US Airways 2005 Annual Report Download - page 231

Table of Contents
US Airways, Inc.
Notes to the Financial Statements — (Continued)
against the Debtors in the Chapter 11 cases will be subject to negotiations, elections and Bankruptcy Court procedures. The value of stock ultimately
distributed to any particular general unsecured creditor under the Plan of Reorganization will depend on a number of variables, including the value of any
claims filed by that creditor, the aggregate of all general unsecured claims and the value of shares of the new common stock of US Airways Group in the
marketplace at the time of distribution. The effects of these distributions were reflected in US Airways' financial statements upon emergence and will not have
any further impact on the results of operations. The unsecured creditors eligible to receive stock distributions are expected, in the aggregate, to recover
between approximately 3.1% and 17.4% of the value of their claim.
PBGC Claim — On November 12, 2004, US Airways filed a motion requesting a determination from the Bankruptcy Court that US Airways satisfied the
financial requirements for a "distress termination" under section 4041(c)(2)(B)(ii)(IV) of the Employee Retirement Security Act of 1974, as amended
("ERISA"), of the Retirement Plan for Flight Attendants in the Service of US Airways, Inc. ("AFA Plan"), the Pension Plan for Employees of US Airways,
Inc. Who Are Represented by the International Association of Machinists and Aerospace Workers (the "IAM Plan"), and the Retirement Plan for Certain
Employees of US Airways, Inc. (the "CE Plan"), as well as approval of each plan's termination. These plans had aggregate benefit obligations of $2.71 billion
and aggregate plan assets of $1.76 billion, as of the plans' termination dates in January 2005. On January 6, 2005, the Bankruptcy Court entered an order
(i) finding that the financial requirements for a distress termination of the plans had been met and (ii) approving termination of the plans. The AFA Plan and
the IAM Plan were terminated effective January 10, 2005, which was the date agreed to by the PBGC and US Airways. The CE Plan was terminated effective
January 17, 2005, which was the date agreed to by the PBGC and US Airways. Effective February 1, 2005, the PBGC was appointed trustee for each of the
three plans. As a result of these terminations, the PBGC filed claims against US Airways for the unfunded portion of each of the plans. Under the Plan of
Reorganization, the PBGC received, as treatment for its claims: (i) cash in the amount of $13,500,000; (ii) an unsecured promissory note in the principal
amount of $10,000,000 issued by US Airways and guaranteed by US Airways Group, bearing interest at a rate of 6.00% per annum payable annually in
arrears, with such promissory note to be payable in a single installment on the seventh anniversary of the effective date of the Plan of Reorganization; and
(iii) 70%, or 4,873,485 shares, of the common stock of US Airways Group issued to the unsecured creditors, net of shares allocated to ALPA.
Agreements with ALPA — On September 14, 2005, US Airways Group, US Airways, America West Holdings and AWA reached agreement with the two
ALPA-represented pilot groups at the separate airlines on a comprehensive agreement (the "Transition Agreement") that will govern many merger-related
aspects of the parties' relationships until there is a single collective bargaining agreement covering all pilots. US Airways Group and US Airways had entered
into a separate letter of agreement that provided that US Airways' pilots designated by ALPA would receive 1.25 million shares of US Airways Group
common stock and options to purchase 1.1 million shares of US Airways Group common stock. The 1.25 million shares were drawn from the 8.2 million
shares initially allocated to unsecured creditors in the Plan of Reorganization and were issued to the pilots in accordance with the instructions provided by
ALPA during the fourth quarter of 2005. The options will be issued according to the following schedule: the first tranche of 500,000 options was issued on
January 31, 2006, a second tranche of 300,000 options will be issued on January 31, 2007, and the third tranche of 300,000 options will be issued on
January 31, 2008. The options will have a term of five years from date of issuance. The exercise price for each tranche of options is the average of the closing
price per share of US Airways Group common stock as reflected on the New York Stock Exchange for the 20 business day period prior to the applicable
option issuance date. The letter of agreement also includes provisions restricting transfer of the options and governing anti-dilution. In connection with the
negotiation of the Transition Agreement and the letter of agreement, US Airways also agreed with ALPA to eliminate an existing 1% pay reduction that
would have otherwise 225