US Airways Group, Inc.
today announced that it has reached agreement with Eastshore Aviation,
LLC, an investment entity owned by Air Wisconsin Airlines Corp., and
shareholders, on a $125 million financing commitment to provide a
substantial portion of the equity funding for a plan of reorganization
(POR).
The $125 million facility will be made in the form of a debtor-in-
possession (DIP) term loan, to be drawn in the amount of $75 million
(immediately upon approval by the U.S. Bankruptcy Court) and two
subsequent $25 million increments. This loan would be second only to the
Air Transportation Stabilization Board (ATSB) loan with regard to the
company’s assets that are pledged as collateral. Upon emergence from
Chapter 11, the $125 million financing package would then convert to
equity in the reorganized US Airways.

Air Wisconsin, based in Appleton, Wis., is the nation’s largest privately
held regional airline. In 2004, its 87 all-jet fleet generated
approximately $700 million in revenue and flew more than 7 million
passengers under the United Express brand. As part of this agreement, US
Airways and Air Wisconsin will enter into an air services agreement under
which Air Wisconsin may, but is not required to, provide regional jet
service under the US Airways Express brand. Air Wisconsin’s arrangements
with United Airlines are unaffected by this agreement with US Airways.

“This agreement has a number of benefits that are consistent with our
restructuring efforts,” said Bruce R. Lakefield, US Airways president and
chief executive officer. “As an initial investor, Eastshore is providing
us with short-term liquidity and also is demonstrating support for our
restructuring and interest in a longer-term relationship with US Airways.
Air Wisconsin is a top-notch airline that has had its own success in
completing a turnaround, so we see tremendous upside from building a
business and financial relationship.”

“US Airways has done a remarkable job in its restructuring efforts and has
built a solid foundation from which to grow. We and Air Wisconsin look
forward to the opportunity to be part of its success,” said Eastshore
principal Richard Bartlett.

Terms of the agreement will be filed with the U.S. Bankruptcy Court for
the eastern district of Virginia, where the US Airways case is being
heard. The DIP facility, which is subject to Bankruptcy Court approval,
will be secured by liens and security interests in the same package of US
Airways assets that are pledged as collateral to the ATSB, with the ATSB
in the first priority position, and Eastshore in the second position. In
addition to the DIP financing facility, the agreement provides for the
conversion of the DIP into equity, in the form of new common stock, that
will be issued in conjunction with US Airways’ emergence from Chapter 11.

“This agreement with Eastshore Aviation provides the cornerstone from
which we can obtain additional financing and construct a plan of
reorganization,” said Lakefield. “While we have more work to do, this is
another positive signal to the marketplace.”
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