US Airways 2005 Annual Report Download - page 24

Table of Contents
against the Debtors 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 the 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, pre-merger 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. Pre-merger 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. The shares 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 will be the
average of the closing price per share of US Airways Group common stock as reflected on the New York Stock Exchange ("NYSE") 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 applied to all pilots as a result of a lump sum payment due to pilots recalled from furlough and further
agreed to pay $500,000 to resolve an outstanding grievance over pay credits for pilots assigned by US Airways to travel to and from certain duty assignments.
While a significant amount of the Debtors' liabilities were extinguished as a result of the discharge granted upon confirmation of the plan of
reorganization, not all of the Debtors' liabilities were subject to discharge. The types of obligations that the Debtors remain responsible for include those
relating to their secured financings, aircraft financings, certain environmental liabilities, the continuing obligations arising under contracts and leases assumed
by the Debtors and certain grievances with our labor unions, as well as allowed administrative claims. Allowed administrative claims consist primarily of the
costs and expenses of administration of the Chapter 11 cases, including the costs of operating the Debtors' businesses since filing for bankruptcy. The
Bankruptcy Court set two bar dates by which creditors asserting administrative claims, other than administrative claims arising in the ordinary course of
business, were required to be filed. The Debtors received a large number of timely filed administrative claims, as well as additional claims that were filed late
without permission of the Bankruptcy Court. Included in these claims, however, are claims for amounts arising in the ordinary course that have either already
been paid, or that are included in the Debtors' business plan and are expected to be paid in the ordinary course. Also included are claims that are duplicative,
claims for which the Debtors believe there is no legal merit for a claim of any status, and claims that the Debtors believe may be valid as unsecured claims but
are not entitled to administrative claims status. Accordingly, the Debtors believe that only a very small portion of the claims filed in response to the bar dates
for non-ordinary course administrative expense claims will actually be allowed in amounts exceeding the ordinary course expenditures already contained in
the Debtors' business plan. However, there can be no assurances that the aggregate amount of the claims ultimately allowed will not be material. To the extent
any of these claims are allowed, they will generally be satisfied in full. 18