneficial owners of the Old Class C Certificates, and in handling or
forwarding tenders for exchange.
US Airways will pay all transfer taxes, if any, applicable to the exchange of
Old Class C Certificates pursuant to the Exchange Offer. If, however,
certificates representing New Class C Certificates or Old Class C
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Certificates for principal amounts not tendered or accepted for exchange are to
be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Class C Certificates tendered, or
if tendered Old Class C Certificates are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax
is imposed for any reason other than the exchange of Old Class C Certificates
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
Miscellaneous
Participation in the Exchange Offer is voluntary and holders should carefully
consider whether to accept. Holders of the Old Class C Certificates are urged
to consult their financial and tax advisors in making their own decision on
what action to take.
US Airways may in the future seek to acquire untendered Old Class C
Certificates, to the extent permitted by applicable law, in open market or
privately negotiated transactions, through subsequent exchange offers or
otherwise. US Airways has no present plans to acquire any Old Class C
Certificates that are not tendered in the Exchange Offer or to file a
registration statement to permit resales of any untendered Old Class C
Certificates.
DESCRIPTION OF THE CERTIFICATES
The following description of the particular terms of the Certificates
provides the general terms and provisions of the Certificates. 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 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. The
documents pertaining to the Class A and Class B Certificates were filed with
the Commission as exhibits to US Airways' Current Report on Form 8-K on
December 29, 1998. The documents pertaining to the Class C Certificates were
filed on February 26, 1999 with the Commission as exhibits to US Airways'
Registration Statement on Form S-4.
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
On December 14, 1998, US Airways, through its Class C Trust, privately placed
an aggregate of $141,366,000 of Old Class C Certificates. The Old C
Certificates were issued, and the New Class C Certificates will be issued,
pursuant to the Class C Pass Through Trust Agreement. The form and terms of the
New Class C Certificates are the same in all material respects as the form and
terms of the Old Class C Certificates, except that:
. US Airways registered the New Class C Certificates under the Securities
Act and their transfer is not restricted like the Old Class C
Certificates; and
. the New Class C Certificates are not entitled to liquidated damages
under the Registration Agreement.
As of the date of this Prospectus, $141,366,000 aggregate principal amount of
Old Class C Certificates is outstanding.
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On December 14, 1998, US Airways publicly sold an aggregate of $447,768,000
of Class A Pass Through Certificates, Series 1998-1 (the "Class A
Certificates") and Class B Pass Through Certificates, Series 1998-1 (the "Class
B Certificates"), which were registered with the Securities and Exchange
Commission (the "Commission"). All $447,768,000 of the Class A and Class B
Certificates remains outstanding as of the date of this Prospectus. Class A and
Class B Certificates are not being exchanged in connection with the Exchange
Offer.
The Certificates 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
were 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
December 4, 1998 (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 property of each Trust (the "Trust Property") consists 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. All
Aircraft financed prior to the date hereof were Leased Aircraft and
there were no Owned Aircraft.
. 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 have been issued in fully registered form only
and are 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 represent interests in the respective Trusts, and all
payments and distributions thereon are made only from the Trust Property of the
related Trust. (Section 3.09) The Certificates do not and 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 are entitled to certain rights with
respect to payments and withdrawals that are required to be made by the
applicable Depositary under the applicable Deposit 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 and withdrawals to be made under the applicable Deposit 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 Deposit Agreement and the Escrow Agreement relating to a Trust,
except for the right to request withdrawals for the purchase of Equipment
Notes, do not constitute Trust Property of such Trust.
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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, the Class B Trust and
the Class C Trust and the Equipment Notes held in each such Trust accrue
interest at the rate of 6.85% per annum for the Class A Certificates, 7.35% per
annum for the Class B Certificates and 6.82% per annum for the Class C
Certificates, 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 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 are supported by a
separate Liquidity Facility 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 Certificates 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 issued by a particular Trust are entitled to
receive and retain the proceeds of drawings under the Liquidity Facility for
such Trust. The Liquidity Facility with respect to the Class C Trust does not
cover amounts payable by US Airways as liquidated damages under the
Registration Agreement. 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
July 30, 2019, for the Class B Certificates is July 30, 2019, and for the Class
C Certificates is January 30, 2016.
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
41
<PAGE>
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 2.3) 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 2.3 and 2.6) 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); Escrow
Agreements Section 2.3) See "--Indenture Defaults and Certain Rights upon an
Indenture Default" and "Description of the Equipment Notes--Redemption."
Each Pass Through Trust Agreement requires 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. The Class C Pass Through Trust Agreement also requires that
the Trustee deposit any Class C Special Indemnity Payments and any Class C
Special Deposit Payments received by the Trustee in the Certificate Account.
Each Pass Through Trust Agreement requires 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 certain permitted investments.
Pursuant to the terms of each Pass Through Trust Agreement, the Trustee is
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)
42
<PAGE>
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 thereon
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 was 1.0000000 on the date of issuance of the Certificates; thereafter,
the Pool Factor for each Trust declines 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)
43
<PAGE>
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 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 1.0000000 $ 0.00 1.0000000 $ 0.00 1.000000
July 30, 1999........... 2,433,005.55 0.9933613 0.00 1.0000000 0.00 1.000000
January 30, 2000........ 5,103,781.46 0.9794350 2,893,145.27 0.9644061 0.00 1.000000
July 30, 2000........... 3,149,032.98 0.9708425 102,480.59 0.9631453 0.00 1.000000
January 30, 2001........ 9,128,060.99 0.9459355 3,546,870.19 0.9195087 0.00 1.000000
July 30, 2001........... 2,003,971.51 0.9404674 101,610.63 0.9182586 0.00 1.000000
January 30, 2002........ 9,829,788.99 0.9136457 4,644,708.50 0.8611154 0.00 1.000000
July 30, 2002........... 1,302,243.51 0.9100924 101,610.63 0.8598653 0.00 1.000000
January 30, 2003........ 10,185,787.67 0.8822993 6,193,863.27 0.7836632 0.00 1.000000
July 30, 2003........... 946,244.83 0.8797173 0.00 0.7836632 0.00 1.000000
January 30, 2004........ 10,870,342.17 0.8500563 7,339,373.87 0.6933680 0.00 1.000000
July 30, 2004........... 413,886.03 0.8489270 0.00 0.6933680 0.00 1.000000
January 30, 2005........ 11,639,293.39 0.8171678 8,494,541.27 0.5888610 0.00 1.000000
July 30, 2005........... 56,514.73 0.8170136 0.00 0.5888610 0.00 1.000000
January 30, 2006........ 14,623,208.46 0.7771125 6,340,007.87 0.5108608 930,106.80 0.9934206
January 30, 2007........ 15,293,762.28 0.7353816 4,188,284.55 0.4593330 3,958,065.23 0.9654219
January 30, 2008........ 13,638,402.14 0.6981677 3,168,589.53 0.4203503 5,695,110.61 0.9251356
January 30, 2009........ 6,051,984.14 0.6816541 2,438,460.00 0.3903503 10,338,868.68 0.8520001
January 30, 2010........ 6,261,480.67 0.6645689 2,438,460.00 0.3603503 20,287,335.49 0.7084908
July 30, 2010........... 463,320.00 0.6633047 0.00 0.3603503 1,000,685.99 0.7014121
January 30, 2011........ 9,744,066.00 0.6367169 2,438,460.00 0.3303503 23,771,328.56 0.5332576
January 30, 2012........ 9,212,170.50 0.6115804 2,438,460.00 0.3003503 25,507,683.49 0.3528204
July 30, 2012........... 1,919,862.00 0.6063418 0.00 0.3003503 991,114.93 0.3458095
January 30, 2013........ 5,962,865.08 0.5900714 2,125,415.09 0.2742017 38,998,859.05 0.0699379
July 30, 2013........... 5,331,994.62 0.5755225 2,473,331.06 0.2437726 6,479,851.23 0.0241005
January 30, 2014........ 53,641,014.05 0.4291567 4,666,657.19 0.1863595 2,926,097.76 0.0034018
July 30, 2014........... 8,693,285.15 0.4054360 1,050,628.59 0.1734337 480,892.18 0.0000000
January 30, 2015........ 26,034,323.21 0.3343983 2,028,521.50 0.1484772 0.00 0.0000000
July 30, 2015........... 1,061,768.36 0.3315012 0.00 0.1484772 0.00 0.0000000
January 30, 2016........ 31,300,318.96 0.2460946 0.00 0.1484772 0.00 0.0000000
July 30, 2016........... 5,666,868.31 0.2306319 0.00 0.1484772 0.00 0.0000000
January 30, 2017........ 60,242,760.23 0.0662524 611,608.26 0.1409526 0.00 0.0000000
July 30, 2017........... 0.00 0.0662524 80,647.56 0.1399604 0.00 0.0000000
January 30, 2018........ 24,280,592.03 0.0000000 11,376,264.58 0.0000000 0.00 0.0000000
</TABLE>
44
<PAGE>
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 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 record of each Trust as the name and period of ownership
of such Certificateholder appears on the records of the registrar of the
Certificates.
