US Airways 2005 Annual Report Download - page 55

Table of Contents
US Airways Group's Emergence from Bankruptcy — As discussed above under Part I, Item 1 "Business — Pre-merger US Airways Group's Second
Chapter 11 Bankruptcy Proceedings," in accordance with the Bankruptcy Code, the plan of reorganization classified claims into classes according to their
relative seniority and other criteria and provides for the treatment for each class of claims. Pursuant to the bankruptcy process, the Debtors' claims agent
received approximately 4,800 timely filed proofs of claims as of the general bar date totaling approximately $26.4 billion in the aggregate, and approximately
380 proofs of claims timely filed by governmental entities totaling approximately $13.4 billion in the aggregate. As of December 31, 2005, there are
$19.6 billion of unresolved claims. The ultimate resolution of certain of the claims asserted against the Debtors in the Chapter 11 cases will be subject to
negotiations, elections and Bankruptcy Court procedures. The amount 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 value of all general
unsecured claims and the value of shares of 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 under section 4041(c)(2)(B)(ii)(IV) of ERISA for a "distress termination" of three retirement plans and approval of each such plan's
termination. These plans had aggregate benefit obligations of $2.71 billion and aggregate plan assets of only $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 plans were terminated in January 2005 by agreement between the PBGC and US Airways, and
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 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 common stock of US Airways Group issued to the
unsecured creditors, net of the 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 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 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 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
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