Back to GetFilings.com

(Mark one)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2003

or

For the transition period from                      to                     

 US Airways, Inc.
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware

2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices)
(703) 872-7000
(Registrant's telephone number, including area code)

(Commission file number: 1-8442)
(I.R.S. Employer Identification No: 53-0218143)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
                                                                Yes    X                      No      

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by court.
                                                                Yes    X                     No      

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
                                                                Yes                            No   X  

     As of June 30, 2003 there were outstanding 1,000 shares of common stock of US Airways, Inc.

US Airways, Inc.
Condensed Consolidated Statements of Operations
(in millions)
(unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

1

US Airways, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

3

     On August 11, 2002 (Petition Date), US Airways, Inc. (US Airways or the Company) filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (Bankruptcy Code) in the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria Division (Bankruptcy Court) (Case No. 02-83985-SSM). On the same date, US Airways Group, Inc. (US Airways Group), US Airways' parent company, and six of its other subsidiaries (collectively with US Airways, the Filing Entities) also filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The reorganization cases were jointly administered under the caption "In re US Airways Group, Inc., et al., Case No. 02-83984-SSM." During the pendency of the Chapter 11 cases, US Airways continued to operate its business as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

     The Filing Entities emerged from bankruptcy protection under the First Amended Joint Plan of Reorganization of US Airways Group, Inc. and Affiliated Debtors and Debtors-in-Possession, As Modified (Plan of Reorganization), which (i) was confirmed pursuant to an order of the Bankruptcy Court on March 18, 2003 (Confirmation Order) and (ii) after each of the conditions precedent to consummation was satisfied or waived, became effective on March 31, 2003 (Effective Date). In accordance with AICPA Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," (SOP 90-7) the Company adopted fresh-start reporting on the Effective Date. See Note 3 for information related to fresh-start reporting.

     The Plan of Reorganization constituted a separate plan of reorganization for each of the Filing Entities. In accordance with the Bankruptcy Code, the Plan of Reorganization divided claims against, and interests in, each of the Filing Entities into classes (Classes of Claims and Interests) according to their relative seniority and other criteria and provided the same treatment for each claim or interest of a particular class unless the holder of a particular claim or interest agreed to a less favorable treatment of its claim or interest. Among other things, the Plan of Reorganization generally provided for full payment of all allowed administrative and priority claims, and the distribution of shares (or warrants to purchase shares) of new equity in the reorganized US Airways Group, Inc. (Reorganized US Airways Group) to the Air Transportation Stabilization Board (Stabilization Board), the Retirement Systems of Alabama Holdings LLC (RSA), the Company's management and labor unions, General Electric Capital Corporation and Bank of America, N.A., and to unsecured creditors of the Filing Entities, including the Pension Benefit Guarantee Corporation (PBGC), in satisfaction of their allowed claims. The distribution to unsecured creditors is estimated to have a value of between 1.2 percent to 1.8 percent of total allowed unsecured claims. Persons holding equity in US Airways Group prior to the Effective Date were not entitled to any distribution under the Plan of Reorganization and their shares of common stock were cancelled. For a complete discussion of the distributions provided for under the Plan of Reorganization, investors should refer to the Plan of Reorganization and the disclosure statement approved by the Bankruptcy Court on January 17, 2003 and filed with the Company's Current Report on Form 8-K, dated January 31, 2003 and filed with the United States Securities and Exchange Commission (SEC) on February 4, 2003 (Disclosure Statement).

4

     Pursuant to a definitive agreement, on the Effective Date, RSA invested $240 million in cash in Reorganized US Airways Group (the RSA Investment Agreement) in exchange for approximately 36.2%, on a fully-diluted basis, of the equity in Reorganized US Airways Group. As of the Effective Date, in connection with its investment, RSA was granted a voting interest of approximately 71.6% in Reorganized US Airways Group and entitled to designate and vote to elect eight of 15 directors to Reorganized US Airways Group's Board of Directors.

     As part of its restructuring efforts, US Airways received approval for a $900 million loan guarantee (ATSB Guarantee) under the Air Transportation Safety And System Stabilization Act (Stabilization Act) from the Stabilization Board in connection with a proposed $1 billion loan financing (the ATSB Loan). The Company required this loan and related guarantee in order to provide the additional liquidity necessary to carry out its restructuring plan. The ATSB Loan was funded on the Effective Date and consists of a $1 billion term loan facility to US Airways, $900 million of which is guaranteed by the Stabilization Board. The ATSB Loan is also guaranteed by each of US Airways Group's domestic subsidiaries (other than reorganized US Airways). The ATSB Loan is secured by first priority liens on substantially all of the unencumbered present and future assets of the reorganized Filing Entities (including certain previously unencumber ed aircraft, aircraft engines, spare parts, flight simulators, real property, takeoff and landing slots, ground equipment and accounts receivable), other than certain specified assets, including assets which are subject to other financing agreements. The ATSB Loan bears interest as follows: (i) 90% of the ATSB Loan bears interest (a) if funded through a participating lender's commercial paper conduit program, at a rate of interest equal to the conduit provider's weighted average cost related to the issuance of certain commercial paper notes and other short-term borrowings plus 0.30% or (b) if not funded through such commercial paper conduit program, at a rate of interest equal to LIBOR plus 0.40% and (ii) 10% of the ATSB Loan bears interest at LIBOR plus 4.0%. In addition, US Airways is charged an annual guarantee fee in respect of the ATSB Guarantee equal to 4.0% of the Stabilization Board's guaranteed amount (initially $900 million) under the ATSB Guarantee, with such guarantee fee increasing by ten b asis points annually. In addition, the Stabilization Board received 7,635,000 warrants that enable it to purchase shares of Reorganized US Airways Group's Class A Common Stock at $7.42 per share.

     The maturity date of the ATSB Loan is October 1, 2009. In addition, the ATSB Loan requires semi-annual amortization payments commencing in October 2006, each amortization payment to be in the amount of $125 million, with a final scheduled principal payment of $250 million due on the maturity date of the ATSB Loan.

     The ATSB Loan is subject to acceleration upon the occurrence of an event of default, after expiration of applicable notice and/or cure periods, under the ATSB Loan. The ATSB Loan contains certain mandatory prepayment events including, among other things, (i) the occurrence of certain asset sales and the issuance of certain debt or equity securities and (ii) the value of the collateral pledged in respect of the ATSB Loan decreasing below specified coverage levels.

