US Airways Reports Fourth Quarter

US Airways Group, Inc. today reported a fourth quarter 2003 net loss of
$98 million compared to a net loss of $794 million for the fourth quarter
2002, which is a $696 million improvement. 
The fourth quarter pretax loss of $99 million compares to a pretax loss of
$848 million for the fourth quarter of 2002, an improvement of $749
million. Results for both periods include unusual items, described in Note
5 below, including the sale of the company`s equity investment in Hotwire
in the fourth quarter of 2003, and a number of items related to the
company`s bankruptcy in the fourth quarter of 2002. Excluding these
unusual items, pretax loss for the fourth quarter of 2003 of $129 million
improved by $223 million from a $352 million pretax loss in the fourth
quarter of 2002.

“Throughout the year, we made progress in reducing our losses, but
regrettably, we are behind in our plan for achieving sustained
profitability,” said US Airways President and Chief Executive Officer
David N. Siegel. “We continue to face the cost and revenue challenges
confronting the other legacy carriers. Absent special items, none of these
carriers reported a full-year profit, which highlights the fundamental
change low-cost carriers are having on the industry overall.”

Siegel said that US Airways` strong share of industry bookings and
improved load factor are good indicators that its customers continue to
support the airline, but the company`s profitability and successful
response to low-cost competition are critical to maintaining its loyal
customer base. Going forward, the company needs to achieve a cost
structure that matches the carriers that have demonstrated consistent
profitability. “As we seek to implement changes that the marketplace
demands, we first must adapt our business model and reduce costs in a way
that will enable us to become profitable in this new competitive
environment.”
The fourth quarter 2003 US Airways system passenger revenue per available
seat mile (PRASM) was 10.83 cents, up 7.4 percent compared to the fourth
quarter of 2002. Domestically, system PRASM grew 3.6 percent. System
statistics encompass mainline, wholly owned airline subsidiaries of US
Airways Group, Inc., as well as capacity purchases from third parties
operating regional jets as US Airways Express. For US Airways mainline
operations only, the PRASM of 9.77 cents was up 7.1 percent. Fourth
quarter 2003 passenger transportation revenues included a $34.2 million
favorable adjustment related to the air traffic liability account.

System available seat miles (ASMs) were up 2.3 percent, while mainline
ASMs increased 0.6 percent during the fourth quarter. Revenue passenger
miles (RPMs) increased 8.2 percent for the full US Airways system, while
mainline RPMs increased 7.0 percent. The mainline passenger load factor of
72.7 percent was 4.4 percentage points higher than the same period last
year and system load factor was up 3.9 percentage points to 71.2 percent.
For the quarter, US Airways Inc.`s mainline operations carried 10.4
million passengers, an increase of 0.3 percent compared to the same period
of 2002, while system passengers of 13.5 million were up 2.2 percent. The
fourth quarter 2003 yield for mainline operations of 13.43 cents was up
0.6 percent from the same period in 2002, while system yield was up 1.7
percent to 15.22 cents.

US Airways Senior Vice President of Marketing and Planning B. Ben Baldanza
said that customer expectations are changing more rapidly than previously
anticipated, and the demand for lower fares is limiting revenue
opportunities. “Meeting and exceeding customer expectations is the key to
long-term success in all industries and we are continuing to transform our
business in a way that addresses this challenge. Our actions have resulted
in improved revenue performance relative to other legacy airlines,” said
Baldanza. “As fares continue to drop, it also becomes essential for us to
lower our costs related to selling tickets.”

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The mainline cost per available seat mile (CASM), excluding fuel and
unusual items, of 10.22 cents for the quarter, declined 7.2 percent versus
the same period in 2002 (for a reconciliation, see Note 3 to the Selected
Airline Operating and Financial Statistics). The fourth quarter of 2003
included $9 million of non-cash, stock-based compensation related to stock
grants given to employees of US Airways` organized labor groups during the
restructuring process. Also during that process, the company substantially
restructured its aircraft obligations. As a result of these two items,
taking aircraft ownership into account and excluding the stock-based
compensation expense, CASM improved 9.2 percent for the quarter.

The cost of aviation fuel per gallon, including taxes, for the fourth
quarter, was 87.74 cents (82.54 cents excluding taxes), up 4.9 percent
from the same period in 2002. US Airways` fuel position is 20 percent
hedged for the first quarter of 2004, 30 percent hedged for all of 2004,
and 5 percent hedged for 2005.

US Airways Group ended the quarter with total restricted and unrestricted
cash of approximately $1.84 billion, including $1.29 billion in
unrestricted cash, cash equivalents and short-term investments.

“We have maintained modestly positive cash flow and strong liquidity since
emerging from Chapter 11 last year; however, we still face great
challenges from a cost perspective,” said Neal S. Cohen, US Airways
executive vice president of finance and chief financial officer. “The
carriers that have consistently reported profits have established a new
benchmark with cost levels at least 25 percent lower than ours.”

Cohen said that the company continues to work to reduce its costs and that
all elements in the company`s cost structure are being examined.
“Everything is on the table, from distribution costs, to labor costs, to
how we schedule our airline,” said Cohen. “In the fourth quarter, for
example, our labor expense for mainline operations accounted for 42
percent of total revenue, compared to an average of 33 percent for the
low-cost carriers.”

Cohen added that the company has strict loan covenants with the Air
Transportation Stabilization Board (ATSB) that will need to be met. “We
are taking the necessary actions to remain in compliance with the terms of
the loan and currently are in discussions with the ATSB.”

Given the significant changes in the industry, as has been previously
reported, US Airways has engaged investment banking advisors in an
exploratory process to identify and value its assets, and that includes
identifying potential buyers, but no decision has been made to sell any of
those assets.
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