45
<PAGE>
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 is 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 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)
46
<PAGE>
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 provides 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.
47
<PAGE>
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 is 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.
. US Airways delivers a certificate and an opinion or opinions of counsel
indicating that such transaction, in effect, complies with such
conditions.
48
<PAGE>
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 do not contain any
covenants or provisions which 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 contains 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 Deposit Agreements, the Escrow
Agreements, 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, 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 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.
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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. (Section 9.02; Trust Supplements,
Section 6.02)
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.
. 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.
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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 immediately 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 is 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 has 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 is based on the
agreements entered into on or shortly after the Issuance Date with respect to
four of the Leased Aircraft delivered during October, November and December
1998 (the "Initial 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 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. 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
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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, (v) the satisfaction of certain liquidity
conditions, and (vi) compliance with certain parameters relating to the per
Aircraft amount and aggregate amount of financing that AVSA, S.A.R.L.
("AVSA"), an affiliate of Airbus, is obligated to provide. "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 believes that, as of the date of this Prospectus, AIFS does
not own any Class C Certificates.
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,
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 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
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
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.
. 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,
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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 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 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; and
(v) modifications to the provision that New York law will govern the
Indentures.
. 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;
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(iii) modification of the obligations of US Airways to furnish certain
opinions with respect to a replacement airframe; and
(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; and
(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
General
Upon issuance, each series 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. 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
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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 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 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
Class C Certificates will be issued in certificated form ("Definitive
Certificates") to respective Certificate Owners or their nominees, rather than
to DTC or its nominee, only if (i) US Airways advises the Class C Trustee in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to such Class C 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, Certificate Owners with
fractional undivided interests aggregating not less than a majority in
interest in the Class C Trust advise the Class C 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 such Certificate
Owners' best interest. Upon the occurrence of any event described in the
immediately preceding sentence, the Class C Trustee will be required to notify
all such Certificate Owners through DTC Participants of the availability of
Definitive Certificates. Upon surrender by DTC of the certificates
representing the Class C Certificates and receipt of instructions for re-
registration, the Class C Trustee will reissue the Class C Certificates as
Definitive Certificates to such Certificate Owners.
Distributions of principal, premium, if any, and interest with respect to
the Class C Certificates will thereafter be made by the Class C Trustee
directly in accordance with the procedures set forth in the Basic Agreement
and the Class C Trust Supplement, 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 Class C Trustee. The
final payment on any Class C Certificate, however, will be made only upon
presentation and surrender of such Class C Certificate at the office or agency
specified in the notice of final distribution to such Certificateholders.
Definitive Certificates will be freely transferable and exchangeable at the
office of the Class C Trustee upon compliance with the requirements set forth
in the Basic Agreement and the Class C Trust Supplement. 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.
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Holders of Old Class C Certificates who do not exchange such Old Class C
Certificates for New Class C Certificates shall be subject to additional
transfer restrictions with respect to such Old Class C Certificates as set
forth in the Class C Trust Supplement.
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. The Deposit Agreements relating to the
Class A and Class B Certificates were filed with the Commission as exhibits to
US Airways' Current Report on Form 8-K on December 29, 1998. The Deposit
Agreement relating to the Class C Certificates was filed with the Commission
on February 26, 1999 as an exhibit to US Airways' Registration Statement on
Form S-4. 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 has entered 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 have
established 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 Initial Delivered Aircraft was deposited (each, a "Deposit")
into the Deposit Accounts by the Underwriters (or, in the case of the Class C
Certificates, by the Initial Purchaser), 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 Airbus aircraft delivered 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.
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
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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. US Airways believes that, as of the date of this
Prospectus, AIFS does not own any Class C Certificates.
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") or, in the case of Deposits relating to the Class C
Certificates, upon the occurrence of a termination event under the Aircraft
Financing Letter Agreement, dated as of October 31, 1997, between AVSA and US
Airways, 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. In the case of
Deposits relating to the Class C Certificates, such distribution will include
a premium payable by US Airways equal to the Deposit Make-Whole Premium with
respect to the remaining Deposits applicable to the Class C Trust, except that
the Deposit Make-Whole Premium will be payable only to the extent the
remaining Deposits applicable to the Class C Trust exceeds the Par Redemption
Amount and will not be payable in respect of a Non-Premium Amount.
"Deposit Make-Whole Premium" means, with respect to the distribution of
unused Deposits to holders of any Class of 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") minus the Non-Premium Amount and, in the case of the
Class C Certificates, the Par Redemption Amount (without duplication) were
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 acquired 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 225 basis points in the case of
the Class A Certificates, 275 basis points in the case of the Class B
Certificates and 222 basis points in the case of Class C Certificates over (b)
the amount of such unused Deposits to be distributed to the holders of such
Certificates minus the Non-Premium Amount and, in the case of the Class C
Certificates, the Par Redemption Amount (without duplication), 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).
"Non-Premium Amount" means the amount equal to unused Deposits to be
distributed due 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. Deposits comprising Non-Premium Amounts will not
be treated as unused Deposits in determining whether the unused Deposits
exceed the Par Redemption Amount.
"Par Redemption Amount" means (x) in the case where the unused Deposits are
returned due to the fault or negligence of US Airways, $0 and (y) in all other
cases $15,000,000.
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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 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, New York branch, ("CSFB") will act as depositary
(the "Depositary"). CSFB was founded in 1856 in Zurich. CSFB's registered head
office is in Zurich, Switzerland. CSFB has been licensed by the Superintendent
of Banks of the State of New York to operate a branch in New York. It is also
subject to review and supervision by the Federal Reserve Bank. CSFB is part of
Credit Suisse Group, which also includes Credit Suisse, a Swiss bank
conducting Swiss domestic banking for individual and corporate clients and
global private banking, and Winterthur Group, merged with Credit Suisse Group
on December 15, 1997.