     The definitive documentation relating to the ATSB Loan contains covenants that require the Company to satisfy ongoing financial requirements, including debt ratio, fixed charge coverage and liquidity. The ATSB Loan contains covenants that also limit, among other things, the Company's ability to pay dividends, make additional corporate investments and acquisitions, enter into mergers and consolidations and modify certain concessions obtained as part of the Chapter 11 restructuring.

     The covenants in the ATSB Loan were negotiated based upon the future expectations with respect to performance of the restructured Company and of the airline industry. These expectations included assumptions about the extent of a general recovery in the airline industry and the time

5

parameters within which that recovery might occur, as well as the Company's performance with respect to the rest of the industry. While these negotiations were conducted during a period in which the possibility of war in Iraq was a consideration, the substantive terms of the ATSB Loan were concluded prior to the commencement of the war in Iraq. At this time, the general recovery of the airline industry has not occurred as rapidly as anticipated which has impacted the Company's performance. The Company needs to satisfy certain financial covenants in the ATSB Loan which it must first comply with beginning June 30, 2004 for predefined measurement periods ending on or after June 30, 2004. If the Company is unable to meet the aforementioned financial covenants, the Company may not be able to execute its business plan which could have a material adverse effect on the Company's future liquidity, results of operations and financial condition.

     Under the Confirmation Order, the Filing Entities were authorized to reject or abandon certain aircraft after the Effective Date as long as each such aircraft was subject to a Section 1110 Agreement (defined below). Section 1110 of the Bankruptcy Code provides, in relevant part, that unless the Filing Entities, within 60 days after the Petition Date, agreed to perform all of the obligations (Section 1110 Agreement) under the lease, security agreement or conditional sale contract and cure all defaults thereunder (other than defaults constituting a breach of provisions relating to the filing of the Chapter 11 cases, the Filing Entities' insolvency or other financial condition of the Filing Entities) within the time specified in section 1110, the right of the lessor, secured party or conditional vendor to take possession of such equipment in compliance with the provisions of the lease, security agreement or conditional sale contract and to enforce any of its other rights or remedies under such lease, security agreement or conditional sale contract is not limited or otherwise affected by the automatic stay, by any other provision of the Bankruptcy Code or by any power of the Bankruptcy Court. Consequently, certain aircraft remain subject to Section 1110 Agreements that have been extended until August 15, 2003. The Company is currently negotiating with the relevant parties on another extension. Prior to the Effective Date, the Company reached agreements covering substantially all of the aircraft subject to restructuring agreements that the terms of the restructured agreements would become effective on the Effective Date. With respect to aircraft for which restructuring documentation has not been completed, the Company continues to negotiate with the relevant lessors and mortgagees to complete final documentation. The Company believes that it will complete definitive documentation with regard to the renegotiation of the obligations subject to Section 1110 Agreements. In the event that the Company fails to renegotiate such obligations, such failure would result in the loss of use of the aircraft subject to such obligations, which could have a material adverse impact on the Company's fleet operations.

     Pursuant to the bankruptcy process, the Company's claims agent received approximately 5,100 timely-filed proofs of claims totaling approximately $59 billion in the aggregate, exclusive of approximately $16 billion in claims from Allegheny County and Allegheny County Airport Authority (Allegheny) which have been resolved (see "Pittsburgh Leases" below) and approximately 350 proofs of claims timely-filed by governmental entities totaling approximately $225 million in the aggregate. Under the Confirmation Order, the Bankruptcy Court established May 15, 2003 as the deadline for filing administrative claims other than those related to personal injury or wrongful death claims, the filing deadline for which was established as September 27, 2003. As is typical in reorganization cases, there are significant differences between amounts scheduled by the Filing Entities and claims filed by creditors; these differences are being investigated and resolved in connection with the claims resolution process. The aggregate amount of claims filed with the Bankruptcy Court far exceeds the Filing Entities' estimate of ultimate liability. The Filing Entities believe that many of these claims are duplicative, based upon contingencies that have not occurred, or otherwise are overstated, and are therefore invalid. As of July 30, 2003, the Filing Entities have filed objections totaling approximately $56 billion. The Plan

6

of Reorganization provides for a disputed claims resolution process. In light of the number of claims asserted against the Filing Entities, the claims resolution process is ongoing and may take considerable time to complete. The Plan of Reorganization provides for 4,968,720 shares of US Airways Group Class A Common Stock and 3,048,030 each of US Airways Group Class A-1 Warrants and shares of US Airways Group Class A Preferred Stock to be issued to unsecured creditors. Distributions of these shares and warrants will commence in mid-August with the distribution of approximately 1.3 million shares of Class A Common Stock and 0.8 million each of Class A-1 Warrants and shares of Class A Preferred Stock to unsecured creditors. The effects of these distributions were reflected in the Company's financial statements upon emergence and will not have any further impact on the results of operations. A number of significant claims, including aircraft related claims and the PBGC claim remain to be resolv ed. Accordingly, the ultimate number and amount of allowed claims, and ultimate distributions of new equity by claimant in Reorganized US Airways Group on account thereof, is not presently known.

     On July 25, 2003, US Airways, Allegheny County and Allegheny reached a consensual agreement subject to final documentation resolving and releasing all bankruptcy claims filed by Allegheny County and Allegheny against US Airways with regard to Pittsburgh International Airport. The agreement resolves all bankruptcy claims, including claims relating to the rejections of the airline operating agreements and other related terminal lease agreements effective January 5, 2004 (unless otherwise agreed upon by the parties). Under the agreement, in exchange for the release of all claims, Allegheny and Allegheny County will be granted an allowed general unsecured claim in the amount of $211 million to be shared with claims of other unsecured creditors. US Airways, Allegheny County and Allegheny are currently negotiating a stipulation reflecting the foregoing agreement. In addition, US Airways and Allegheny continue to discuss future operations at Pittsburgh Inte rnational Airport.

