US Airways 2006 Annual Report Download - page 185

Table of Contents
US Airways, Inc.
Notes to the Financial Statements — (Continued)
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 was 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
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 Reorganized Debtors' liabilities were extinguished as a result of the discharge granted upon
confirmation of the Plan of Reorganization, not all of the Reorganized Debtors' liabilities were subject to discharge. The types of
obligations that the Reorganized 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 Reorganized Debtors and
certain grievances with 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 Reorganized Debtors' businesses since
filing for bankruptcy. The Bankruptcy Court set August 22, 2005 and November 14, 2005 as the 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
Reorganized 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 Reorganized Debtors' business plan and are expected to be paid in the ordinary
course. Also included are claims that are duplicative, claims for which the Reorganized Debtors believe there is no legal merit for a claim
of any status, and claims that the Reorganized Debtors believe may be valid as unsecured claims but are not entitled to administrative
claims status. Accordingly, the Reorganized 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 Reorganized Debtors' business plan. However, there can be no assurances that the aggregate amount of the
claims
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