CSFB has long-term unsecured senior debt ratings of A1 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, 1998 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 ("Citibank"). (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 March 31,
1999, 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, 1998 and as
of December 31, 1997 are set forth in the Annual Report and Form 10-K of
Citicorp and its subsidiaries for the year ended December 31, 1998 and as of
March 31, 1999 and March 31, 1998 are set forth in the Financial Review and
Form 10-Q for the quarter ended March 31, 1999. 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.
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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. The Escrow Agreements relating to the Class A and Class B
Certificates were filed with the Commission as exhibits to US Airways' Current
Report on Form 8-K on December 29, 1998. The Escrow Agreement relating to the
Class C Certificates was filed with the Commission on February 26, 1999 as an
exhibit to US Airways' Registration Statement on Form S-4. The provisions of
the Escrow Agreements are substantially identical except as otherwise
indicated. Five additional Aircraft were delivered after the Initial Delivered
Aircraft and the applicable amounts were withdrawn from escrow to finance such
Aircraft.
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 (in the case of
the Class C Trust) have entered 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 Initial Delivered Aircraft was
deposited by the Underwriters or the Initial Purchaser, 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.
The Escrow Agent has issued 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. In connection with the Exchange Offer,
each Escrow Receipt attached to an Old Class C Certificate (an "Old Escrow
Receipt") will be exchanged for an Escrow Receipt attached to a New Class C
Certificate (a "New Escrow Receipt") that will be identical in all material
respects to the Old Escrow Receipt. Each Escrow Receipt will be registered by
the Escrow Agent in the same name and manner as the Certificate to which it is
affixed.
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DESCRIPTION OF THE LIQUIDITY FACILITIES
The following is a description of the particular terms of the Liquidity
Facilities. 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 was filed with the Commission as an exhibit to US Airways' Current
Report on Form 8-K on December 29, 1998. The provisions of the Liquidity
Facilities are substantially identical except as otherwise indicated.
General
The Liquidity Provider has entered 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.
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,
is $37,656,437, $8,961,341, and $14,461,742, respectively.
Except as otherwise provided below, the Liquidity Facility for each Trust
enables 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 does 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 does not
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provide for drawings thereunder to pay any amounts payable with respect to the
Deposits relating to such Trust. The Liquidity Facility with respect to the
Class C Trust does not cover amounts payable by US Airways as liquidated
damages under the Registration Agreement.
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 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.
(Intercreditor Agreement, Section 1.1)
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.
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"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 provides that the relevant Liquidity
Provider's obligations thereunder will expire on the earliest of:
. 364 days after the 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 provides 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 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))
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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 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.
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Liquidity Events of Default
Events of Default under each Liquidity Facility (each, a "Liquidity Event of
Default") consist 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") is 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.
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following is a description of the particular terms of the Intercreditor
Agreement. The statements 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 was filed with the Commission
as an exhibit to US Airways' Current Report on Form 8-K on December 29, 1998.
Intercreditor Rights
General
The Intercreditor Agreement is 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.
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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 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) irrevocably agree, and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) are 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."
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"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. (Intercreditor Agreement, Section 1.1)
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;
. 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.
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"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). (Intercreditor Agreement, Section 1.1)
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 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;
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. 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 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.
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"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 40.5%, for the Class B
Certificates 51.0% and for the Class C Certificates 67.0%. (Intercreditor
Agreement, Section 1.1)
"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
NonPerforming 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 is 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 A319 aircraft, and six Airbus A320
aircraft (the "Aircraft"), 13 of which have been delivered by the manufacturer
to US Airways and the remaining 10 of which are scheduled for delivery from
June 1999 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 A319 and Airbus 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 A319 aircraft will be CFM International,
Inc. CFM-56-5. The seating capacity of the Airbus A320 aircraft is
approximately 142 passengers. The engine type utilized on the Airbus A320
aircraft will be CFM International, Inc. CFM-56-5.
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
Registration Serial Delivery ---------------------------------
Aircraft 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 14, 1998 37,700,000 38,140,000 37,210,000
Airbus A319............. N705UW 0929 December 17, 1998 37,700,000 38,140,000 37,210,000
Airbus A320............. N101UW 0936 January 29, 1999 44,600,000 44,390,000 42,970,000
Airbus A319............. N706US 0946 January 22, 1999 38,700,000 38,420,000 37,280,000
Airbus A319............. N707UW 0949 January 29, 1999 38,700,000 38,420,000 37,280,000
Airbus A319............. N708UW 0972 March 4, 1999 38,700,000 38,420,000 37,360,000
Airbus A319............. N709UW 0997 March 31, 1999 38,700,000 38,420,000 37,430,000
Airbus A320............. N102UW 0844 May 17, 1999 45,300,000 44,710,000 43,320,000
Airbus A320............. N103US 0861 June 1999 45,300,000 44,710,000 43,320,000
Airbus A319............. N710UW 1019 May 20, 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 July 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 13 aircraft are set forth. The
actual delivery date for any other Aircraft may be subject to delay or
acceleration. See "--Deliveries of Aircraft."
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
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appraisals, copies of which are annexed to this Prospectus 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
Thirteen Aircraft have been delivered and the remaining Aircraft are
scheduled for delivery from June 1999 through July 1999 under a purchase
agreement between US Airways Group and AVSA. 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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DESCRIPTION OF THE EQUIPMENT NOTES
The following is a description of the terms of 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. 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. The documents relating to the Class A and Class B Certificates were
filed with the Commission as exhibits to US Airways' Current Report on form 8-
K on December 29, 1998. The documents relating to the Class C Certificates
were filed with the Commission on February 26, 1999 as exhibits to US Airways'
Registration Statement on Form S-4. 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.
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
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set forth in "Description of the Certificates--Payments and Distributions"
until the final 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, January 30, 2000 in the case of the Class B
Certificates and January 30, 2006 in the case of the Class C 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.
In certain circumstances, US Airways may be obligated under the Registration
Agreement to pay liquidated damages to the Class C Trust for distribution to
Holders of Class C Certificates. US Airways will pay any such liquidated
damages to the Class C Trust for distribution to each Holder affected thereby
as "Class C Special Deposit Payments" under the Participation Agreement (which
will be an amount equal to the Deposits held in respect of the Class C Trust
multiplied by the Multiplier) and as "Class C Special Indemnity Payments"
under the Note Purchase Agreement (which will be an amount equal to the
aggregate amount of Series C Equipment Notes held by the Class C Trust
multiplied by the Multiplier ). (Participation Agreement, 6(d); Note Purchase
Agreement, 5(a)) Liquidated damages paid by US Airways to the Class C Trust
are not subject to the Intercreditor Agreement and, accordingly, are not
subordinated to the payment of principal and interest on the Class A and Class
B Certificates. Liquidated damages payable by US Airways, if any, will not be
covered by the Class C Liquidity Facility.
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, but not less than all, of the Equipment Notes issued with respect to a
Leased Aircraft may be redeemed prior to maturity with the consent of US
Airways, and all of the Equipment Notes issued with respect to the
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Owned Aircraft may be redeemed in whole 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 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
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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. (Indentures, 1.01)
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 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 Equipment 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.