     The accompanying Condensed Consolidated Financial Statements include the accounts of US Airways and US Airways Investment Management Company, Inc. (USIM), a former wholly-owned subsidiary of US Airways, through June 30, 2002. Effective July 1, 2002, USIM and USLM Corporation, a wholly-owned subsidiary of US Airways Group, were merged into US Airways. These interim period statements should be read in conjunction with the Consolidated Financial Statements contained in US Airways' Annual Report to the SEC on Form 10-K for the year ended December 31, 2002. Certain prior year amounts have been reclassified to conform with current year presentation.

     Management believes that all adjustments necessary for a fair statement of results have been included in the Condensed Consolidated Financial Statements for the interim periods presented, which are unaudited. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

     In accordance with SOP 90-7, the Company adopted fresh-start reporting on the Effective Date. References in the Condensed Consolidated Financial Statements and the Notes to the Condensed Consolidated Financial Statements to "Predecessor Company" refer to the Company prior to March 31, 2003. References to "Successor Company" refer to the Company on and after March 31, 2003, after giving effect to the application of fresh-start reporting. See Note 3 for information related to fresh-start reporting.

7

     SOP 90-7 requires that the financial statements for periods following the Chapter 11 filing through the Effective Date distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, revenues, expenses, realized gains and losses and provisions for losses directly associated with the reorganization and restructuring of the business are reported separately as Reorganization items, net in the Condensed Consolidated Statements of Operations. The Condensed Consolidated Balance Sheet as of December 31, 2002 distinguishes pre-petition liabilities subject to compromise from both those pre-petition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities subject to compromise are reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. In addition, cash used for reorganization items is disclosed separately in the Condensed Cons olidated Statements of Cash Flow.

(this space intentionally left blank)

8

     In connection with its emergence from bankruptcy on March 31, 2003, US Airways adopted fresh-start reporting in accordance with SOP 90-7. Accordingly, the Company valued its assets, liabilities and equity at fair value. The excess of the reorganization value over tangible assets and identifiable intangible assets has been reflected as Goodwill on the Condensed Consolidated Balance Sheet. Estimates of fair value represent the Company's best estimate based on independent appraisals and valuations and, where the foregoing have not yet been completed or are not available, industry trends and by reference to market rates and transactions. US Airways Group's equity value of $438 million at March 31, 2003 was determined with the assistance of financial advisors. In determining the equity value, the financial advisors and US Airways Group considered several matters, including the following: (i) certain recent financial information of US Airways Group; (ii) cer tain financial projections prepared by US Airways Group in connection with the ATSB Loan and RSA Investment Agreement including the underlying assumptions; (iii) the equity transactions encompassed by the RSA Investment Agreement; (iv) a discounted cash flow analysis prepared on a going concern basis; (v) current and historical market values of publicly traded companies that are in businesses reasonably comparable to US Airways Group and (vi) certain additional economic and industry conditions. The Company's equity value of $356 million was determined based on a review of each of US Airways Group's subsidiaries' fair values of assets and liabilities. The Company is currently in the process of having certain assets and liabilities appraised. Changes in the fair values of these assets and liabilities from the current estimated values as well as changes in other assumptions could significantly impact the reported value of Goodwill. See Note (c) below for changes in Goodwill since March 31, 2003 a s a result of the completion of certain appraisals. The foregoing estimates and assumptions are inherently subject to significant uncertainties and contingencies beyond the control of the Company. Accordingly, there can be no assurance that the estimates, assumptions, and values reflected in the valuations will be realized, and actual results could vary materially.

     As a result of the adoption of fresh-start reporting, the Company's post-emergence financial statements are not comparable with its pre-emergence financial statements, because they are, in effect, those of a new entity. The effects of the Plan of Reorganization and fresh-start reporting through June 30, 2003 on the Company's Condensed Consolidated Balance Sheet as of March 31, 2003 are as follows (in millions):

10

     The Company's federal and state income tax expense was $13 million for the second quarter 2003. The Company's estimated annual effective tax rate was 0.8%. The Company continues to record a full valuation allowance against its net deferred tax asset. As a result of the March 2002 enactment of the Job Creation and Worker Assistance Act of 2002 (Act), the Company recognized an income tax credit in 2002 equal to the Company's carryback potential. The tax credit recorded in the first six months of 2002 included $53 million related to 2001 losses realizable due to the enactment of the Act and was recorded in the period of enactment. The remainder of the tax credit recorded in the first six months of 2002 was based on the then estimated annual effective tax rate for 2002 of 11% exclusive of benefit related to 2001.

5.  Long-Term Debt, Including Capital Lease Obligations

     Details of long-term debt of the Successor Company are as follows (in millions):

		June 30,
					2003
Senior Debt:
ATSB Loan, Installments due 2006 to 2009				$	1,000
Equipment Financing Agreements, Installments due 2003 to 2022					1,536
Engine Manufacturer Credit Facility, Installments due 2004 to 2012					388
Engine Manufacturer Liquidity Facility, Installments due 2010 to 2012					80
					3,004
Capital Lease Obligations					51
Total					3,055
Less: Unamortized discount					(34	)
Current Maturities					(71	)
				$	2,950 ====

     Maturities of long-term debt and debt under capital leases as of June 30, 2003 are as follows (in millions):

    The ATSB Loan was funded in connection with the Company's emergence from bankruptcy on March 31, 2003. The ATSB Loan consists of a $1 billion term loan facility to US Airways, $900 million of which is guaranteed by the Stabilization Board. Refer to Note 1 above for more information regarding the ATSB Loan.

    As of June 30, 2003, the weighted average interest rate is 8.2% for the Equipment Financing Agreements.

     In November 2001, the Company obtained a $404 million Credit Facility from General Electric (GE Credit Facility) secured by collateral including 11 A320-family aircraft and 28 spare engines. As discussed below, the terms of this credit facility were renegotiated so that borrowings bear interest rates of LIBOR plus 3.5% and the term of the facility is extended from 2006 to 2012.

11

     General Electric (GE) is the Company's largest creditor. In addition to the GE Credit Facility, GE has provided financing or guarantees on 114 of the Company's current operating aircraft. It also maintains the engines on the Company's B737-family aircraft, the A320-family aircraft and the B767 aircraft. In connection with its reorganization under Chapter 11, the Company reached a global settlement with GE that resolves substantially all aircraft, aircraft engine and loan-related issues. In exchange for warrants to purchase 3,817,500 shares of Class A Common Stock at $7.42 per share in Reorganized US Airways Group, GE (i) modified the terms of certain agreements to meet the cost savings requirements of the business plan published in the Disclosure Statement, (ii) provided an exit liquidity facility of up to $360 million that refinanced obligations under the debtor-in-possession facility and provided additional liquidity, (iii) will provide $350 million of lease equity for the financing of regional jets and (iv) extended the term of the GE Credit Facility (see above). GE subsequently agreed to provide committed financing for up to 70 regional jets utilizing lease equity and/or mortgage debt (inclusive of the lease equity noted above).

