Court Approves US Airways Disclosure Statement, Action Clears Way for Plan of Reorganization Vote by Creditors

US Airways Group, Inc. has been given authorization by the U.S. Bankruptcy Court in Alexandria (VA), to solicit approval from its creditors on its plan of reorganization that provides for the airline's emergence from Chapter 11 protection in March 2003.

At the conclusion of a two-day hearing, Judge Stephen S. Mitchell, of the Bankruptcy Court of the Eastern District of Virginia, approved the company's disclosure statement as having adequate information for the solicitation, and authorized the airline to distribute its disclosure statement and plan of reorganization. The company will mail notice of the March 18, 2003, hearing on the final approval of its plan of reorganization to more than 144,000 interested parties. The mailing will initiate a 38-day process in which qualified claim holders will be allowed to vote on the company's plan.

"The court's approval was critical to our efforts to complete our restructuring quickly, and keeps us on our timeline for emerging from Chapter 11 this spring," said David N. Siegel, US Airways president and chief executive officer. "We are committed to positioning the airline so that our passengers, our employees and the communities we serve will benefit from our future success."

Among the key points of the company's proposed plan:

• The company must secure final approval of the $900 million federal guarantee from the Air Transportation Stabilization Board (ATSB) for a $1 billion loan, to be used as exit financing upon emergence and also close its investment agreement with RSA.
• The company is pursuing a legislative solution, in cooperation with its pilots union, to implement an amortized pension funding plan.  If those efforts are unsuccessful, the company will have no choice but to terminate the existing pilot pension program and begin formal negotiations with the Air Line Pilots Association (ALPA) on an agreeable replacement plan, with an anticipated completion of March 2003.
• As previously disclosed, the plan provides that the existing common stock of the parent company will be cancelled.
• T he Retirement Systems of Alabama (RSA) will invest $240 million upon emergence, and will hold the lead investor position in the company with a 36.2 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 ALPA (19.3 percent); other employees (10.8 percent); management (7.8 percent); and other ATSB loan participants (0.4 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, $200 million to $1 billion for PBGC claims, and $2.5 billion to $3.1 billion for unsecured claims. Holders of allowed secured and priority claims are estimated to recover their fully-allowed claims, while recoveries to PBGC and general unsecured claims are estimated to be in the range of 1.2 percent to 1.8 percent of their allowed claims.

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 weeks.

"I am especially grateful for the cooperation of our employees in both making sacrifices to help save our airline, as well as ensuring that this has been a seamless process for our customers," said Siegel. "I also want to compliment the efforts of the ATSB and its staff members in working closely with us throughout this restructuring.

"We are very appreciative of the continuing support and financial commitment of the Retirement Systems of Alabama to US Airways, as well as the formal endorsement of our plan of reorganization by the Official Committee of Unsecured Creditors," added Siegel, who noted that RSA has approved the disclosure statement and plan of reorganization under the DIP and investment agreements.

Judge Mitchell laid out a timeline that includes:

• Jan. 9, 2003--Holders of claims as of this date will receive plan solicitation materials or notices.
• Jan. 31, 2003--Last date for US Airways to mail solicitation packages.
• Feb. 14, 2003--Deadline for creditors to file motions to seek temporary allowance of claims (for voting purposes only) that have been objected to by US Airways.
• Feb. 27, 2003--Deadline for US Airways to file plan exhibits.
• March 7, 2003--Date on which claims will be allowed for voting purposes unless objected by US Airways.
• March 10, 2003--Deadline for receipt of ballots on the Plan of Reorganization and filing objections in the Bankruptcy Court to confirmation of the Plan of Reorganization.
• March 18-20, 2003--Confirmation hearing on Plan of Reorganization
• March 31, 2003--Target emergence date from Chapter 11.

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 August 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.

FMI: www.usairways.com