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
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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..... $ 22.90 $ 36.50 62.7% $ 28.62 $ 43.99 65.1%
July 30, 2000........ 22.74 35.38 64.3 28.62 42.67 67.1
July 30, 2001........ 22.19 34.25 64.8 27.92 41.35 67.5
July 30, 2002........ 21.42 33.12 64.7 27.15 40.03 67.8
July 30, 2003........ 20.63 31.99 64.5 26.34 38.71 68.0
July 30, 2004........ 19.77 30.86 64.1 25.46 37.39 68.1
July 30, 2005........ 18.86 29.73 63.4 24.53 36.07 68.0
July 30, 2006........ 17.88 28.60 62.5 23.53 34.75 67.7
July 30, 2007........ 16.84 27.47 61.3 22.46 33.43 67.2
July 30, 2008........ 15.72 26.34 59.7 21.41 32.11 66.7
July 30, 2009........ 14.75 25.21 58.5 20.65 30.79 67.1
July 30, 2010........ 13.65 24.09 56.7 19.34 29.47 65.6
July 30, 2011........ 12.61 22.96 54.9 18.08 28.15 64.2
July 30, 2012........ 11.49 21.83 52.7 15.22 26.83 56.7
July 30, 2013........ 9.42 20.70 45.5 12.81 25.51 50.2
July 30, 2014........ 5.40 19.19 28.1 10.33 24.19 42.7
July 30, 2015........ 5.40 17.69 30.5 7.67 22.43 34.2
July 30, 2016........ 5.40 16.18 33.4 5.00 20.67 24.2
July 30, 2017........ 2.21 14.68 15.0 1.96 18.91 10.3
</TABLE>
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.
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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 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)
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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 a Lease
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 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.
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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 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
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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 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.
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The Leases and Certain Provisions of Owned Aircraft Indentures
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 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.
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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)
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
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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 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)
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
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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 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
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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 (i) a CFM International Model 56-5 (or improved) type engine or (ii) a CFM
engine or another manufacturer's engine suitable for use on the relevant
airframe and having a value and utility equal to or greater than a CFM Model
56-5 type engine, 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).
. 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 FAA
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 sublessee) has undertaken and is diligently carrying
forward all steps which are necessary or desirable to permit the normal use
of such property by US Airways (or such sublessee), but in any event an
Event of Loss will occur if such "grounding" extends for a period of more
than three hundred sixty (360) days (or, if earlier, the expiration of the
term); provided that no Event of Loss will occur if such "grounding" has
been applicable to US Airways' entire fleet of such aircraft and US
Airways, prior to the expiration of one year from the prohibition of such
use, 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, all steps which
are necessary or desirable to permit the
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normal use of such property by US Airways (or such sublessee) but in any
event an Event of Loss will occur if such use is prohibited for a period of
two (2) consecutive years or such use is prohibited at the expiration of
the term.
. Any divestiture of title to or interest in an engine in connection with
pooling or certain other arrangements or any event with respect to an
engine that is deemed to be an Event of Loss 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.
. 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)
87
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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
The following summary describes the principal U.S. federal income tax
consequences to Certificateholders of the exchange of the Old Class C
Certificates for the New Class C Certificates pursuant to the Exchange Offer.
This summary does not describe any tax consequences arising under the laws of
any state, locality or taxing jurisdiction other than the United States. This
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. No rulings have been sought from the Internal Revenue
Service (the "IRS") with respect to the U.S. federal income tax consequences,
discussed below, and no assurances can be given that the IRS will not take
contrary positions.
The exchange of the Old Class C Certificates for the New Class C
Certificates pursuant to the Exchange Offer will not be a taxable event for
U.S. federal income tax purposes. As a result, no gain or loss will be
recognized by a holder of the Old Class C Certificates (with attached Old
Escrow Receipts) upon receipt of the New Class C Certificates (with attached
New Escrow Receipts). A holder's tax basis in the New Class C Certificates
received pursuant to the Exchange Offer will be the same as the holder's tax
basis in the Old Class Certificates exchanged therefor and a holder's tax
basis in the New Escrow Receipts received pursuant to the Exchange Offer will
be the same as the holder's tax basis in the Old Escrow Receipts exchanged
therefor. A holder's holding period for the New Class C Certificates received
pursuant to the Exchange Offer will include its holding period for the Old
Class C Certificates exchanged therefor and a holder's holding period for the
New Escrow Receipts received pursuant to the Exchange Offer will include its
holding period for the Old Escrow Receipts exchanged therefor.
Certificateholders should consult their own tax advisors with respect to the
federal, state, local and foreign tax consequences to them of exchanging the
Old Class C Certificates for the New Class C Certificates and of the ownership
and disposition of the New Class C Certificates received pursuant to the
Exchange Offer in light of their own particular circumstances.
88
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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.
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 acquire any New Class C
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 acquiring any New Class C 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 New Class C Certificate, the Plan's
assets will include both the New Class C Certificate and an undivided interest
in each of the underlying assets of the Class C 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 the Class C Trust by, or on behalf of,
employee benefit plans will not be monitored. If the assets of the Class C
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.
89
<PAGE>
Prohibited Transaction Exemptions
In addition, whether or not the assets of the Class C Trust are deemed to be
Plan assets under the Plan Asset Regulation, the fiduciary of a Plan that
proposes to acquire and hold any New Class C Certificates should consider,
among other things, whether such acquisition 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 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 New Class C Certificates.
Each person who acquires or accepts a New Class C 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
New Class C Certificate or an interest therein or (ii) the purchase and
holding of such New Class C 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.
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 the acquisition of New
Class C Certificates by insurance company general accounts.
90
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Class C Certificates for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Class C Certificates.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of New Class C
Certificates received in exchange for Old Class C Certificates where such Old
Class C Certificates were acquired as a result of market-making activities or
other trading activities. US Airways has agreed that for a period of one
hundred eighty (180) days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
US Airways will not receive any proceeds from any sale of New Class C
Certificates by broker-dealers. New Class C Certificates received by broker-
dealers for their own account pursuant to the Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Class C
Certificates or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such New Class C Certificates. Any broker-dealer that
resells New Class C Certificates that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such New Class C Certificates may be deemed to be an
"underwriter" within the meaning of the 1933 Act and any profit on any such
resale of New Class C Certificates and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
1933 Act. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the 1933 Act.
For a period of one hundred eighty (180) days after the Expiration Date, US
Airways will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. US Airways has agreed to pay all
expenses incident to the Exchange Offer other than commissions or concessions
of any brokers or dealers and will indemnify the holders of the Certificates
(including any broker-dealers) against certain liabilities, including
liabilities under the 1933 Act.
The Initial Purchaser may sell the Class C Certificates from time to time in
one or more transactions at a fixed price or prices, which may be changed, 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.
LEGAL MATTERS
The validity of the New Class C Certificates is being passed upon for US
Airways by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates.
EXPERTS
The consolidated financial statements of US Airways, Inc. and its subsidiary
as of December 31, 1998 and 1997, and for each of the years in the three-year
period ended December 31, 1998 which are included in US Airways' Annual Report
on Form 10-K for the year ended December 31, 1998, have been incorporated by
reference herein and in the registration statement in reliance upon the report
of KPMG LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
91
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The references to AVITAS, AvSolutions and MBA, and to their respective
appraisal reports, each dated as of November 16, 1998, are included herein in
reliance upon the authority of each such firm as an expert with respect to the
matters contained in its appraisal report.
AVAILABLE INFORMATION
US Airways has filed with the Commission a Registration Statement on Form S-
4 (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.