     Every obligation of the Company to GE is generally cross-defaulted to all GE obligations including the GE Credit Facility and is cross-collateralized to the collateral securing the GE Credit Facility.

     Pursuant to registration rights agreements, dated as of March 31, 2003, between US Airways Group, and each of ATSB Securities Trust (ATSB Trust), RSA, GE and Bank of America, US Airways Group agreed to use commercially reasonable efforts (i) to prepare and file a registration statement with the SEC by June 27, 2003, covering all of the Class A Common Stock of US Airways Group issued or to be issued upon exercise of Class A-1 Warrants issued in connection with the ATSB Loan and the GE financing agreements and (ii) to cause such registration statement to become effective by September 26, 2003. In light of its ongoing process of exploring liquidity options for its stock, including listing on a national stock exchange, US Airways Group requested GE, Bank of America, RSA and ATSB Trust to grant waivers (or in the case of ATSB Trust, an amendment) of such filing requirement until September 1, 2003 (or in the case of ATSB Trust, October 1, 2003), and waivers of t he requirement regarding effectiveness of the registration statement until December 1, 2003 (or in the case of the ATSB Trust, December 31, 2003). Such waivers and the amendment were approved by the respective parties.

     Interest rates on $1.48 billion principal amount of long-term debt as of June 30, 2003 are subject to adjustment to reflect changes in floating interest rates. 

      As of June 30, 2003, US Airways Group had 19 A320-family aircraft on firm order scheduled for delivery in the years 2007 through 2009 and 35 purchase-right aircraft which may be converted to firm-order aircraft. US Airways Group also had 10 A330-300 aircraft on firm order scheduled for delivery in the years 2007 through 2009, and options for 10 additional aircraft. In addition, US Airways Group had firm orders for 60 CRJ Series 200, 50-seat single-class aircraft and 25 CRJ 705, 75-seat dual-class aircraft. However, subsequent to June 30, 2003, US Airways Group notified Bombardier, Inc. that it will not be taking delivery of the CRJ 705 aircraft, but instead is in negotiations to take delivery of 25 CRJ 701 aircraft. The first CRJ aircraft is scheduled to be delivered in October 2003 and all firm-order CRJ aircraft will be delivered by April 2005. US Airways Group also had firm orders for 85 Embraer ERJ-170, 72-seat aircraft, with the first delivery scheduled for November 2003. US Airways Group has the option to convert the ERJ-170s to ERJ-175s with 76 seats. All ERJ-170 deliveries are to be received by September 2006. As of June 30, 2003, the minimum determinable payments associated with these acquisition agreements for all firm-order aircraft (including progress payments, payments at delivery, spares, capitalized interest, penalty payments, cancellation fees and/or nonrefundable deposits) were estimated to be $311 million for the remainder of 2003, $1.90 billion in 2004, $840 million in 2005, $417 million in 2006, $31 million in 2007 and $2 million thereafter. As a result of the recent regional jet aircraft

12

orders, the Company believes it is probable it will not take delivery of certain previously ordered narrow-body aircraft and recorded an accrual of $35 million for related penalties during the three months ended June 30, 2003.

     The Company has secured approximately 85% to 90% of the necessary financing for the firm-order regional jet aircraft. This financing includes commitments from GE (see Note 5) and from the respective airframe manufacturers and is subject to certain credit standards or financial tests. Among the applicable credit standards under the aircraft financing commitments is the requirement that US Airways Group and US Airways maintain a minimum credit rating of "B-" by Standard & Poor's (S&P) or "B3" by Moody's Investor Service (Moody's). Both US Airways Group and US Airways presently have received a "B" rating by S&P, but cannot be certain that they will be able to maintain that rating, particularly in view of the ongoing weakness in the airline industry. If the Company is unable to meet the aforementioned credit standards or financial tests, the Company may not be able to execute its regional jet business plan whi ch could have a material adverse effect on the Company's future liquidity, results of operations and financial condition.

7.  Leases

    As of June 30, 2003, obligations under capital and noncancelable operating leases for future minimum lease payments for the Company are as follows (in millions):

	Capital      Leases					Operating Leases
Remaining in 2003	$	3			$		287
2004		5					698
2005		5					697
2006		5					617
2007		5					535
Thereafter		114					3,744
Total minimum lease payments		137					6,578
Less sublease rental receipts		-					(34	)
Total minimum operating lease payments					$		6,544 ====
Less amount representing interest		(86	)
Present value of future minimum capital lease payments		51
Less current obligations under capital leases		(1	)
Long-term obligations under capital leases	$	50 ==

     US Airways also leases certain owned flight equipment to both third and related parties under noncancelable operating leases which expire in the years 2004 through 2006. The future minimum rental receipts associated with these leases are: $4 million-remaining in 2003; $9 million-2004; $7 million-2005 and $1 million-2006.

      The Predecessor Company applied the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations to account for awards of stock-based compensation granted to employees. Upon emergence, the Successor Company adopted the fair value method of recording stock-based employee compensation contained in Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." and will account for this change in accounting principal using the "prospective method" as described by Statement of Financial Accounting Standards No. 148 (SFAS 148), "Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No. 123." Accordingly, all Successor Company stock option grants will be priced based on the fair value on the date of grant and the related compensation will be amortized as compensation expense over the vesting period.

     The following table illustrates the effect on net income (loss) and net earnings (loss) per common share as if the fair value based recognition provisions of SFAS 123 had been applied to

13

all outstanding and unvested stock option awards in each period presented (in millions, except per share data).

     Upon emergence from bankruptcy, all then-outstanding awards of the Predecessor Company were cancelled. The Plan of Reorganization provides for new stock awards to the Company's employees covered by collective bargaining agreements and to the Company's management. The Company did not grant any employee stock options during the three months ended June 30, 2003. The Company does expect to grant employee stock options during the quarter ended September 30, 2003.

