US Airways 2005 Annual Report Download - page 22

Table of Contents
respectively, associated with termination payments and health care benefits for approximately 2,700 employees participating in these voluntary programs. The
majority of the employees expected to participate in voluntary terminations notified US Airways by March 31, 2005.
In connection with the outsourcing of a portion of its aircraft maintenance and certain fleet service operations, the closing of its Pittsburgh reservation
center, and the closing of certain airport clubs and city ticket offices, US Airways involuntarily terminated or furloughed approximately 2,300 employees. In
the first quarter of 2005, US Airways Group recognized a $44 million charge associated with contractual severance payments and healthcare benefits for those
employees. Notification for the majority of planned involuntary terminations was completed in the first quarter of 2005.
In addition to the cost savings achieved with labor groups, US Airways implemented pay and benefit reductions for its management and other non-union
employees, including reductions to base pay, elimination of jobs and modifications to vacation and sick time accruals. US Airways also reduced the amount it
contributes to its defined contribution retirement plans on behalf of employees and implemented modifications to its postretirement medical benefits and other
retiree benefits. The pay rate and defined contribution plan reductions went into effect October 11, 2004 and the reductions to retiree medical benefits went
into effect March 1, 2005.
Pre-merger US Airways Group also reached agreements with certain of its lessors and lenders to restructure existing aircraft lease and debt financings. On
December 17, 2004, the Bankruptcy Court approved pre-merger US Airways Group's agreements for the continued use and operation of substantially all of its
mainline and Express fleet. Pre-merger US Airways Group reached a comprehensive agreement with General Electric and its affiliates ("GE") on aircraft
leasing and financing and engine services, which provided pre-merger US Airways Group with short-term liquidity, reduced debt, lower aircraft ownership
costs, enhanced engine maintenance services, and operating leases for new regional jets. In June 2005, pre-merger US Airways Group reached an agreement
with GE on the terms and conditions of an agreement that amends and supplements certain provisions of the earlier agreement and provides for additional
agreements regarding rent obligations under aircraft leases and the early redelivery of certain aircraft. The GE agreement was further amended in September
2005 to provide for a cash payment of $125 million by September 30, 2005 in lieu of the issuance of convertible notes to an affiliate of GE as originally
contemplated in the GE agreement. Pre-merger US Airways Group also reached agreements with EMBRAER-Empresa Brasileira de Aeronautica SA and
Bombardier, Inc. providing for continued use and operation of its aircraft, short term liquidity and new financing for regional jets, which were approved by
the Bankruptcy Court in January 2005. Each of these agreements is discussed in detail below in Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations — Liquidity and Capital Resources."
In connection with the merger, US Airways Group and America West Holdings entered into a Memorandum of Understanding with Airbus that includes,
among other things, adjustments to the delivery schedules for narrow-body and wide-body aircraft, a new order for twenty A350 wide-body aircraft for which
Airbus has agreed to provide backstop financing for a substantial number of aircraft, substantial elimination of cancellation penalties on pre-merger
US Airways Group's existing order for ten A330-200 aircraft provided that US Airways Group has met certain predelivery payment obligations under the
A350 order, and a term loan of up to $250 million. The term loan is discussed in more detail below in Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations — Liquidity and Capital Resources."
On September 16, 2005, the Bankruptcy Court issued an order confirming the Debtors' plan of reorganization. The plan of reorganization, which was
based upon the completion of the merger, among other things, set forth a revised capital structure and established the corporate governance for US Airways
Group following the merger and subsequent to emergence from bankruptcy. Under the plan of reorganization, the Debtor's general unsecured creditors
received or will receive approximately 8.2 million shares of the new common stock of US Airways Group, and this represented approximately 10% of
US Airways Group common stock outstanding as of the completion of the merger. The holders of
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