REPORTS TO CERTIFICATEHOLDERS
State Street Bank and Trust Company, in its capacity as Trustee under each
of the Trusts, will provide the Certificateholders of each Trust certain
periodic reports concerning the distributions made from such Trust. See
"Description of the Certificates--Reports to Certificateholders." Such reports
will not constitute financial statements prepared in accordance with generally
accepted accounting principles.
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, 1998, filed on March 19,
1999, (ii) US Airways' Quarterly Reports on Form 10-Q for the quarterly period
ended March 31, 1999, filed on May 7, 1999 and (iii) US Airways' Current
Reports on Form 8-K filed on January 21, March 5, March 30, April 9, April 21,
and May 18, 1999.
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 exchange of the Certificates exchanged 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
92
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subsequently filed document which also is or is deemed to be incorporated by
reference herein or contained in the Prospectus 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.
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APPENDIX I--INDEX OF TERMS
<TABLE>
<CAPTION>
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<S> <C>
ABN AMRO................................................................... 65
Adjusted Expected Distributions............................................ 69
Administration Expenses.................................................... 68
AFA........................................................................ 18
Agent's Message............................................................ 34
Aggregate LTV Collateral Amount............................................ 29
AIFS....................................................................... 17
Airbus..................................................................... 30
Airbus Financing Commitment................................................ 17
Airbus Financing Termination Event......................................... 59
Aircraft................................................................... 71
Aircraft Operative Agreements.............................................. 53
Amendment No. 1 to the Registration Agreement.............................. 30
American Airlines.......................................................... 26
Appraised Current Market Value............................................. 70
Appraisers................................................................. 71
Assumed Aircraft Value..................................................... 76
Assumed Amortization Schedule.............................................. 44
Assumed Appraised Value.................................................... 52
Average Life Date.......................................................... 75
AVITAS..................................................................... 71
AVSA....................................................................... 52
AvSolutions................................................................ 71
Base Rate.................................................................. 64
Basic Agreement............................................................ 39
Book Entry Confirmation.................................................... 34
Book Entry Transfer Facility............................................... 34
Business Day............................................................... 43
Cash Collateral Account.................................................... 62
Cede....................................................................... 54
Certificate Account........................................................ 42
Certificate Owner.......................................................... 54
Certificateholder.......................................................... 40
Certificates............................................................... 1
Citibank................................................................... 59
Class A Certificates....................................................... 40
Class A Trust.............................................................. 40
Class A Trustee............................................................ 21
Class B Certificates....................................................... 40
Class B Trust.............................................................. 40
Class B Trustee............................................................ 21
Class C Certificates....................................................... 1
Class C Special Deposit Payments........................................... 74
Class C Special Indemnity Payments......................................... 74
Class C Trust.............................................................. 40
Class C Trustee............................................................ 21
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Class Exemptions......................................................... 90
Code..................................................................... 50
Commission............................................................... 40
Company.................................................................. 1
Controlling Party........................................................ 62, 66
Convention............................................................... 82
CSFB..................................................................... 59
Current Distribution Date................................................ 68
CWA...................................................................... 18
default.................................................................. 47
Definitive Certificates.................................................. 56
Delay Period............................................................. 30
Delivery Period.......................................................... 71
Delivery Period Termination Date......................................... 58
Delta Air Lines.......................................................... 19
Deposit.................................................................. 57
Deposit Account.......................................................... 57
Deposit Agreements....................................................... 57
Deposit Make-Whole Premium............................................... 58
Depositary............................................................... 59
Depreciation Assumption.................................................. 76
Distribution Date........................................................ 42
DOT...................................................................... 20
Downgrade Drawing........................................................ 62
DTC...................................................................... 45
DTC Participants......................................................... 55
Eligible Institution..................................................... 34
Equipment Notes.......................................................... 73
ERISA.................................................................... 89
ERISA Plans.............................................................. 89
Escrow Agent............................................................. 60
Escrow Agreements........................................................ 60
Escrow Receipts.......................................................... 60
Event of Loss............................................................ 85
Exchange Act............................................................. 92
Exchange Agent........................................................... 31
Exchange Offer........................................................... 30
Excusable Delay.......................................................... 72
Expected Distributions................................................... 68
Expiration Date.......................................................... 33
FAA...................................................................... 19
Final Distributions...................................................... 67
Final Drawing............................................................ 63
Final Maturity Date...................................................... 41
General Account Regulations.............................................. 90
H.15(519)................................................................ 75
IAMAW.................................................................... 18
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
Indenture Default.......................................................... 46
Indentures................................................................. 51
Indirect Participants...................................................... 55
Initial Delivered Aircraft................................................. 51
Initial Purchaser.......................................................... 30
Intercreditor Agreement.................................................... 65
Interest Drawings.......................................................... 61
IRS........................................................................ 88
Issuance Date.............................................................. 30
Kennedy.................................................................... 20
LaGuardia.................................................................. 20
Lease...................................................................... 82
Lease Event of Default..................................................... 46
Lease Period Date.......................................................... 82
Leased Aircraft............................................................ 51
Leased Aircraft Indenture.................................................. 51
Letter of Transmittal...................................................... 30
LIBOR...................................................................... 64
Liquidity Event of Default................................................. 65
Liquidity Expenses......................................................... 68
Liquidity Facility......................................................... 61
Liquidity Obligations...................................................... 68
Liquidity Provider......................................................... 65
Loan Trustee............................................................... 21
Loss Payment Date.......................................................... 85
LTV Appraisal.............................................................. 70
LTV Collateral Amount...................................................... 70
LTV Ratio.................................................................. 70
LTVs....................................................................... 8
Make-Whole Premium......................................................... 75
Mandatory Document Terms................................................... 53
Mandatory Economic Terms................................................... 52
Maximum Amount............................................................. 58
Maximum Available Commitment............................................... 61
MBA........................................................................ 71
MetroJet................................................................... 24
Minimum Sale Price......................................................... 67
Moody's.................................................................... 21
most recent H.l5(519)...................................................... 75
Multiplier................................................................. 32
New Class C Certificates................................................... 30
New Escrow Receipt......................................................... 60
NMB........................................................................ 18
Non-Extension Drawing...................................................... 63
Non-Performing Equipment Note.............................................. 70
Non-Premium Amount......................................................... 58
Note Holders............................................................... 53
Note Purchase Agreement.................................................... 51
Note Purchase Termination Events........................................... 52
Notice of Guaranteed Delivery.............................................. 36
</TABLE>
<TABLE>
<CAPTION>
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<S> <C>
NTSB................................................................... 29
NYSE................................................................... 36
O'Hare................................................................. 20
Old Class C Certificates............................................... 30
Old Escrow Receipt..................................................... 60
Owned Aircraft......................................................... 51
Owned Aircraft Indenture............................................... 51
Owner Participant...................................................... 73
Owner Trustee.......................................................... 40
Par Redemption Amount.................................................. 58
Participating Broker-Dealer............................................ 31
Participation Agreement................................................ 51
Pass Through Trust Agreements.......................................... 40
Paying Agent........................................................... 60
Paying Agent Account................................................... 43
Performing Equipment Note.............................................. 62
Pilots Pension Plan.................................................... 29
Plan Asset Regulation.................................................. 89
Plans.................................................................. 89
Pool Balance........................................................... 43
Pool Factor............................................................ 43
PTC Event Of Default................................................... 48
PTCE................................................................... 90
Purchase Agreement..................................................... 30
Rating Agencies........................................................ 21
Reagan National........................................................ 20
Receiptholder.......................................................... 60
Registration Default................................................... 32
Registration Agreement................................................. 30
Registration Statement................................................. 92
Regular Distribution Dates............................................. 41
Remaining Weighted Average Life........................................ 75
Replacement Facility................................................... 62
Required Amount........................................................ 61
Rules.................................................................. 55
Scheduled Payments..................................................... 41
Section 1110 Period.................................................... 62, 79
Securities Act......................................................... 92
Series A Equipment Notes............................................... 73
Series B Equipment Notes............................................... 73
Series C Equipment Notes............................................... 73
Shelf Registration Statement........................................... 32
Southwest Airlines..................................................... 19
Special Distribution Date.............................................. 42
Special Payment........................................................ 42
Special Payments Account............................................... 42
Standard & Poor's...................................................... 21
Stated Interest Rate................................................... 41
Subordination Agent.................................................... 70
Substitute Aircraft.................................................... 72
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
Termination Notice........................................................ 65
Termination Value......................................................... 84
Threshold Rating.......................................................... 63
Transportation Code....................................................... 48
Travelers................................................................. 59
Treasury Yield............................................................ 75
Triggering Event.......................................................... 48
Trust Agreements.......................................................... 73
Trust Indenture Act....................................................... 38
</TABLE>
<TABLE>
<CAPTION>
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<S> <C>
Trust Property............................................................. 40
Trust Supplement........................................................... 40
Trustee.................................................................... 40
Trusts..................................................................... 40
US Airways................................................................. 16
US Airways Express......................................................... 26
US Airways Group........................................................... 16
US Airways Shuttle......................................................... 26
</TABLE>
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[LOGO OF AVITAS APPEARS HERE]
- --------------------------------------------------------------------------------
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
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US AIRWAYS, INC. NOVEMBER 16, 1998
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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.