9. Comprehensive Income (Loss)

     Comprehensive income for the Successor Company was $28 million for the three months ended June 30, 2003. Comprehensive income (loss) for the Predecessor Company was $2.48 billion for the three months ended March 31, 2003 and $(239) million and $(497) million for the three and six months ended June 30, 2002, respectively. Comprehensive income encompasses net income and "other comprehensive income," which includes all other non-owner transactions and events that change stockholders' equity. Other comprehensive income includes changes in the fair value of the Company's available-for-sale equity investments and changes in the fair value of certain derivative financial instruments which qualify for hedge accounting

10. Operating Segments and Related Disclosures

     US Airways has two reportable operating segments: US Airways and US Airways Express. The US Airways segment includes the operations of US Airways (excluding US Airways' former wholly-owned subsidiary). The US Airways Express segment only includes certain revenues and expenses related to US Airways Group's wholly-owned regional airlines and from marketing agreements with certain non-owned US Airways Express air carriers. Financial information for each reportable operating segment is set forth below (in millions):

14

(iii)  Reorganization Items, Net

     On August 14, 2003, US Airways Group entered into a purchase agreement with Aviation Acquisition L.L.C. (Aviation) and OCM Principal Opportunities Fund II, L.P. (OCM) pursuant to which, subject to the terms and conditions of the agreement, Aviation and OCM will purchase shares of Class A Common Stock retained by US Airways Group from those shares of Class A Common Stock allocated to employees pursuant to the Plan of Reorganization and vested at July 31, 2003 (the Purchase Agreement). The retained shares represent the total employee tax withholding obligation of approximately $37 million with respect to the vested portion of the restricted stock grants. The amount of withholding was determined on the basis of a price of $7.34 per Class A common share and applicable federal, state, and local taxes. Aviation and OCM will pay $7.34 per share for the Class A common shares. The Purchase Agreement provides for the escrow by Aviation and OCM of a total of $37 milli on on August 15, 2003 for up to 5,007,148 shares, which is the estimated maximum number of withheld shares subject to the Purchase Agreement, and which will be released as the amounts of such shares are determined. The Purchase Agreement provides that shares will be delivered to the purchasers and the funds for such shares delivered to US Airways Group on or before August 27, 2003 in one or more tranches when the final determination of the amount of withheld shares used to meet the employee withholding obligations has been determined.

 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

     Part I, Item 2 of this report should be read in conjunction with Part II, Item 7 of US Airways, Inc.'s (US Airways or the Company) Annual Report to the United States Securities and Exchange Commission (SEC) on Form 10-K for the year ended December 31, 2002. The information contained herein is not a comprehensive discussion and analysis of the financial condition and results of operations of the Company, but rather updates disclosures made in the aforementioned filing.

     Certain of the information contained herein should be considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, that reflect the Company's current views with respect to current events and financial performance. Such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company's operations and business environment which may cause the actual results of the Company to be materially different from any future results, express or implied, by such forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: the ability of the Company to operate pursuant to the terms of its financing facilities; the ability of the Company to obtain and maintain normal terms with vendors and service providers; the Company's ability to maintain contracts that are critical to its operations; the ability of the Company to fund and execute its business plan; the ability of the Company to attract, motivate and/or retain key executives and

16

associates; the ability of the Company to attract and retain customers; the ability of the Company to maintain satisfactory labor relations; demand for transportation in the markets in which the Company operates; economic conditions; labor costs; financing availability and costs; aviation fuel costs; security-related costs; competitive pressures on pricing (particularly from lower-cost competitors) and on demand (particularly from low-cost carriers and multi-carrier alliances); weather conditions; government legislation and regulation; impact of the Iraqi war; other acts of war or terrorism; and other risks and uncertainties listed from time to time in the Company's reports to the SEC. There may be other factors not identified above of which the Company is not currently aware that may affect matters discussed in the forward-looking statements, and may also cause actual results to differ materially from those discussed. The Company assumes no obligation to update such estimates to reflect actual results, c hanges in assumptions or changes in other factors affecting such estimates other than as required by law.

     Chapter 11 Reorganization

     On August 11, 2002 (Petition Date), US Airways filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (Bankruptcy Code) in the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria Division (Bankruptcy Court) (Case No. 02-83985-SSM). On the same date, US Airways Group, Inc. (US Airways Group), US Airways' parent company, and six of its other subsidiaries (collectively with US Airways, the Filing Entities) also filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The reorganization cases were jointly administered under the caption "In re US Airways Group, Inc., et al., Case No. 02-83984-SSM." During the pendency of the Chapter 11 cases, US Airways continued to operate its business as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankr uptcy Code and orders of the Bankruptcy Court.

     The Filing Entities emerged from bankruptcy protection under the First Amended Joint Plan of Reorganization of US Airways Group, Inc. and Affiliated Debtors and Debtors-in-Possession, As Modified (Plan of Reorganization), which (i) was confirmed pursuant to an order of the Bankruptcy Court on March 18, 2003 (Confirmation Order) and (ii) after each of the conditions precedent to consummation was satisfied or waived, became effective on March 31, 2003 (Effective Date). In accordance with AICPA Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," (SOP 90-7) the Company adopted fresh-start reporting on the Effective Date.

     The Plan of Reorganization constituted a separate plan of reorganization for each of the Filing Entities. In accordance with the Bankruptcy Code, the Plan of Reorganization divided claims against, and interests in, each of the Filing Entities into classes (Classes of Claims and Interests) according to their relative seniority and other criteria and provided the same treatment for each claim or interest of a particular class unless the holder of a particular claim or interest agreed to a less favorable treatment of its claim or interest. Among other things, the Plan of Reorganization generally provided for full payment of all allowed administrative and priority claims, and the distribution of shares (or warrants to purchase shares) of new equity in the reorganized US Airways Group, Inc. (Reorganized US Airways Group) to the Air Transportation Stabilization Board (Stabilization Board), the Retirement Systems of Alabama Holdings LLC (RSA), the Company's management and labor unions, General Electric Capital Corporation and Bank of America, N.A., and to unsecured creditors of the Filing Entities, including the Pension Benefit Guarantee Corporation (PBGC), in satisfaction of their allowed claims. The distribution to unsecured creditors is estimated to have a value of between 1.2 percent to 1.8 percent of total allowed unsecured claims. Persons holding equity in US Airways Group prior to the Effective Date were not entitled to any distribution under the Plan of Reorganization and their shares of common stock were cancelled. For a complete discussion of the distributions provided for under the Plan of Reorganization, investors should refer to the Plan of Reorganization and the disclosure statement approved by the Bankruptcy Court on January 17, 2003 and filed with the Company's Current

17

Report on Form 8-K, dated January 31, 2003 and filed with the SEC on February 4, 2003 (Disclosure Statement).

