US Airways Files Re-Organisation Plan

US Airways Group, Inc. confirmed today that it filed its Disclosure Statement and Plan of Reorganization with the U.S. Bankruptcy Court on Friday evening, keeping the company’s “fast-track” voluntary Chapter 11 reorganization on schedule, and putting in motion a timeline for the nation’s seventh-largest airline to emerge from Chapter 11 protection as early as March 2003.

“We have achieved unprecedented results on all fronts thus far, and are on-track to reduce operating costs by more than $1.8 billion annually. As the entire industry grapples with restructuring, our efforts will ensure that we emerge from Chapter 11 protection as a very efficient airline with competitive labor, fleet and operating costs,” said David Siegel, US Airways president and chief executive officer. “The support of our customers and the cooperation of our employees and labor union leaders, as well as our lenders, lessors and vendors, have allowed us to use this process to lay the groundwork for our future success.”


The company said that the capital structure and distributions included in the Plan were negotiated consensually with the company’s Official Committee of Unsecured Creditors and the Retirement Systems of Alabama (RSA) - the airline’s Debtor-in-Possession (DIP) lender and its proposed equity sponsor. Both groups are expected to formally endorse the Plan at or prior to the hearing on the adequacy of the Disclosure Statement that has been scheduled for Jan. 16, 2003, in the Bankruptcy Court.


“The management team and employees of US Airways continue to impress us with their professionalism, vision and commitment to a successful restructuring,” said Dr. David Bronner, the chief executive of RSA. “As recently as this week, we have held high-level discussions with the airline’s leadership and reiterated our commitment to the company. The agreements recently reached with its labor unions for additional cost and productivity savings demonstrate to us that there is a dedicated workforce that will pull the company through and who will benefit from the future success of their airline.”


The Disclosure Statement and Plan were filed in the United States Bankruptcy Court for the Eastern District of Virginia, where the Honorable Stephen S. Mitchell is presiding over the case. Court approval of the adequacy of the Disclosure Statement on Jan. 16, 2003, will allow

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US Airways to commence solicitation of votes for confirmation of the Plan by its creditors in late January and for the Bankruptcy Court to conduct a plan confirmation hearing by late March.


Key elements of the Plan, as proposed, and subject to approval by the Bankruptcy Court include:


The company must secure final approval of the federal guarantee from the Air Transportation Stabilization Board (ATSB) for a $1 billion loan, to be used as exit financing upon emergence and close its investment agreement with RSA / The company must implement the additional labor cost savings agreements reached with all of the airline`s unions (to date, the Air Line Pilots Association has ratified its agreement, with others expected over the next two weeks) / The company must resolve a pension funding liability estimated at $3.1 billion over the next seven years. The company continues to explore options to lower its pension expense / As previously disclosed, the plan assumes that the existing common stock of the parent company will be cancelled / RSA will invest $240 million upon emergence, and will hold the lead investor position in the company with a 36.6 percent stake (on a fully diluted basis). The remaining stock will be divided among the Unsecured Creditors (10.5 percent); the ATSB (10.0 percent); General Electric (5.0 percent); members of the Air Line Pilots Association (19.3 percent); other employees (10.8 percent) and management (7.8 percent) / A newly-reconstituted 15-member Board of Directors will be appointed, to include eight nominees selected by RSA, four representatives of US Airways union groups (the Air Line Pilots Association, the International Association of Machinists, the Association of Flight Attendants/Transport Workers Union, and the Communications Workers of America), CEO David Siegel, and two independent directors nominated by the company in consultation with the Committee of Unsecured Creditors / Valuations included in the Disclosure Statement estimate the value of the total common equity and warrants of the reorganized US Airways in the range between $425 million and $645 million / On a consolidated basis, claims aggregating approximately $61 billion were filed against the company. While there can be no assurance that the company will be successful in its claims administration process, the company estimates that claims will finally be allowed in the range of $2.1 to $2.2 billion for secured claims and $2.5 billion to $3.1 billion for unsecured claims. Holders of allowed secured and priority claims are estimated to recover their full allowed claims while recoveries to general unsecured claims are estimated to be in the range of 1.6 percent to 2 percent of their allowed claims / The planned emergence of some or all of the company’s subsidiaries is not necessarily tied to the planned March 2003 emergence of US Airways. Prior to emerging, the wholly owned regional air carriers must reach agreements with their respective labor unions on competitive labor contracts that will allow for the transition to an all-regional jet fleet at each of the subsidiaries.


The filing does not address specifics as to which airport or aircraft leases or other executory contracts will be assumed or rejected. These and other details will continue to be the subject of negotiations and finalization over the next several months. The company`s present intention is to file its plan exhibits in the Bankruptcy Court with information relating to assumption or rejection of executory contracts and other matters in early March 2003, in advance of the proposed voting deadline on the reorganization plan.


The filing also included a detailed “liquidation analysis” - a required element of the Disclosure Statement - which concludes that the airline’s creditors and the overall value of the company’s estate would be better served if US Airways completes a successful restructuring and remains an on-going enterprise of which creditors would be given stock in the company in exchange for unpaid claims.


“The restructuring process has presented us with many challenges, and needless to say, many sacrifices have been made,” said Siegel. “Despite having to work to get more cost savings than originally anticipated because of the industry’s prolonged downturn, I am actually more optimistic than ever about our prospects.”


US Airways is the nation’s seventh-largest airline, serving more than 200 communities in the U.S., Canada, Mexico, the Caribbean and Europe. Most of its route network is concentrated in the eastern U.S., where it is the largest air carrier east of the Mississippi. It employs approximately 33,000 people and operates a fleet of 279 mainline jet aircraft. US Airways and its US Airways Express partner carriers operate more than 3,400 flights per day.


The company filed for Chapter 11 protection on Aug. 11, 2002, after the impact of the September 11 terrorist attacks led to almost $2 billion in losses in the subsequent four quarters of operation. It is the only major U.S. airline to receive unanimous conditional approval of the federal loan guarantee from the ATSB, and its restructuring efforts have been described by airline industry analysts in very positive terms with regard to the company’s commitment to long-term success and positive labor-management relations. Since filing for Chapter 11 protection,


US Airways has implemented schedule changes which have preserved service to virtually all of the communities in its route network and has been at the top of the U.S. Department of Transportation monthly customer service reports.


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