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US AIRWAYS, INC. NOVEMBER 16, 1998
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FIGURE 1
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US AIRWAYS, INC.
AIRCRAFT DESCRIPTION &
SUMMARY OF AIRCRAFT VALUES
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AIRCRAFT VALUES IN US$ MILLIONS
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Base Value
No. Type Manufacturer Engine Date of Delivery at Delivery
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1 A319 Airbus CFM56-5B6 Oct-98 $ 37.7
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2 A319 Airbus CFM56-5B6 Oct-98 37.7
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3 A319 Airbus CFM56-5B6 Nov-98 37.7
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4 A319 Airbus CFM56-5B6 Nov-98 37.7
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5 A319 Airbus CFM56-5B6 Dec-98 37.7
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6 A319 Airbus CFM56-5B6 Dec-98 37.7
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7 A319 Airbus CFM56-5B6 Jan-99 38.7
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8 A319 Airbus CFM56-5B6 Jan-99 38.7
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9 A319 Airbus CFM56-5B6 Feb-99 38.7
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10 A319 Airbus CFM56-5B6 Mar-99 38.7
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11 A319 Airbus CFM56-5B6 May-99 39.3
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12 A319 Airbus CFM56-5B6 Jun-99 39.3
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13 A319 Airbus CFM56-5B6 Jun-99 39.3
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14 A319 Airbus CFM56-5B6 Jul-99 39.8
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15 A319 Airbus CFM56-5B6 Jul-99 39.8
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16 A319 Airbus CFM56-5B6 Jul-99 39.8
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17 A319 Airbus CFM56-5B6 Jul-99 39.8
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18 A320 Airbus CFM56-5B4 Jan-99 44.6
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19 A320 Airbus CFM56-5B4 May-99 45.3
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20 A320 Airbus CFM56-5B4 May-99 45.3
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21 A320 Airbus CFM56-5B4 Jun-99 45.3
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22 A320 Airbus CFM56-5B4 Jun-99 45.3
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23 A320 Airbus CFM56-5B4 Jul-99 46.0
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US AIRWAYS, INC. NOVEMBER 16, 1998
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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.
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US AIRWAYS, INC. NOVEMBER 16, 1998
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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
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A319 FLEET DATA
as of JUNE 1998
---------------------------------------------------------------------------
Operator In Service Orders Options Total
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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
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SWISSAIR 8 - - 8
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TAP AIR PORTUGAL 4 12 - 16
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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
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FINNAIR - 5 5 10
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GE CAPITAL AVIATION SERVICES INC. - 2 4 6
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IBERIA - - 9 9
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ILFC - 42 - 42
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LAN CHILE - 11 9 20
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NORTHWEST AIRLINES - 50 100 150
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SABENA - 26 - 26
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SILKAIR - 3 - 3
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TACA INTERNATIONAL AIRLINES - 21 18 39
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TAM TRANSPORTES AEREOS REGIONAIS - 25 25 50
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TUNIS AIR - 3 - 3
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UNKNOWN OPERATOR - 4 - 4
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US AIRWAYS - 109 276 385
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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
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OPERATOR AIRCRAFT ON ORDER
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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
- --------------------------------------------------------------------------------
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.
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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
12
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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
- --------------------------------------------------------------------------------
. 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.
14
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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
- --------------------------------------------------------------------------------
<PAGE>
[LOGO OF AVITAS APPEARS HERE]
- --------------------------------------------------------------------------------
APPENDIX B - AVITAS APPRAISAL METHODOLOGY
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
<PAGE>
AvSOLUTIONS
- --------------------------------------------------------------------------------
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>
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
<PAGE>
AvSOLUTIONS
- --------------------------------------------------------------------------------
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>
APPRAISALS
[LOGO OF AVITAS APPEARS HERE]
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]
II-1
<PAGE>
A DET NORSKE VERITAS COMPANY
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.
Figure 1
US AIRWAYS, INC.
AIRCRAFT DESCRIPTION &
SUMMARY OF AIRCRAFT VALUES
AIRCRAFT VALUES IN US$ MILLIONS
<TABLE>
<CAPTION>
Base Value
Date of at
No. Type Manufacturer Engine Delivery Delivery
- --- ---- ------------ --------- -------- ----------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
II-2
<PAGE>
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.
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.
II-3
<PAGE>
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.
Figure 2
A319 FLEET DATA
as of JUNE 1998
<TABLE>
<CAPTION>
Operator In Service Orders Options Total
- -------- ---------- ------ ------- -----
<S> <C> <C> <C> <C>
Air Canada...................................... 33 -- -- 33
Lufthansa....................................... 17 2 20 39
Airbus Industrie................................ 10 -- -- 10
Air France...................................... 9 4 8 21
United Air Lines................................ 9 25 -- 34
Swissair........................................ 8 -- -- 8
TAP Air Portugal................................ 4 12 -- 16
Eurowings....................................... 3 1 2 6
Croatia Airlines................................ 1 4 6 11
America West Airlines........................... -- 22 20 42
Finnair......................................... -- 5 5 10
GE Capital Aviation Services Inc................ -- 2 4 6
Iberia.......................................... -- -- 9 9
ILFC............................................ -- 42 -- 42
LAN Chile....................................... -- 11 9 20
Northwest Airlines.............................. -- 50 100 150
Sabena.......................................... -- 26 -- 26
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
</TABLE>
Source: BACK Information Services
II-4
<PAGE>
Figure 3
A319 AIRCRAFT BY ENGINE MANUFACTURER
as of JUNE 1998
<TABLE>
<CAPTION>
Engine In Service Orders Options Total
- ------ ---------- ------ ------- -----
<S> <C> <C> <C> <C>
CFM 56.......................................... 81 222 430 733
V2500........................................... 13 116 72 201
Undecided....................................... -- 33 -- 33
--- --- --- ---
Grand Total..................................... 94 371 502 967
</TABLE>
Source: BACK Information Services
Figure 4
A319/A320/A321 SERIES CURRENT FLEET AND BACKLOG
as of JUNE 1998
<TABLE>
<CAPTION>
Model In Service Orders Options Total
- ----- ---------- ------ ------- -----
<S> <C> <C> <C> <C>
A319-100........................................ 94 371 502 967
A320-100........................................ 18 -- -- 18
A320-200........................................ 631 344 136 1,111
A321-100........................................ 74 34 64 172
A321-200........................................ 28 87 34 149
--- --- --- -----
Grand Total..................................... 845 836 736 2,417
</TABLE>
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.