     Pursuant to a definitive agreement, on the Effective Date, RSA invested $240 million in cash in Reorganized US Airways Group (the RSA Investment Agreement) in exchange for approximately 36.2%, on a fully-diluted basis, of the equity in Reorganized US Airways Group. As of the Effective Date, in connection with its investment, RSA was granted a voting interest of approximately 71.6% in Reorganized US Airways Group and entitled to designate and vote to elect eight of 15 directors to Reorganized US Airways Group's Board of Directors.

     As part of its restructuring efforts, US Airways received approval for a $900 million loan guarantee (ATSB Guarantee) under the Air Transportation Safety And System Stabilization Act (Stabilization Act) from the Stabilization Board in connection with a proposed $1 billion loan financing (the ATSB Loan). The Company required this loan and related guarantee in order to provide the additional liquidity necessary to carry out its restructuring plan. The ATSB Loan was funded on the Effective Date and consists of a $1 billion term loan facility to US Airways, $900 million of which is guaranteed by the Stabilization Board. The ATSB Loan is also guaranteed by each of US Airways Group's domestic subsidiaries (other than reorganized US Airways). See "Liquidity and Capital Resources" below.

     Under the Confirmation Order, the Filing Entities were authorized to reject or abandon certain aircraft after the Effective Date as long as each such aircraft was subject to a Section 1110 Agreement (defined below). Section 1110 of the Bankruptcy Code provides, in relevant part, that unless the Filing Entities, within 60 days after the Petition Date, agreed to perform all of the obligations (Section 1110 Agreement) under the lease, security agreement or conditional sale contract and cure all defaults thereunder (other than defaults constituting a breach of provisions relating to the filing of the Chapter 11 cases, the Filing Entities' insolvency or other financial condition of the Filing Entities) within the time specified in section 1110, the right of the lessor, secured party or conditional vendor to take possession of such equipment in compliance with the provisions of the lease, security agreement or conditional sale contract and to enforce any of its other rights or remedies under such lease, security agreement or conditional sale contract is not limited or otherwise affected by the automatic stay, by any other provision of the Bankruptcy Code or by any power of the Bankruptcy Court. Consequently, certain aircraft remain subject to Section 1110 Agreements that have been extended until August 15, 2003. The Company is currently negotiating with the relevant parties on another extension. Prior to the Effective Date, the Company reached agreements covering substantially all of the aircraft subject to restructuring agreements that the terms of the restructured agreements would become effective on the Effective Date. With respect to aircraft for which restructuring documentation has not been completed, the Company continues to negotiate with the relevant lessors and mortgagees to complete final documentation. The Company believes that it will complete definitive documentation with regard to the renegotiation of the obligations subject to Section 1110 Agreements. In the event that the Company fails to renegotiate such obligations, such failure would result in the loss of use of the aircraft subject to such obligations, which could have a material adverse impact on the Company's fleet operations.

18

     Pursuant to the bankruptcy process, the Company's claims agent received approximately 5,100 timely-filed proofs of claims totaling approximately $59 billion in the aggregate, exclusive of approximately $16 billion in claims from Allegheny County and Allegheny County Airport Authority (Allegheny) which have been resolved (see "Pittsburgh Leases" below) and approximately 350 proofs of claims timely-filed by governmental entities totaling approximately $225 million in the aggregate. Under the Confirmation Order, the Bankruptcy Court established May 15, 2003 as the deadline for filing administrative claims other than those related to personal injury or wrongful death claims, the filing deadline for which was established as September 27, 2003. As is typical in reorganization cases, there are significant differences between amounts scheduled by the Filing Entities and claims filed by creditors; these differences are being investigated and resolved in connection with the claims resolution process. The aggregate amount of claims filed with the Bankruptcy Court far exceeds the Filing Entities' estimate of ultimate liability. The Filing Entities believe that many of these claims are duplicative, based upon contingencies that have not occurred, or otherwise are overstated, and are therefore invalid. As of July 30, 2003, the Filing Entities have filed objections totaling approximately $56 billion. The Plan of Reorganization provides for a disputed claims resolution process. In light of the number of claims asserted against the Filing Entities, the claims resolution process is ongoing and may take considerable time to complete. The Plan of Reorganization provides for 4,968,720 shares of US Airways Group Class A Common Stock and 3,048,030 each of US Airways Group Class A-1 Warrants and shares of US Airways Group Class A Preferred Stock to be issued to unsecured creditors. Distributions of these shares and warrants will commence in mid-August with the distribution of approxi mately 1.3 million shares of Class A Common Stock and 0.8 million each of Class A-1 Warrants and shares of Class A Preferred Stock to unsecured creditors. The effects of these distributions were reflected in the Company's financial statements upon emergence and will not have any further impact on the results of operations. A number of significant claims, including aircraft related claims and the PBGC claim remain to be resolved. Accordingly, the ultimate number and amount of allowed claims, and ultimate distributions of new equity by claimant in Reorganized US Airways Group on account thereof, is not presently known.

     On July 25, 2003, US Airways, Allegheny County and Allegheny reached a consensual agreement subject to final documentation resolving and releasing all bankruptcy claims filed by Allegheny County and Allegheny against US Airways with regard to Pittsburgh International Airport. The agreement resolves all bankruptcy claims, including claims relating to the rejections of the airline operating agreements and other related terminal lease agreements effective January 5, 2004 (unless otherwise agreed upon by the parties). Under the agreement, in exchange for the release of all claims, Allegheny and Allegheny County will be granted an allowed general unsecured claim in the amount of $211 million to be shared with claims of other unsecured creditors. US Airways, Allegheny County and Allegheny are currently negotiating a stipulation reflecting the foregoing agreements. In addition, US Airways and Allegheny continue to discuss future operations at Pittsburgh Int ernational Airport.