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.
II-5
<PAGE>
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.
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.
II-6
<PAGE>
Figure 5
A320-200 TEN LARGEST OPERATORS
as of JUNE 1998
<TABLE>
<CAPTION>
Operators Aircraft in Service
- --------- -------------------
<S> <C>
Northwest Airlines.......................................... 56
Air France.................................................. 45
United Air Lines............................................ 44
Air Canada.................................................. 34
Lufthansa................................................... 33
America West Airlines....................................... 30
Indian Airlines Corporation................................. 30
Iberia...................................................... 22
All Nippon Airways.......................................... 21
Ansett Airlines............................................. 20
</TABLE>
Source: BACK Information Services
Figure 6
A320-200 TEN LARGEST ORDERHOLDERS
as of JUNE 1998
<TABLE>
<CAPTION>
Operator Aircraft on Order
- -------- -----------------
<S> <C>
Iberia........................................................ 31
ILFC.......................................................... 28
GECAS......................................................... 25
United Airlines............................................... 25
America West Airlines......................................... 24
Alitalia...................................................... 19
Taca International Airlines................................... 16
US Airways.................................................... 15
TAM Transportes Aereos Regionais.............................. 13
Northwest Airlines............................................ 12
</TABLE>
Source: BACK Information Services
II-7
<PAGE>
Presented below is the A320 current fleet and backlog by engine type.
Figure 7
A320-200 CURRENT FLEET & BACKLOG BY ENGINE TYPE
as of JUNE 1998
<TABLE>
<CAPTION>
Engine Type In Service Orders Options Total
- ----------- ---------- ------ ------- -----
<S> <C> <C> <C> <C>
CFM56-5......................................... 384 178 39 601
V2500........................................... 247 139 95 481
Unknown......................................... 27 2 29
--- --- --- -----
Grand Total..................................... 631 344 136 1,111
</TABLE>
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.
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.
II-8
<PAGE>
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 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
II-9
<PAGE>
APPENDIX A--AVITAS VALUE DEFINITIONS
. 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.
. 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.
II-10
<PAGE>
APPENDIX B--AVITAS APPRAISAL METHODOLOGY
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 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
II-11
<PAGE>
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.
II-12
<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
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
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<PAGE>
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:
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.
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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<PAGE>
ATTACHMENT 1
EETC COLLATERAL SUMMARY
<TABLE>
<CAPTION>
Aircraft Delivery MTOW
No. Aircraft Mo/Yr Engines (Pounds) Base Value
- -------- --------------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
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
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
</TABLE>
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
II-15
<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.
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.
II-16
<PAGE>
*Aircraft Availability as of 10/98 for sale/lease
<TABLE>
<S> <C>
A319.................................................... 0
A320.................................................... 3--Wet Lease Only
</TABLE>
--------
* Information provided by BACK Information Services
IV. VALUATION
<TABLE>
<CAPTION>
* Base Value
Aircraft Date of Mfr. Registration # ($000,000)
- -------- ------------ -------------- ------------
<S> <C> <C> <C>
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
</TABLE>
- --------
* Base Value includes adjustment for additional MTOW.
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.
II-17
<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
II-18
<PAGE>
[LOGO APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Company will indemnify its directors, officers and employees, and will
have the power to indemnify its other agents, to the full extent permitted by
the General Corporation Law of the State of Delaware (the "GCL"), as amended
from time to time (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader indemnification
rights than such law permitted the Company to provide on June 29, 1989). As of
the date of the Prospectus, Section 145 of the GCL, forming a part of this
Registration Statement, provides as follows:
"(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which the person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
"(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by the person in connection with the defense or settlement of such action or
suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
"(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct
set forth in subsections (a) and (b) of this section. Such determination shall
be made, with respect to a person who is a director or officer at the time of
such determination, (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
S-1
<PAGE>
(2) by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (4) by the stockholders.
"(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by former directors and officers or other employees
and agents may be so paid upon such terms and conditions, if any, as the
corporation deems appropriate.
"(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office.
"(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against such person and incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under
this section.
"(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under this section with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
"(i) For purposes of this section, references to "other enterprises' shall
include employee benefit plans; references to "fines' shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation' shall include any
services as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner not opposed to the best interests of the corporation' as referred to in
this section.
"(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
"(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees)."
S-2
<PAGE>
The Company maintains directors' and officers' liability insurance.
Item 21. Exhibits and Financial Statement Schedules
(a) Reference is made to the Exhibit Index which immediately precedes the
exhibits filed with this Registration Statement, which is incorporated herein
by reference.
(b) Not Applicable.
(c) Not Applicable.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
posteffective amendment all information concerning a transaction, and the
Company being acquired involved therein, if any, that was not the subject of
and included in the registration statement when it became effective.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
S-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Arlington, State of
Virginia, on May 27, 1999.
US AIRWAYS, INC.
/s/ Rakesh Gangwal
By: _________________________________
Rakesh Gangwal,
Director, President and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated,
on May 27, 1999.
/s/ Rakesh Gangwal
By: ____________________________
Rakesh Gangwal, Director, President and Chief Executive Officer
(Principal Executive Officer)
/s/ Thomas A. Mutryn
By: ____________________________
Thomas A. Mutryn, Senior Vice President--Finance
and Chief Financial Officer (Principal Financial Officer
and Accounting Officer)
By: ____________________________
Stephen M. Wolf, Director and Chairman
*
By: ____________________________
Mathias J. DeVito, Director
*
By: ____________________________
Peter M. George, Director
*
By: ____________________________
Robert L. Johnson, Director
*
By: ____________________________
Robert LeBuhn, Director
*
By: ____________________________
John G. Medlin, Jr., Director
S-4
<PAGE>
*
By: ____________________________
Hanne M. Merriman, Director
By: ____________________________
Thomas H. O'Brien, Director
By: ____________________________
Hilda Ochoa-Brillembourg, Director
By: ____________________________
Richard B. Priory, Director
*
By: ____________________________
Raymond W. Smith, Director
/s/ Thomas A. Mutryn
*By: ___________________________
Thomas A. Mutryn, Attorney-In-Fact
- --------
* Signed pursuant to power of attorney filed with US Airways' Registration
Statement on Form S-4 filed with the Securities and Exchange Commission on
February 26, 1999.