     For the second quarter of 2003, the Company's operating revenues were $1.76 billion, operating income was $68 million and net income was $16 million. For the comparative period in 2002, operating revenues were $1.89 billion, operating loss was $164 million and net loss was $225 million. The Company's results for the three and six months ended June 30, 2003 and 2002 include unusual items, including a one-time benefit under the 2003 Emergency Wartime Supplemental Appropriations Act (Emergency Wartime Act). Absent this benefit, the Company continues to incur substantial losses. (See further discussion on unusual items in "Results of Operations"

19

below).

     The Company continues to face a weak revenue environment. Although passenger loads have steadily increased throughout the quarter as industry passenger traffic began recovering from the impact of the Iraqi War, continued low passenger fares significantly impacted second quarter 2003 results. These low passenger fares resulted from declines in business traffic (which has higher yields than leisure traffic) which began early in 2001 and were exacerbated by the events of September 11^th and continue to remain depressed. The airline industry has engaged in heavy price discounting to stimulate the industry-wide soft demand related to the sluggish economic conditions, the Iraqi war, the Severe Acute Respiratory Syndrome and the threat of further terrorist attacks. In addition, competition from low-fare carriers continues to intensify in the Company's core Eastern U.S. markets. Recent orders for additional aircraft by AirTran Airways and JetBlue Airways and an announcement by Atlantic Coast Airlines that it intends to become a regional low-fare carrier indicate that this trend will continue to have a negative impact on the Company's revenue recovery.

     As discussed above, the Company emerged from Chapter 11 and adopted fresh-start reporting on March 31, 2003. References to "Predecessor Company" refer to the Company prior to March 31, 2003. References to "Successor Company" refer to the Company on and after March 31, 2003, after giving effect to the application of fresh-start reporting. As a result of the application of fresh-start reporting, the Successor Company's financial statements are not comparable with the Predecessor Company's financial statements. However, for purposes of discussion of the results of operations, the three and six months ended June 30, 2003 have been compared to the three and six months ended June 30, 2002 as included, in part, in the Company's Condensed Consolidated Statements of Operations (which are contained in Part I, Item 1 of this report) and in "Selected US Airways Operating and Financial Statistics" below. Except where noted, operating statistics referred to below are for scheduled serv ice only.

Operating Revenues-Passenger transportation revenues decreased $151 million or 10.5% due to a 10.5% decrease in RPMs while yield was flat. The decrease in RPMs is primarily due to a reduction in demand which led to the schedule reductions that were initiated following the Company's bankruptcy filing in 2002. US Airways Express transportation revenues increased 7.9% due to a 3.8% increase in RPMs and a 4.3% increase in yield. Cargo and freight revenues decreased 5.6% primarily due to lower mail and freight volume.

Operating Expenses-Operating expenses were lower by 17.7%. Operating expenses excluding Government compensation and Special items were lower by 9.1% on a capacity decrease of 11.0%. Personnel costs decreased 18.7% due to lower headcount levels, wage rates and employee pension and benefit expenses partially offset by $92 million of stock-based compensation expenses resulting from the issuance of US Airways Group common stock to employees covered by collective bargaining agreements following emergence from Chapter 11. Aviation fuel increased 7.4% due to higher average fuel prices partially offset by schedule-driven decreases in consumption. Aircraft rent decreased 15.0% due to favorably restructured leases and lease rejections made in connection with the Company's Chapter 11 filing partially offset by new leases as a result of the conversio n of mortgaged aircraft to leased aircraft. Other rent and landing fees decreased 4.0% due to schedule driven decreases in landing fees. Selling expenses decreased 3.0% due to sales volume driven decreases in credit card fees, computer reservation fees and travel agent commissions. Aircraft maintenance increased 28.0% reflecting higher costs associated with third-party engine repair services partially offset by the fewer aircraft in the operating fleet. Depreciation and amortization decreased 25.7% due to fewer owned aircraft in the operating fleet and lower book values on the

20

existing fleet as a result of fresh-start reporting. Other operating expenses decreased 8.3% due to decreases in insurance expenses and schedule-related expenses including passenger food expenses and crew travel expenses. Refer to "Unusual Items" below for information on Special items and Government compensation.

Other Income (Expense)-Interest income decreased due to lower return rates quarter-over-quarter partially offset by higher average investment balances. Interest expense decreased as a result of the conversion of mortgaged aircraft to leased aircraft and the abandonment of certain aircraft partially offset by interest related to the ATSB Loan. Other, net income increased as a result of mark-to-market adjustments on certain stock options held by the Company. Refer to "Unusual Items" below for information on Reorganization items, net.

Provision (Credit) for Income Taxes-The Company's federal and state income tax expense was $13 million for the second quarter 2003. The Company's estimated annual effective tax rate was 0.8%. The Company continues to record a full valuation allowance against its net deferred tax asset. As a result of the March 2002 enactment of the Job Creation and Worker Assistance Act of 2002 (Act), the Company recognized an income tax credit in 2002 equal to the Company's carryback potential. The tax credit recorded in the second quarter of 2002 was based on the then estimated annual effective tax rate for 2002 of 11% exclusive of benefit related to 2001.

Operating Revenues-Passenger transportation revenues decreased $341 million or 12.4% due to a 12.2% decrease in RPMs and a 0.4% decrease in yield. The decrease in RPMs is primarily due to a reduction in demand which led to the schedule reductions that were initiated following the Company's bankruptcy filing in 2002. US Airways Express transportation revenues increased 6.5% due to a 3.6% increase in RPMs and a 3.0% increase in yield.