S-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
4.1 Purchase Agreement, dated December 14, 1998, between US Airways,
Inc. and Airbus Industrie Financial Services(1)
4.2 Registration Agreement, dated December 14, 1998, among US Airways,
Inc., Airbus Industrie Financial Services and State Street Bank
and Trust Company(1)
4.3 Amendment No. 1 to the Registration Agreement, dated January 20,
1999, among US Airways, Inc., Airbus Industrie Financial Services
and State Street Bank and Trust Company(1)
4.4 Pass Through Trust Agreement, dated December 4, 1998, between
State Street Bank and Trust Company, as Pass Through Trustee, and
US Airways, Inc.(1)
4.5 Pass Through Trust Supplement No. 1998-1C, dated December 14,
1998, between State Street Bank and Trust Company, as Pass Through
Trustee, and US Airways, Inc.(1)
4.6 Deposit Agreement (Class C), dated December 14, 1998, between
First Security Bank, National Association, as Escrow Agent, and
Citibank, N.A., as Class C Depositary(1)
4.7 Revolving Credit Agreement (Class C), dated December 14, 1998,
between State Street Bank and Trust Company, as Subordination
Agent, and ABN AMRO Bank N.V., as Liquidity Provider(2)
4.8 Intercreditor Agreement, dated December 14, 1998, between State
Street Bank and Trust Company, as Pass Through Trustee and as
Subordination Agent, and ABN AMRO Bank N.V., as Liquidity
Provider(2)
4.9 Escrow and Paying Agent Agreement (Class C), dated December 14,
1998, among First Security Bank, National Association, as Escrow
Agent, Airbus Industrie Financial Services and State Street Bank
and Trust Company, as Class C Trustee and as Paying Agent(1)
4.10 Note Purchase Agreement, dated December 14, 1998, among US
Airways, Inc., State Street Bank and Trust Company, as Pass
Through Trustee, Subordination Agent, and as Paying Agent, and
First Security Bank, National Association, as Escrow Agent(2)
4.11 Exhibit A-1 to Note Purchase Agreement--Form of Leased Aircraft
Participation Agreement(2)
4.12 Exhibit A-2 to Note Purchase Agreement--Form of Lease(2)
4.13 Exhibit A-3 to Note Purchase Agreement--Form of Leased Aircraft
Indenture(2)
4.14 Exhibit A-4 to Note Purchase Agreement--Form of Aircraft Purchase
Agreement Assignment(2)
4.15 Exhibit A-5 to Note Purchase Agreement--Form of Leased Aircraft
Trust Agreement(2)
4.16 Exhibit C-1 to Note Purchase Agreement--Form of Owned Aircraft
Participation Agreement(2)
4.17 Exhibit C-2 to Note Purchase Agreement--Form of Owned Aircraft
Indenture(2)
4.18 Old Class C Global Certificate(1)
4.19 Form of New Class C Global Certificate(1)
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP(1)
10.1 Purchase Agreement dated October 31, 1997 between US Airways Group
and AVSA, S.A.R.L. (portions of this exhibit were omitted pursuant
to a request for confidential treatment filed separately with the
SEC)(3)
10.2 Amendment No. 1 dated June 10, 1998 to Purchase Agreement dated
October 31, 1997 between US Airways Group and AVSA, S.A.R.L.
(portions of this exhibit have been omitted pursuant to a request
for confidential treatment and filed separately with the SEC)(4)
10.3 Amendment No. 2 dated January 19, 1999 to Purchase Agreement dated
October 31, 1997 between US Airways Group and AVSA, S.A.R.L.
(portions of this exhibit have been omitted pursuant to a request
for confidential treatment and filed separately with the SEC)(5)
10.4 Purchase Agreement dated November 24, 1998 between US Airways
Group and AVSA, S.A.R.L. (portions of this exhibit were omitted
pursuant to a request for confidential treatment filed separately
with the SEC)(6)
12.1 Statements re: computation of ratios+
23.1 Consent of KPMG LLP+
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
its opinion filed as Exhibit 5.1)
23.3 Consent of AVITAS, Inc.(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
23.4 Consent of AvSolutions, Inc.(1)
23.5 Consent of Morton Beyer and Agnew, Inc.(1)
24.1 Powers of Attorney(1)
25.1 Form T-1 Statement of Eligibility of Trustee under the Trust
Indenture Act of Trustee(7)
99.1 Form of Letter of Transmittal for the New Class C Certificates(1)
99.2 Form of Notice of Guaranteed Delivery for the New Class C
Certificates(1)
</TABLE>
- --------
+ Filed herewith.
(1) Filed with US Airways' Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on February 26, 1999.
(2) Incorporated by reference to US Airways' Current Report on Form 8-K filed
with the Securities and Exchange Commission on December 29, 1998.
(3) Incorporated by reference to US Airways' Quarterly Report on Form 10-Q/A
filed with the Securities and Exchange Commission on May 24, 1999.
(4) Incorporated by reference to US Airways' Annual Report on Form 10-K/A--
Amendment No. 2 filed with the Securities and Exchange Commission on May
24, 1999.
(5) Incorporated by reference to US Airways' Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 19, 1999.
(6) Incorporated by reference to US Airways' Annual Report on Form 10-K/A
filed with the Securities and Exchange Commission on May 14, 1999.
(7) Incorporated by reference to US Airways' Registration Statement on Form S-
3 filed with the Securities and Exchange Commission on September 28, 1998.
<PAGE>
EXHIBIT 12.1
US AIRWAYS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Three months ended
March 31, Year ended December 31,
---------------------- --------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(in thousands except ratio amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Pre-tax income (loss) $ 109,223 $ 168,739 $ 935,844 $ 673,229 $ 191,043 $ 37,398 $ (716,183)
Add (deduct):
Fixed charges:
Interest expense $ 49,957 $ 62,774 $ 223,604 $ 260,029 $ 283,936 $ 301,923 $ 285,846
Amortization of debt
issue expense 926 2,003 6,507 2,684 2,844 3,724 4,300
Interest factor in
noncapitalized rentals 76,963 76,548 346,948 320,625 303,383 316,977 364,462
Interest capitalized** (4,031) (2,525) 10,478 (11,582) (8,398) (8,781) (13,760)
Amortization of previously
capitalized interest 2,466 2,543 10,112 10,269 10,286 10,238 8,802
--------- --------- ----------- ----------- --------- --------- ----------
$ 235,504 $ 310,082 $ 1,533,493 $ 1,255,254 $ 783,094 $ 661,479 $ (66,533)
--------- --------- ----------- ----------- --------- --------- ----------
Fixed charges:
Interest expense $ 49,957 $ 62,774 $ 223,604 $ 260,029 $ 283,936 $ 301,923 $ 285,846
Amortization of debt
issue expense 926 2,003 6,507 2,684 2,844 3,724 4,300
Interest factor in
noncapitalized rentals 76,963 76,548 346,948 320,625 303,383 316,977 364,462
--------- --------- ----------- ----------- --------- --------- ----------
$ 127,846 $ 141,325 $ 577,059 $ 583,338 $ 590,163 $ 622,624 $ 654,608
--------- --------- ----------- ----------- --------- --------- ----------
Ratio of earnings to fixed
charges 1.8 2.2 2.7 2.2 1.3 1.1 *
</TABLE>
-----------
*For the year ended December 31, 1994, US Airways' earnings were not
sufficient to cover its fixed charges. Additional earnings of
$721 million would have been required to achieve a ratio
of earnings to fixed charges of 1.0.
**During the second quarter of 1998, US Airways wrote-off capitalized
interest on equipment purchase deposits in conjunction
with the settlement of litigation between US Airways
and the Boeing Company.
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
The Board of Directors
US Airways, Inc.:
We consent to the use of our report dated February 24, 1999 incorporated herein
by reference and to the reference to our firm under the heading "Experts" in the
prospectus.
KPMG LLP
Washington, DC
May 27, 1999