Operating Expenses-Operating expenses were lower by 17.3%. Operating expenses excluding Government compensation and Special items were lower by 13.0% on a capacity decrease of 11.9%. Personnel costs decreased 25.1% due to lower headcount levels, wage rates and employee pension and benefit expenses partially offset by $92 million of stock-based compensation expenses resulting from the issuance of US Airways Group common stock to employees covered by collective bargaining agreements following emergence from Chapter 11. Aviation fuel increased 12.6% due to higher average fuel prices partially offset by schedule-driven decreases in consumption. Aircraft rent decreased 15.8% due to favorably restructured leases and lease rejections made in connection with the Company's Chapter 11 filing partially offset by new leases as a result of the conversion of mortgaged aircraft to leased aircraft. Selling e xpenses decreased 22.2% due to sales volume driven decreases in credit card fees, computer reservation fees and travel agent commissions. Travel agent commission rates decreased due to the elimination of the base domestic commissions in March 2002 and increases in internet bookings which are less costly to the Company. Aircraft maintenance increased 12.9% reflecting higher costs associated with third-party engine repair services partially offset by the fewer aircraft in the operating fleet. Depreciation and amortization decreased 19.6% due to fewer owned aircraft in the operating fleet and lower book values on the existing fleet as a result of fresh-start reporting. Other operating expenses decreased 9.5% due to decreases in insurance expenses and schedule-related expenses including passenger food expenses and crew travel expenses. Refer to "Unusual Items" below for information on Special items and Government compensation.

Other Income (Expense)-Interest income decreased due to lower return rates quarter-over-quarter partially offset by higher average investment balances. Interest expense decreased as a result of the conversion of mortgaged aircraft to leased aircraft and the abandonment of certain aircraft partially offset by interest related to the ATSB Loan. Other, net income increased as a result of mark-to-

21

market adjustments on certain stock options held by the Company. Refer to "Unusual Items" below for information on Reorganization items, net.

Provision (Credit) for Income Taxes-The Company's federal and state income tax expense was $13 million. The Company's estimated annual effective tax rate was 0.8%. The Company continues to record a full valuation allowance against its net deferred tax asset. As a result of the March 2002 enactment of the Job Creation and Worker Assistance Act of 2002 (Act), the Company recognized an income tax credit in 2002 equal to the Company's carryback potential. The tax credit recorded in the first six months of 2002 included $53 million related to 2001 losses realizable due to the enactment of the Act and was recorded in the period of enactment. The remainder of the tax credit recorded in the first six months of 2002 was based on the then estimated annual effective tax rate for 2002 of 11% exclusive of benefit related to 2001.

(i) Special Items

     During the quarter ended June 30, 2003, the Company recorded a $35 million charge in connection with its intention not to take delivery of certain aircraft scheduled for future delivery.

(ii)  Government Compensation      

     In April 2003, President George W. Bush signed into law the Emergency Wartime Act, which included $2.4 billion for reimbursement to the airlines for certain aviation-related security expenses. The Emergency Wartime Act includes the following key provisions: (1) $2.3 billion of the appropriation is for grants to be made by the Transportation Security Administration (TSA) to U.S. air carriers based on the proportional share each carrier has paid or collected as of the date of enactment of the legislation for passenger security and air carrier security fees; (2) the TSA will not impose passenger security fees during the period beginning June 1, 2003 and ending September 30, 2003; (3) $100 million of the appropriation will be available to compensate air carriers for the direct costs associated with the strengthening of flight deck doors and locks on aircraft; (4) aviation war risk insurance provided by the federal government is extended until August 2004; and (5) certain airlines that receive the aviation-related assistance must agree to limit the total cash compensation for certain executive officers during the 12-month period beginning April 1, 2003 to an amount equal to the annual salary paid to that officer during the air carrier's fiscal year 2002. Any violation of this agreement will require the carrier to repay to the government the amount reimbursed for airline security fees.  The Company does not anticipate any difficulties in complying with this limitation on executive compensation and believes the likelihood of repaying the government for the amount of the security fee reimbursement is remote. The Company's security fee reimbursement was $212 million, net of amounts due to certain affiliates, and was recorded as a reduction to operating expenses during the second quarter of 2003.

(iii)  Reorganization Items, Net

     Reorganization items, net for the Predecessor Company represents amounts recognized and incurred as a direct result of the Company's Chapter 11 filing and emergence and are presented separately in the Company's Condensed Consolidated Statement of Operations. Such items consist of the following (dollars in millions):

22

(a)   See Note 3 to the Condensed Consolidated Financial Statements.
(b)   As of March 31, 2003, the Company had restructured aircraft debt and lease agreements related to 119 aircraft in
        connection with its Chapter 11 reorganization including the conversion of 52 mortgages to operating leases.
        The restructured terms generally provide for shorter lease periods and lower lease rates.
(c)   Effective March 31, 2003, US Airways terminated its qualified and nonqualified pilot defined benefit pension plans.
        The PBGC was appointed trustee of the qualified plan effective with the termination. The Company recognized a
        gain in connection with the termination which is partially offset by the Company's estimate of the PBGC claim.
        See Part II, Item 1 "Legal Proceedings" for more information.
(d)   Damage and deficiency claims largely arose as a result of the Company electing to either restructure, abandon or
        reject aircraft debt and leases during the bankruptcy proceedings.

	Three Months Ended June 30,				Increase (Decrease)	Six Months Ended June 30				Increase (Decrease)
	2003		2002			2003		2002
Revenue passengers (thousands)*	10,855		12,982		(16.4)%	20,282		24,807		(18.2)%
RPMs (millions)* (2)	9,811		10,966		(10.5)%	18,044		20,547		(12.2)%
ASMs (millions)* (3)	13,005		14,606		(11.0)%	25,171		28,584		(11.9)%
Passenger load factor* (4)	75.4	%	75.1	%	0.3 pts.	71.7	%	71.9	%	(0.2) pts.
Yield* (5)	13.10	c	13.11	c	(0.1)%	13.31	c	13.36	c	(0.4)%
Passenger revenue per ASM* (6)	9.88	c	9.84	c	0.4%	9.54	c	9.60	c	(0.6)%
Average stage length (miles)*	754		684		10.2%	743		667		11.4%
Cost of aviation fuel per gallon (7)	84.87	c	69.28	c	22.5%	89.61	c	68.80	c	30.2%
Cost of aviation fuel per gallon, excluding fuel taxes (8)	79.71	c	63.57	c	25.4%	84.28	c	63.13	c	33.5%
Gallons of aviation fuel consumed (millions)	222		252		(11.9)%	430		498		(13.7) %
Scheduled mileage completion factor*	99.8	%	99.3	%	0.5 pts.	99.0	%	99.4	%	(0.4) pts.
Operating aircraft at period-end	279		311		(10.3)%	279		311		(10.3)%
Full-time equivalent employees at period-end	26,587		33,902		(21.6)%	26,587		33,902		(21.6)%
* Scheduled service only (excludes charter service).